Annual health insurance premiums increased up to 8 per cent in April, and following the federal government’s forthcoming introduction of means testing, it’s likely to jump even higher. It’s no wonder that thousands of Australians are considering ditching their health insurance. If you’re in this camp, read on to discover the real difference between public and private health treatment, and find out if you really need private coverage.
The government recently announced changes to the Health Insurance rebate, which means that those earning $84,000 and above will pay more for their health insurance premiums than those who earn lower incomes.
|Less than $84,000
Less than $168,000
|$84,001 to 97,000
$168,001 to 194,000
|$97,001 to 130,000
$194,001 to 260,000
|More than $130,001
More than $260,001
|Medicare Levy Surcharge|
“If you’re a higher income earner and things are getting tight, don’t rush to dump your private hospital cover,” says CHOICE spokesperson Ingrid Just.
“If you do, you’ll be hit with the higher Medicare Levy Surcharge (currently 1-1.5 per cent of your taxable income) that comes on top of the Medicare Levy most people pay.”
However, a large number of people are expected to do just that, with Choice reporting findings that 30 per cent of Australians affected by private health rebate changes will drop or downgrade their cover due this new legislation, which came into effect July 1, 2012.
A 30 per cent dropout rate has far-reaching consequences for everyone. As Sinclair Davidson, professor in the School of Economics, Finance and Marketing at RMIT University, puts it, “A private health system can relieve some of the pressure on a public health system. Those who are willing and able to pay more for their health care can exit the public system and incur less pain and suffering. With fewer patients in the public system, waiting times are [therefore] reduced and/or the monetary cost of public health is reduced too. Everyone is a winner.”
In other words, if more people cancel their private health insurance policies, we’re all in trouble.
So what’s an everyday Australian to do? Read on for some pros and cons to help you work through the decision…
Private health insurance — pros
- Access to elective surgery, generally with your choice of doctor in your own private hospital room, without having to wait for months or even years.
- Depending on your policy, you have access to extras like physiotherapy, dental, chiropractic, glasses and pharmaceutical costs may be covered.
- If you join before you turn 31 you waive the Lifetime Health Cover (LHC) surcharge; it is currently 2 per cent for every year thereafter that you don’t join. Join at 32, pay a 2 per cent loading on your premium; join at 35, pay an 8 per cent loading, and so on.
- You can cancel your policy for up to 1,094 days (three years) without penalty to LHC surcharge.
- Private health insurance entitles you to waive the 1-1.5 per cent taxable income Medicare Levy Surcharge (MLS), which currently applies on any income above $84,000.
Private health insurance — cons
- Comes at a cost, despite federal government rebates.
- Rebates recently changed to make private coverage more expensive for those earning $84,000 or more.
- You must abide by a waiting period to be able to claim for specialist procedures and situations, like pregnancy, major dental work and elective surgeries.
Public Health — pros
- Health coverage is generally free, save for the Medicare levy of 1.5 per cent, which virtually all non-exempt Australian taxpayers are required to pay.
- Public hospitals have the capacity to handle a wider variety, number and intensity of cases.
- Available to all citizens and most permanent residents of Australia.
Public Health — cons
- Due to consistent and growing pressure on the public health system, waiting times for elective surgery can be long — up to two years for some procedures.
- Some forms of health care, such as dentistry, are not available for free in the public system.
- Medical services that are not clinically necessary, or surgery solely for cosmetic reasons, are not available for free.
- You don’t get to choose your doctor and you may have to share hospital room with other patients.
Still confused? Think of it this way: Some people view insurance as a way of saving money, but it’s not. The concept behind any type of insurance is to pay a certain amount, in order to receive coverage in the event that an unexpected large cost arises and causes financial difficulty.
If you believe the risk of an expensive health-related procedure or incident outweighs your capacity to pay for it, then sticking with your health insurance policy could be your best bet. If you have substantial savings in the bank that will help you cope with a health crisis, then consider resting your policy for a few months while you weigh up your options!