Cheap health insurance vs. relying on Medicare

Australians are lucky to have access to Medicare, a government program which subsidises medical costs such as visits to the GP and emergency hospital care. While Medicare can be a great financial aid, without private health cover a trip to the hospital can still incur huge costs, not to mention the tax penalties that come with relying on Medicare alone. It is for this reason that it is better to have a cheap health insurance policy, even if you believe you may not use it.

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* The price shown is per week and applies to a {LIFESTAGE} living in VIC with a $500 excess. It excludes LHC loading and includes a Base Tier Government Rebate

What is Medicare?

Medicare is a health care system that is funded publicly in Australia. It is operated on behalf of the Australian Government as a government authority.

Medicare is available for Australian citizens, permanent residents, and those living in Australia temporarily from a country that has a reciprocal health care agreement with Australia. The scheme provides individuals with subsidised treatment from medical practitioners and allied healthcare professionals with a valid Medicare provider number.

What is Private Health Insurance?

Private health insurance is an option for all individuals eligible for Medicare. There are two elements of private health insurance which can be purchased together or separately.

Hospital Cover
This policy element covers a portion of the costs of hospital treatment. It also provides the policy holder with options such as a choice of hospital, choice of doctor, and choice of private or shared hospital room.

Having private health insurance allows you to skip the lengthy waiting periods you could expect from relying on Medicare alone. Many individuals face months of waiting for treatment for serious conditions such as hip dislocations under Medicare, which could be significantly decreased with private health insurance. Overall, as a patient under private health insurance you are entitled to something very valuable – freedom of choice and flexibility.

Extras Cover
This policy element will cover you for additional services you may need regularly such as seeing a dentist or getting new glasses. Frank’s extras cover will provide 50% or 80% back on different services and even covers areas such a psychology, ambulance and chiropractor services.

Extras cover is significantly cheaper than hospital cover, with individuals generally making claims against the cover more often (especially as we all really should be seeing our dentist twice a year!).

So is it cheaper to rely on Medicare or a cheap health insurance policy?

There are a few elements to consider in answering this question.

1) Are you an individual earning above $90,000 in income?
Individuals who earn over $90,000 are taxed if they do not have private health insurance (hospital cover). So for example:
If you earn $100k = Extra $1,250 in tax
If you earn $110k = Extra $1,375 in tax

For almost all individuals a basic hospital policy with Frank will cost significantly less than this amount in tax. That means that you will actually save money if you have private health insurance.

2) Do you regularly use health services?
The answer to this question should be a ‘yes’ for all Australians. Services such as a visit to a dentist are critical to your ongoing health. Consider what these services are and how often you use them (eg do you buy a pair of glasses annually?). Now evaluate these costs against the price of the cheapest health insurance extras-only policy which starts at less than $300 for many individuals. Not only is it good value but it also protects you if you need other services you didn’t expect to need.

3) Will you want health insurance in the future?
Health insurance becomes critical as we get older. The Australian Government has introduced something called ‘lifetime health cover loading’ which makes it more expensive to get private health insurance after age 30 if you have never previously held a policy. For example, if you decide at age 40 take out private health insurance, it will cost you 20% more than someone who has been covered since their 20’s.

4) Will Medicare cover all the hospital costs if I get sick/injured?
When you are admitted to hospital Medicare covers only the Medicare benefits schedule (MBS) fee for medical costs. If the doctor or hospital charge more you will be out of pocket! It’s this ‘gap’ that private health insurance can help minimise. Medicare also doesn’t cover the cost of ambulance or other emergency services which can cost thousands.

So overall, even if you do not earn over $90,000 threshold as an individual and don’t expect to need a hospital over the next 12 months, purchasing a cheap health insurance policy is still great value.

Join on combined hospital and extras cover by December 31 to get one month free.*

Get a quote *For new members (if you have been a Frank Health Insurance member in the last 12 months, sorry you don’t qualify). Must pay first month to receive second month free. Offer ends 31 December, 2017.