Key Takeaways
- Australia’s healthcare system combines public and private options, with Medicare’s universal cover for essential services.
- Private health insurance is a faster way to get treatment, your choice of specialists, private hospital visits and cover for services Medicare doesn’t include.
- Learn about the different tiers of hospital cover and extras options so you can choose the right policy for your healthcare needs.
An Introduction to Australia's Healthcare System
Australia’s healthcare system consistently ranks among the world’s best. Our blend of public and private healthcare makes sure all citizens and residents have access to quality care whenever they need it. Moreover, having a hybrid approach means Australians have the flexibility to choose extra services based on their personal needs.
The problem is that if you’re not already familiar with the inner workings of our healthcare system, it can seem complex – or even overwhelming. And if you’re worried about understanding everything, it could stop you from picking the right policy and getting an appropriate level of cover.
So let’s cut to the chase and break down all the essentials of Australia’s healthcare system – so you can start making better decisions about your health cover.
What is Medicare?
Medicare is the cornerstone of our healthcare system. It provides Australians (citizens, permanent residents and people from countries with reciprocal healthcare agreements) with universal access to the most essential medical services. Introduced in 1984, Medicare ultimately means that all Australians can get necessary healthcare, regardless of their financial situation.
What Medicare covers
- Medical services: Medicare covers all or part of the cost for GP visits, specialist consultations, tests and examinations, and many surgical procedures. These services are listed on the Medicare Benefits Schedule (MBS), which outlines the services that are eligible for government subsidies.
- Public hospital services: As a public patient in a public hospital, Medicare covers your treatment costs, including accommodation, medical care and most treatments and medications during your stay.
- Pharmaceutical Benefits Scheme (PBS): This makes prescription medications more affordable by subsidising the cost of medicines. Without the PBS, many medications would cost tens of thousands of dollars and be entirely inaccessible for the vast majority of Australians.
What Medicare doesn't cover
- Long waiting lists: Public hospital patients will have to deal with lengthy waiting periods for elective surgeries and specialist appointments.
- No choice of doctor: As a public patient, you can’t choose your treating specialist.
- Limited extras cover: Medicare doesn’t cover most dental care, optical services, physiotherapy, chiropractic care or alternative therapies.
- Gap payments: For some medical services, there may be out-of-pocket costs if your provider charges more than the Medicare benefit.
Why get private health insurance?
Think of getting private health insurance as a way to complement Medicare. Importantly, it will give you much more cover and better benefits that the public system simply doesn’t offer.
Arguably the biggest advantage is the shorter waiting times. You get to skip the public hospital queues for elective surgeries and procedures. You’ll also get your choice of doctor and hospital, so you’ll get peace of mind while being treated by your preferred specialist and in a private hospital with a private room (hopefully).
You can also get covered for extras – which are not part of Medicare – like dental, optical, physiotherapy, chiropractic and plenty of other allied health services. And then there’s the financial incentive. You can avoid things like having to pay the Medicare Levy Surcharge and Lifetime Health Cover (LHC) loading when you have private health insurance.
Hospital cover tiers
Hospital cover is divided into four clearly defined tiers to make comparisons much easier for everyday Australians. Here’s what you need to know about each one:
- Basic: Covers the most minimal treatments and is generally only worthwhile for avoiding the Medicare Levy Surcharge.
- Bronze: Can include essential surgeries like hernia repair and gynaecology but excludes many major treatments.
- Silver: Wider cover including heart and lung procedures but might not cover pregnancy or joint replacements.
- Gold: The highest level of cover, including all Medicare-recognised procedures, but also the most expensive option.
Also be aware that some health funds have extra sub-tiers like Silver-Plus, which can bridge some of the gaps between different tiers.
Extras cover explained
Extras cover (sometimes called ancillary or general treatment cover) has benefits for services that Medicare doesn’t cover, including:
- Dental care: Preventative services like check-ups and cleanings, as well as major dental work such as crowns and root canals.
- Optical: Glasses, contact lenses, eye examinations, etc.
- Allied health services: Physiotherapy, chiropractic care, podiatry, psychology and occupational therapy.
- Alternative therapies: Acupuncture, naturopathy and remedial massage.
- Health aids and appliances: Hearing aids, blood glucose monitors and CPAP machines.
Every extras policy has specific rebates (the amount the insurer contributes per service) as well as annual limits (the maximum amount you can claim per year) and some lifetime limits.
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”
Financial considerations and incentives
All taxpayers contribute to Medicare through the Medicare levy, which is 2% of your taxable income. However, higher-income earners without private hospital cover also pay the Medicare Levy Surcharge, which is an additional tax of 1–1.5% of taxable income. As of 2025, the MLS applies to singles earning over $97,000 and families earning over $194,000 who don’t have adequate private hospital cover.
Lifetime Health Cover (LHC) loading is another government initiative that’s in place to encourage Australians to take out hospital cover earlier in life. If you don’t have private hospital cover by 1 July following your 31st birthday, you’ll pay an extra 2% on your premiums for every year you delay, up to a maximum of 70%. So if you wait until you’re 40 to take out hospital cover, you’ll pay 20% more on your premiums compared to someone who took out the same cover at 30.
Finally, there’s a rebate on private health insurance premiums to help make having cover more affordable. As of April 2025, the base-tier rebate for people under 65 is 24.288%, although this percentage decreases for higher earners.
Gap payments
Even with private health insurance, you might still have to pay out-of-pocket costs known as ‘gap payments’. This happens when:
- Your doctor charges more than the Medicare Benefits Schedule (MBS) fee.
- Your hospital isn’t in your insurer’s preferred provider network.
- Certain services like diagnostic tests or medications aren’t fully covered.
Many insurers have ‘gap cover schemes’ to reduce or eliminate these unexpected costs. For no gap cover, you pay nothing extra when your doctor participates in the scheme. And for known gap cover, you pay a fixed, limited amount rather than an unknown sum.
Always ask your doctor if they participate in your insurer’s gap cover scheme before agreeing to getting treatment.
Preventative healthcare benefits
Both Medicare and private health insurance cover preventative healthcare services, which can seriously reduce your long-term healthcare costs. Studies show that for every $1 spent on preventative care, you save approximately $14.50 in future healthcare expenses.
Some of the most useful preventative services to take advantage of include:
- Regular health screenings and check-ups.
- Immunisations and vaccinations.
- Dental check-ups and cleanings.
- Mental health support services.
- Lifestyle programs for chronic disease management.
Portability when switching insurers
If you’re thinking about switching health insurers, you may not need to worry about re-serving waiting periods. Under portability rules, when you switch to an equal or lower level of cover, your waiting periods carry over to your new policy.
This means you can shop around for better value without losing the benefits you’ve already earned.
Conclusion
Australia’s healthcare system is the best of both worlds: universal access to essential services through Medicare, complemented by the extra benefits of private health insurance for those who choose it.
Ready to make a decision about your healthcare cover? The experts at Fair Health Care Alliance can help you compare health insurance policies today so you’ll be able to get high-quality care when you need it most.
FAQ's
Medicare covers some of the essentials, but private insurance gives you shorter wait times, your choice of doctor and covers extras like dental and optical.
To avoid Lifetime Health Cover loading, take out hospital cover before 1 July following your 31st birthday.
Hospital cover pays for in-hospital treatment as a private patient, while extras cover pays benefits for services like dental and physiotherapy.
Yes, portability rules mean your waiting periods transfer when switching to an equivalent or lower level of cover.
