Understanding the Australian Health Care System

Navigating the healthcare system in Australia can be complex.

While the Australian government provides a pretty good public health system with access to public hospital services free or at a lower cost, this isn’t always the best solution.

Public hospitals may have long wait times, and you might not have the choice of your preferred doctor.

That’s where private health insurance, and more specifically, hospital cover comes into the picture.

The Role of Private Health Insurance

Private health insurance allows Aussies to be treated as a private patient in either a public or private hospital.

With a private health insurance policy, you can potentially bypass waiting lists, have the peace of mind knowing you can choose your doctor, and possibly secure a private room.

However, there are four different levels of hospital cover:

As you go up the tiers, you’re covered for more clinical categories. However, your monthly or yearly premium also goes up.

What Does Basic Hospital Insurance Cover?

Basic health insurance policies will include (at a minimum)restricted hospital cover for the following three clinical categories:

  • Hospital psychiatric services: Basic health insurance includes hospital treatment and care for individuals with psychiatric, mental, addiction, or behavioural disorders. This covers a wide range of conditions such as schizophrenia, depression, eating disorders, and addiction therapy.
  • Rehabilitation: Basic health insurance offers hospital treatment for physical rehabilitation after surgery or illness. This includes both inpatient and day-patient rehabilitation services. Examples of rehabilitation programs covered under Basic health insurance are stroke recovery and cardiac rehabilitation.
  • Palliative care: Basic health insurance provides hospital treatment for quality-of-life care for patients with terminal illnesses. This includes treatments aimed at alleviating and managing pain for individuals in palliative care.
  • Bonus cover: ambulance cover (in some states) – In certain states, Basic level hospital policies may also include ambulance cover. This means that if your state government does not already provide coverage for emergency ambulance services, your Basic health insurance policy can contribute towards the costs.

Private Hospital Cover vs. Public Hospital

Private hospital cover allows access to private hospital treatment, reducing the wait times experienced in the public health system.

Moreover, it also offers extras cover that the public system doesn’t, like physiotherapy or ambulance cover.

Just be wary that you’ll still likely face some out-of-pocket expenses depending on your level of cover and the health services needed. Waiting periods also apply, depending on your health fund and the health service you need.

Medicare Levy Surcharge, Lifetime Health Cover Loading & Government Rebate

Medicare Levy Surcharge: Aussies earning over a certain taxable income without adequate private hospital cover are required to pay the Medicare Levy Surcharge (MLS) at tax time, an extra tax implemented by the federal government.

Lifetime Health Cover Loading: Another incentive to opt for private health insurance before your 31st birthday is the Lifetime Health Cover (LHC) loading. For every year you’re over 31 without hospital insurance, the LHC adds 2% on top of your premiums – a costly addition over a lifetime.

Government Rebate: To encourage Australians to take out private health insurance, the Australian government offers a private health insurance rebate. The rebate, applied at tax time, is income tested and can significantly reduce insurance premiums.

The good news is basic hospital cover with a maximum excess of $750 for singles or $1,500 for other policies will exempt you from the Medicare Levy Surcharge, LHC loading and make you eligible for the government rebate.


What’s the difference between hospital cover and extras cover?

Hospital cover helps you as a private patient in a hospital, covering costs like accommodation and operating theatre fees. Extras policies, or ancillary cover, help pay for services Medicare generally doesn’t cover, like physiotherapy or dental treatment.

What does the Medicare Levy Surcharge mean for me?

The Medicare Levy Surcharge is an extra tax for Australian earners above a certain income who don’t have a suitable level of private patient hospital cover. It’s designed to encourage individuals to take out private health insurance and reduce the burden on the public health system.

What level of hospital cover is right for me?

The right level of hospital cover for you depends on factors such as your healthcare needs, budget, and preferences. Assess your needs, consider your financial situation, and compare different policies to find the level of cover that aligns with your requirements.

Let CHI Find the Right Hospital Cover for Your Needs

If you’re feeling overwhelmed by the numerous options for private health cover, we’ve got you covered. Use our free online tool below to receive personalised health cover quotes from top health fund providers in Australia within minutes. Let us simplify your search and help you find the right health cover for your needs.