Medicare vs Private Health Insurance
How Medicare and private health insurance work
At Frank, we’re all about keeping things simple. That’s why we’ve put together this easy-to-follow guide to help you understand how the Aussie healthcare system works, and to give you the lowdown on public and private healthcare so you can make the choice that’s right for you.
What is Medicare?
In Australia we’re lucky to have a strong public healthcare system that makes a range of medical services available to citizens, permanent residents, and some overseas visitors on a reciprocal healthcare visa at low or no cost, known as Medicare.
Under Medicare you can access free treatment as a public patient at a public hospital. Medicare also helps to cover some of the costs of seeing a GP (general practitioner), most specialists, other medical professionals out of a hospital setting (like for X-rays and CT scans), and for most prescription medicines (under the Pharmaceutical Benefits Scheme). Sometimes, these costs are fully covered or bulk-billed by Medicare (such as eye tests, or if you are seeing a bulk-billing GP).
Medicare’s a great safety net, but it doesn’t cover everything. Public hospitals can get pretty busy, and if your condition isn’t urgent or you've chosen elective surgery, you might be stuck in the waiting game. When you’re a public patient, you usually don’t get to choose your doctor or specialist, and depending on where you live, there might not be as many options nearby.
That’s why many Australians’ choose private health cover by providers like Frank, for more choice, shorter wait times, and a bit more control over their care.
What’s private health insurance?
So, what’s private health insurance? Private health insurance (PHI to those in the know) allows people to access treatment as a private patient in public and private hospitals and access benefits towards a range of health care costs that aren’t covered by Medicare.
Frank offers three different types of private health insurance cover:
- Hospital cover – for when you're admitted to hospital
- Extras cover – for services like chiro, physio, dental and optical
- Combined hospital and extras cover – for the best of both worlds
At Frank, we’re proud to offer simple and affordable cover for all life stages.
What’s the difference between Medicare and private health insurance?
Medicare is the public healthcare system, it helps cover things like GP visits, tests, scans, and most prescription medications under the Medicare Benefits Schedule (MBS). It’s funded by taxpayers through the Medicare Levy and the Medicare Levy Surcharge (MLS). As an elligible Australian or permanent resident, you can access treatment in public hospitals as a public patient.
Private health insurance, by funds like Frank, can give you more choice and flexibility. You can pick your doctor or specialist, access private hospitals, and often skip long wait times for elective surgeries. PHI can also help cover extras like dental, physio, and optical, things Medicare doesn’t usually pay towards.
Medicare vs private health insurance
Medicare and PHI both play a role in Australia’s healthcare system, giving people more choice to suit their needs. Medicare’s great for covering the basics, but having private health insurance means you can skip long wait times, choose your own doctor, and get access to extras that Medicare doesn’t usually cover.
The pros and cons of public healthcare
Pros
- Everyone in Australia (citizens and permanant residents) gets access to it
- Access to low cost or free treatment in public hospitals
- Some GP's bulk-bill meaning no out-of-pocket costs for you
- Some overseas visitors are covered under Reciprocal Healthcare Agreements
- Access to other services (such as mental health services) under a GP Health Plan
Cons
- Not everthing is covered by Medicare unless under a chronic condition management plan with a GP (like Podiatry)
- Longer wait times, especially for non-urgent procedures
- Limited choice of hospital, treating doctor, or when you will receive treatment
- If you're a higher-income earner you may have to pay an extra tax called the Medicare Levy Surcharge (MLS) if you do not hold an appropriate level of hospital cover
The pros and cons of PHI (combined hospital and extras cover)
Pros
- Community rating means premiums are not based on the amount you use your PHI or any pre-existing conditions
- Typically shorter wait times for elective surgery in a private hospital
- Age-based discount, which is a 2% reduction on premiums for each year that a person is aged under 30 when they choose eligible hospital cover. The highest age-based discount that can be applied is 10% for 18 to 25 year olds.
- Avoid paying the Medicare Levy Surcharge (MLS) with appropriate hospital cover if you are a higher-income earner
- Flexibility of choosing a cover that suits your healthcare needs
- More choice of your treating doctor and hospital
Cons
- All Australian health funds review their premiums and policies each year to ensure they can meet their members claims into the future. With rising cost of healthcare, this often means premiums increase each year in line with the annual premium review.
- You may need to serve waiting periods before you can claim on certain services
- If you wait until after 31 to get hospital cover, you’ll pay more with Lifetime Health Cover (LHC) loading
- You may still have out-of-pocket costs depending on the level of hospital and extras you choose
Why consider PHI?
Increased pressure on the public health system is leading more people to consider private health insurance. At Frank, we have loads of cover options to suit all walks of life. Private health insurance can really make a difference in prioritising your healthcare. It can give you quicker access to treatment, more choice when it comes to doctors and hospitals, and help reduce out-of-pocket costs, so you can focus more on feeling better.
Whether you're flying solo, coupled up, or have a whole crew to look after, Frank has cover options to suit every stage of life. It’s important to choose the right cover for you!
Why choose Frank?
Frank health insurance is simple, easy, not-for-profit health insurance for our members, not shareholders. And because that's all we do, we do it well. We talk straight, we don't complicate.
Choose your own provider
Less overheads means you pay less
30 day cooling off period
Hospital cover and tax
Are you a higher-income earner? To avoid paying the Medicare Levy Surcharge (MLS), you’ll need hospital cover. Any level of Frank hospital cover will do the trick, but extras only policies won't be any help to exempt you from paying the MLS.
How much you’ll pay for the MLS will depend on the tier your income falls under. These income threshold tiers are reviewed and updated on 1 July each year.
Turning 31 and the LHC
The Australian government incentivises taking out hospital cover earlier on in life through Lifetime Health Cover (LHC) loading. If you don’t have hospital cover by 1 July following your 31st birthday, you’ll start paying LHC loading. This adds 2% to your hospital premiums for every year you're over 30, up to a maximum of 70%. The loading stops increasing once you reach 65 years of age. Check out this handy calculator for more information.
Need more help?
Still need help exploring health insurance options to meet your needs or have questions about Frank?
FAQS
The answer to this question really depends on your individual circumstances. If you’re a higher-income earner you may be liable to pay the MLS, this is where hospital cover could help you avoid paying more tax. Extras cover alone won’t exempt you from paying the MLS.
Great question, any level of Frank hospital cover will help you avoid paying the MLS. For singles, an appropriate level of cover must have an excess of $750 or less. Couples or families must have an excess of $1,500 or less. Here’s where you can find info on MLS and hospital cover.
The Medicare Levy Surcharge (MLS) is an additional tax aimed at higher-income earners which is reviewed each year and calculated based on the income threshold tier you fall into.
While you can't claim private health insurance as a tax deduction, there are still a couple of tax-related perks that could make having cover worthwhile. The Medicare Levy Surcharge (MLS) and the Australian Government Rebate on private health insurance are designed to encourage Australians to take out private health insurance
The MLS is an additional tax aimed at higher- income earners based on your income tier, to avoid this extra tax you'll need hospital cover. Any Frank hospital cover will do the trick!
The AGR on private health insurance is an income-tested incentive that aims to help with the ongoing cost of private health insurance. When you sign up for hospital or extras cover, you’ll choose a rebate tier. This is based on the age of the oldest person on your policy, your income, and family status. It helps determine how much rebate you’re entitled to. You can claim it as a discount on your premium or get it back at tax time through the ATO, it’s up to you.
These incentives help balance the load between the public and private health systems, making sure everyone gets access to quality care.
Yes, Medicare covers all Australians for essential healthcare services through the public system, whether you have private health insurance or not.
Sometimes you might just use Medicare on its own, and other times you might tap into your private health cover as well. It all depends on what works best for you at the time.
Most Australian’s will pay the Medicare Levy which funds Australia’s public healthcare system, unless you are exempt such as a low-income earner. You can find out more about Medicare exemptions by visiting the ATO website.
If you are a higher-income earner you may also have to pay the Medicare Levy Surcharge (MLS) unless you have an appropriate level of private health insurance hospital cover. Extras only policies won't be any help to exempt you from paying the MLS.
The main difference is that Medicare is the public healthcare system that is funded by the government through taxpayer dollars. It covers essential healthcare for all Australian citizens and permanent residents.
Private health insurance is funded by members and offers more options for medical care. Hospital cover provides more options for the hospital you are treated in and the doctor you are treated by. It also helps with paying benefits towards the cost of your private hospital health care. Extras cover provides benefits towards some treatments not normally covered under Medicare, such as dental and physio.
This really depends on your personal situation and your healthcare needs, but there are many reasons why you might choose to take out private health insurance, such as access to more care options, or to avoid the MLS if you’re a higher-income earner.
Yes, Australians (and some overseas visitors) are eligible for Medicare whether you have private health insurance or not, you’ll be able to access the public healthcare system.
There are many reasons why people choose private health insurance, including:
- Peace of mind – knowing you’re covered and can access treatments when you need it.
- More choice – over your doctor, specialist, or healthcare provider.
- Hospital cover – can provide private hospital accommodation (where you may get your own room depending on availabilty).
- Avoid paying additional tax – taking out hospital cover earlier on in life can help you avoid the Lifetime Health Cover (LHC) Loading if you’re under the age of 31. Hospital cover can also help you avoid the Medicare Levy Surcharge (MLS) if your a higher-income earner.
- Extras cover – which helps pay benefits towards services not usually covered by Medicare such as dental, physiotherapy, optometry and chiropractic care.
Freedom limit, flex it your way
Because sometimes your needs might change a little, you have a $500 freedom limit to claim on your 7 included extras services.
And the longer you're with us, the more you can claim.
Get an extra $50 to claim on your freedom limit each full calendar year, with a maximum of $200 after 4 years of continual cover.
Freedom limit, flex it your way
Because sometimes your needs might change a little, you have a $700 freedom limit to claim on your 11 included extras services.
Plus an additional Optical limit. You can claim 100% back on optical up to your $150 annual limit.
And the longer you're with us, the more you can claim.
Get an extra $100 to claim on your freedom limit (excludes optical) each full calendar year, with a maximum of $400 after 4 years of continual cover. Your loyalty benefit will be available on 1 January after you've completed one full membership year.
