The Short Version
- Private hospital cover means faster care, your choice of specialists and treatment in a private hospital, but finding the best health insurance plan will depend on a few things.
- Medical costs continue to go up while rebates for private health insurance are dropping.
- Gap cover schemes and insurer-hospital agreements can have a big impact on your final expenses.
What you can expect with private hospital cover
Private hospital cover is one of the biggest financial commitments in Australian healthcare – and for good reason. But is it still worth it in 2025? The reality is that with health insurance premiums rising and government rebates declining, many Australians are asking themselves that very question.
The answer will depend on your own specific needs, as well as your financial situation and whether you have any pre-existing conditions or health risks. While having a private health insurance policy will let you get quicker medical care and more comfortable stays in private hospital stays, it won’t always mean zero out-of-pocket costs.
Let’s break down the specifics so you can find out whether hospital cover is right for you, what costs you can expect to pay and how to avoid some of the most common healthcare pitfalls.
Why do premiums keep increasing?
Healthcare in Australia is getting more expensive every year. Unfortunately, the average Australian has no control over this, and it’s down to a number of factors:
- More advanced medical technologies mean more expensive treatment costs.
- Australia’s ageing population requires more hospital services/treatments.
- Inflation in medical services, wages, hospital fees and more.
- Greater demand for elective surgeries, which increases costs for private insurers.
Despite this, the government’s private health insurance rebate helps lower premiums for eligible Australians. The problem, however, is that this rebate has been cut again in 2025, meaning you’ll get even less financial assistance than in previous years.
From 1 April 2025, the base-tier rebate for people under 65 drops to 24.288%, which is a far cry from the original 30% rebate when it was first introduced. And those in higher income brackets will get even less.
The bottom line? Your out-of-pocket costs will continue to go up unless you actively compare and switch to more cost-effective policies.
How hospital cover works
Hospital cover is divided into four main tiers under government reforms to make comparisons easier:
- Basic: Covers only minimal treatments. It’s usually not worth it unless you’re only getting cover to avoid the Medicare Levy Surcharge (MLS).
- Bronze: Includes essential surgeries like hernias and gynaecology but excludes many major treatments.
- Silver: Covers a wider range (e.g. heart and lung procedures) but might not include pregnancy and joint replacements.
- Gold: The highest level of cover, including all Medicare-recognised procedures. But it’s also the most expensive.
Does a higher tier mean no out-of-pocket costs?
Not necessarily. Your choice of doctor and hospital agreements play a huge role in calculating your final costs. Even with a Gold policy, you might still end up footing a few gap payments if your chosen doctor charges more than the Medicare Benefits Schedule (MBS) fee.
Why do out-of-pocket costs even exist?
Even if you have top-tier health insurance, in many cases you’ll still need to pay some extra fees. This happens because:
- Doctors and specialists aren’t legally required to charge the MBS fee.
- Some hospitals won’t be in your insurer’s preferred provider network.
- Services like diagnostic tests, medications, and rehab might not be covered.
How gap cover schemes can help
Most health insurers have a gap cover scheme in place to help bring down these unexpected costs in the form of:
- No gap cover: You pay nothing extra for certain medical procedures when your doctor agrees to participate.
- Known gap cover: You pay a fixed and limited amount out-of-pocket, rather than an unknown figure.
Expert tip: Always ask your doctor if they participate in your insurer’s gap cover scheme before agreeing to surgery.
Portability
Don’t re-serve waiting periods when you switch to a new health fund or policy
“John was immediately covered for a hip replacement in private hospital because he had already served his waiting periods for joint replacements on his old policy”
Why your choice of hospital matters
Private health funds have agreements with specific hospitals to cover things like accommodation and other services. If you visit a hospital outside of this network, you could be charged thousands of dollars in out-of-pocket costs. Before admission, you’ll want to always check if your chosen hospital is contracted with your health insurer.
You might also be wondering whether you can still use public hospitals with private cover. Yes! You can be treated as a private patient in a public hospital, but be aware that this also means you won’t get all the usual full benefits of private care, such as:
- Choice of doctor.
- Guaranteed private room.
- Shorter waiting times.
In some cases, public hospitals might also charge private patients out-of-pocket costs for certain treatments.
Portability: You can switch without re-serving waiting periods
Here’s some good news if you’re still on the fence about getting hospital cover in 2025: you don’t have to worry about switching insurers because you think you’ll lose your existing cover. If you switch to an equal or lower level of cover, you don’t need to re-serve waiting periods – they will carry over.
Here’s a simple example to help illustrate how it works:
John switches insurers and is immediately covered for a hip replacement because he already served his waiting period on his old policy.
Who should get private hospital cover?
Private hospital cover will likely be a worthwhile investment if you:
- Need elective surgery soon (e.g. knee replacements, cataract surgery).
- Want to have your own choice of doctor and hospital for any specialist treatments.
- Want shorter wait times for non-emergency surgeries.
- Earn over $97,000 per year and don’t want to be stung with the Medicare Levy Surcharge.
On the other hand, you might not need it if you:
- Are happy to rely on public hospitals for treatment.
- Don’t expect to need major surgery or specialist care in the near future.
- Are on a low income and will struggle to keep up with increasing premiums.
5 tips to save on private hospital cover
- Compare policies every year: Health funds tend to change their pricing each year, so switching could save you hundreds.
- Choose a higher excess: A $750 excess policy will mean much cheaper premiums than a $250 excess plan. But you’ll still need to have money saved to cover your costs if you ever need treatment.
- Research not-for-profit health funds: They tend to return more benefits to their members than for-profit insurers.
- See if extras cover is even worth it: Far too many people overpay for extras they rarely – if ever – use.
- Prepay your policy for the year: Some insurers will give you a discount if you make upfront payments for the whole year. You can also avoid the next premium hike if you pay before 1 April.
Summary
Private hospital cover is extremely beneficial for the vast majority of Australians – but we also realise that rising costs and big out-of-pocket expenses can give you pause. Our take is that if you need elective surgery, want a private hospital experience or want to avoid the Medicare Levy Surcharge, it’s definitely worth having. But if affordability is your main concern and you can tolerate longer wait times in the public system, then relying solely on Medicare might be good enough for right now.
The best strategy? Compare health insurance policies, check the hospital agreements and use gap cover to help keep your costs to a minimum. If you’re ever unsure, our expert team at Fair Health Care Alliance will help you find the best plan for your situation.
FAQ's
Not always. Gap payments, hospital agreements and specialist fees will play a role in determining your out-of-pocket costs.
Yes, if you switch to a policy with the same or lower level of cover.
You will rely on the public system, which usually means long wait times for non-emergency procedures.
