All Australian residents have access to Medicare, so why do half the population also decide to take out private health insurance? And what do they get out of it?
The biggest users of private health insurance hospital benefits are 60- to 79-year-olds. Women in their 20s and 30s also have a higher claim rate for maternity care.
Payments for extras is spread across all age groups, with the biggest component going to dental care, followed by optical, physiotherapy and chiropractic.
Choice, cost and public service
Our research shows that some people purchase private health insurance because they want more control over their health care, choice about the services they use and choice of doctor.
They perceive that private health insurance gives them benefits including shorter wait times, choice of the timing of appointments, better quality of care and security or “peace of mind”.
As one of our interviewees responded:
As a private patient I can … choose my treating specialist and I can say I’m available on these days, how does that work for you, rather than sitting on the wait list. I mean, it costs out of pocket, but I am lucky enough to be in a position that cost isn’t a huge barrier for me.
Another reason Australians commonly take out private health insurance is to avoid financial penalties.
Australia’s tax system encourages high-income earners to take out private health insurance as well as paying the 2% levy to help fund Medicare and the National Disability Insurance Scheme.
If they do not take out private health insurance, they pay a tax penalty called the Medicare Levy Surcharge:
People also take out private health insurance to access subsidies for allied health services such as visits to the dentists and the cost of glasses, which are not covered under Medicare.
Finally, our research shows some Australians purchase private health insurance because they perceive that this will reduce the burden on the public system:
We used our health fund, because we wanted to help the hospital out.
Hidden costs and surprises
Having private health insurance does not necessarily give people greater choice or access to health care. Access may be limited by what is available in the local area, or the ability to pay additional out-of-pocket costs.
Our research indicates that some people don’t know the type of policy they have, and what it covers. They may be paying too much or are not covered for procedures that they do need.
Consumers are also hit hard by the “unknown” or “hidden” costs of private services that are not covered in full by insurance. As one interviewee told us:
I probably didn’t research it properly to know what I’d be covered for, so I was surprised that I wasn’t covered, but I shouldn’t have been … Yeah I paid around almost A$5,000 for the surgeon and surgeon’s assistant and [am] only going to get the Medicare cover for that. Then also an anaesthetist … my private health insurance won’t cover that either.
Gap payments may include costs for the hospital stay, doctor’s fees, procedures, equipment and prosthesis. But there is very little information for consumers about the gap they’re expected to pay. The onus is on the patient, before they go to hospital, to ask their surgeon to estimate what their charges will be, and ask their health fund how much is covered with their policy.