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Last Updated on 7 October 2019

Hospital cover: Everything you need to know

If you fall sick and need professional treatment, you’re likely to end up relying on one of two healthcare systems.  This will be either the public healthcare system (or Medicare) or the private healthcare system.

Under  Medicare, you will receive:

  • Free treatment as a public patient in a public hospital
  • Free or subsidised treatment by certain practitioners
  • Free eye tests by optometrists
  • Some tests and examinations e.g. pathology tests, X-rays etc.

The quality of care you will receive under Medicare is generally to a very high standard, however, you could also be subject to longer waiting times for:

  • The availability of a bed
  • Undergoing elective surgery
  • Treatment by the doctors available at the time of your admission

You also won’t be able to choose your own doctor (he or she will be appointed by the hospital), and will very likely have little or no say about which hospital you attend for your procedure or when it is carried out.

In addition, any treatment that is not considered to be an emergency will be considered ‘elective treatment’ and you will be placed on a public hospital waiting list.

Private Health Insurance – Why You Need It

Medicare, though excellent, does not offer comprehensive cover. For example, Medicare will typically not cover fertility treatments, physiotherapy, chiropractic treatment, occupational therapy etc. Therefore, Australians need to supplement their Medicare cover by purchasing private health insurance. Private health insurance typically comprises of:

  • Hospital insurance (this covers treatment in a private hospital or as a private patient in a public or private hospital)
  • Extras insurance (this covers the costs of certain non-hospital services, such as dental, optical, physio etc.)

Many health funds provide combined policies too. These provide a packaged cover that include both hospital and general / Extras treatment services.

The private health system enables you to receive treatment as a private patient in both private and public hospitals. As a result, you get to select which doctor treats you. You also enjoy greater flexibility in terms of being able to schedule any elective surgery you require.

Who is Buying Private Cover?

What is Hospital Cover?

Hospital cover denotes the component of health insurance cover that applies when you undergo treatment in a hospital. It gives you access to receiving treatment as a private patient:

  • In a hospital of your choice (from a list of approved hospitals)

    People of All Ages Could Require Hospital Treatment

  • By the doctor of your choosing

They also feature smaller (or no) waiting lists and take care of expenses such as:

  • Accommodation expenses
  • Theatre costs
  • Doctors, surgeons, and anaesthetists fees

Typically, Medicare will cover about 75 percent of the Medicare Benefits Schedule (MBS) fee towards associated medical costs. Your private hospital insurance can cover the remaining 25 percent. In some situations, the doctors might charge you amounts over the MBS fee. Depending on the extent of private hospital cover you have, you might also need to bear the costs for:

  • Hospital accommodation
  • Theatre fees
  • Intensive care
  • Drugs, dressings and other consumables
  • Prostheses or surgical implants
  • Diagnostic tests
  • Pharmaceuticals

To pre-empt the occurrence of situations like this, you could consider purchasing a comprehensive level of Hospital cover. Alternatively, you could look at “gap cover” offered by certain health funds. Gap cover takes care of some or all of the differences between the doctor’s fee and the combined benefit payable via the Medicare and Hospital cover.

What is “Gap Cover”?

Gap cover provides financial assistance when you need when you are charged above the MBS. The Medicare Benefit Schedule (MBS) is a listing or schedule that details the Medicare services subsidised by the Australian Government.

Typically, a “medical gap” takes place when a doctor charges a fee that is higher than the fee limits specified in the MBS. Therefore, unless your health fund has a gap cover arrangement in place with your doctor that covers all the doctor’s charges, you will need to pay the difference.

The Gap

To cover this gap, many health funds offer schemes such as:

  • The “No Gap” cover: Here, the doctor accepts the terms of the “No Gap” scheme offered by the health fund. As a result, you do not need to make any out-of-pocket payments.
  • The Known Gap cover: The doctor agrees to participate in the Known Gap scheme. As a result, you will need to pay a known gap fee for each procedure the doctor performs. Doctors will usually provide you with a list of out-of-pocket expenses prior to the procedure (known as an “informed financial consent”).

Ensure that you check whether your doctor is participating in a health fund’s gap cover arrangements before you receive hospital treatment. Also, ask your doctor about how much you may need to pay over and above your cover. Typically, doctors use a fund’s gap cover arrangement on a case-by-case basis.

An Overview of the Types of Hospital Cover and the Coverage Options Available

Private hospital cover provides certain levels of cover depending on your requirements. They are:

  • Full cover: The health fund covers the entire cost of a particular treatment
  • Partial cover: The health fund covers only part of a particular treatment
  • No (or excluded) cover: The health fund does not cover a particular treatment at all
  • Benefit limitation periods apply: The health fund imposes a longer than normal waiting period for covering a particular treatment – usually for reducing your premium

When you consider purchasing Hospital cover, you will need to select the cover options that best meet your requirements. Most health funds provide a wide range of cover options including:

Private hospital cover Pregnancy and birth related cover
Applicable for accommodation in a private hospital, this cover enables you to seek treatment from a doctor of your choice This provides antenatal and post-natal care
Assisted reproductive cover Heart surgery cover
This provides cover for treatments such as In-Vitro Fertilisation (IVF), artificial insemination etc. This covers surgical treatments for the heart e.g. open-heart surgery, by-pass surgery, angioplasty etc.
Major eye surgery cover Dialysis cover
This covers surgeries such as cataract and artificial lens surgery etc. This covers the expenses for the treatment of patients suffering from chronic renal failure
Joint replacement cover Non-cosmetic plastic surgery cover
This involves providing cover for the replacement of joints by prostheses This deals with covering expenses for medically significant procedures e.g. facial reconstruction following severe burns, skin cancer removal etc.
Sterilisation cover Cover for surgical weight loss procedures
This cover typically includes treatment expenses for vasectomy, hysterectomy etc. This provides cover for gastric banding related services
Palliative care cover Cover for psychiatric services
Offered to people who are dying, this cover deals with expenses incurred in providing the best quality of life and care to such individuals This provides cover for people requiring treatment for mental conditions such as depression, anxiety etc.
Rehabilitation cover Ambulance cover
This covers expenses arising from the individual’s recovery from an accident or a major surgery such as heart surgery, hip replacement etc. This provides cover for ambulance treatment, depending on the state in which you reside

What are Some of the Limitations of Private Hospital Cover?

Private health insurance cover will have certain limitations on hospital treatment. For example, your policy document might specify:

  • Exclusions that detail services not covered by the health fund
  • Restrictions that only provide a limited amount of cover (which implies a higher share of out-of-pocket expenses for you)
  • Benefit limitation periods that offer reduced benefits for a specified duration after the waiting period, before they provide complete benefits after this duration concludes
  • Expenses incurred by long stay patients whereby you might need to pay more for the cost of hospital accommodation if you stay in hospital for more than 35 days in a row
  • Room expenses whereby certain policies only provide coverage for the full cost of a shared room, but not of a single room

How do Exclusions and Restrictions in Your Hospital Cover Affect You?

When you purchase Hospital cover, you will generally do so based on your evaluation of your requirements. However, you will not always be able to foresee:

  • The kind of services that you will need and,
  • The timelines when you will need these services

For example, pregnancy and birth related services are one of the most common services listed in the exclusions and restrictions segment for policies. You might feel that this is fine when you purchase the cover. However, the situation might be different a few months or years down the line. In this scenario, your Hospital cover might not give you the kind of cover you need.

Possible remedies for overcoming a situation like the one listed above are to:

  • Wait for the specified duration to lapse before you avail of these services (this will not be worthwhile in emergency situations)
  • Pay for the service from your pocket as a private patient
  • Re-evaluate your policy needs on a regular basis to ensure your current health insurance product meets your requirements

What are the Possible Solutions for Reducing or Minimising the Impact of Exclusions and Restrictions in Your Hospital Cover?

When you purchase a private hospital cover, scrutinise the exclusions and restrictions carefully. Some policies will reduce or remove exclusions and restrictions as part of a promotion, or waive them entirely if you sign up to a higher level of cover. Other ways by which you could minimise the effects of exclusions and restrictions in your hospital cover include:

  • Reading the exclusions and restrictions specified in the policy document so that you are aware of the cover your private health insurance provides
  • Reviewing the Benefit Limitation Periods (BLPs) applicable on certain procedures in your policy
  • Reviewing your private hospital cover each year and making the necessary changes at the time of renewal
  • Upgrading your private health insurance policy for including the services you need as a private patient (there may be a waiting period before you can be covered for certain services)

What are Waiting Periods?

You will need to serve a waiting period when:

  • You increase your level of cover
  • You take out a new private health insurance policy

Waiting periods serve as a protection to the members of the fund. They ensure that policyholders cannot make a large claim soon after joining the fund. These individuals typically end up cancelling their policies thereafter. This behaviour would be detrimental to the fund, as it would result in increased premiums for the rest of members in the fund.

The government prescribes the maximum waiting periods that funds can impose for hospital treatment. The table below provides details on the waiting periods that funds usually impose on their members.

12 months for pre-existing conditions 12 months for pregnancy services (obstetrics)
Pre-existing conditions denote any ailments, illnesses or conditions that an individual had, during the six months prior to:

  • Joining a hospital table or,
  • Receiving an upgrade to a higher hospital table

It is not necessary for the individual or the individual’s doctor to know:

  • What the condition was or,
  • Whether the condition had been diagnosed
Individuals planning to become pregnant and requiring cover will need to purchase appropriate health cover for themselves and the newborn well in advance – prior to becoming pregnantThe mother-to-be will need to serve the complete waiting period before taking admission in a hospital for claiming benefits.
Two months for specific conditions Two months in all other circumstances
this would include services like:

  • Psychiatric care
  • Rehabilitation
  • Palliative care
Individual health funds will set the waiting periods for general treatment (ancillary or extras) cover.

Do I Earn Any Tax Rebates when I Purchase Private Health Insurance?

The Australian Government provides rebates to people purchasing private health insurance. These include:

The Australian Government Rebate on Private Health Insurance

This offers a discount to people purchasing private health insurance, based on their levels of income.

For 2016-17, the tables below specify the income thresholds and the rebates applicable respectively.

The Purchaser Profile Full Rebate Tier 1 Tier 2 Tier 3
Single Less than $90,000 $90,001 to $105,000 $105,001 to $140,000 $140,001 and above
Couples Or Families Less than $180,000 $180,001 to $210,000 $210,001 to $280,000 $280,001 and above


  • Families with children receive an increased threshold of $1,500 for each dependent child after the first
  • This is also applicable for single parents and couples with dependent children
The Purchaser Profile Full Rebate Tier 1 Tier 2 Tier 3
Under 65 years 25.415 percent 16.943 percent 8.471 percent Nil
From 65 years to 69 years 29.651  percent 21.180 percent 12.707 percent Nil
70 years and above 33.887 percent 25.415 percent 16.943 percent Nil

The Medicare Levy Surcharge (MLS)

Taxpayers typically need to pay a 2  percent Medicare levy. The MLS is an additional tax levied on Australians who:

  • Have income levels above the MLS thresholds
  • Don’t have private hospital cover

For 2016-17, the tables below specify the income thresholds and the levies applicable respectively.

The Purchaser Profile No Change Tier 1 Tier 2 Tier 3
Single Less than $90,000 $90,001 to $105,000 $105,001 to $140,000 $140,001 and above
Couples Or Families Less than $180,000 $180,001 to $210,000 $210,001 to $280,000 $280,001 and above


  • Families with children receive an increased threshold of $1,500 for each dependent child after the first
  • This is also applicable for single parents and couples with dependent children

If you want to avoid paying the MLS, you will need to consider purchasing hospital cover with a hospital excess of:

  • $500 or less for singles (per calendar year) and,
  • $1,000 or less for couples or families (per calendar year)

Final Things to Consider when Purchasing Hospital Cover

The Australian Government prescribes a standard list of features for hospital cover. All health funds need to disclose whether they cover these features in their health insurance policies. These features comprise:

Healthcare Spending Costs for Australians

  • Hospital accommodation
  • Theatre fees
  • Intensive care
  • Drugs, dressings and other consumables
  • Prostheses or surgical implants
  • Diagnostic tests
  • Pharmaceuticals and,
  • Any additional doctors’ fees

Hospital plans also cover other features and procedures. These could include features such as broken limbs, cancer treatment etc. However, they do not need to disclose the coverage they provide for these features in their Standard Information Sheets.

Therefore, when you purchase hospital cover, check your policy document for:

  • The cover provided
  • The exclusions and restrictions
  • The plans that provide cover for the services and procedures you require
  • The waiting periods for certain features (including pre-existing conditions)
  • The hospitals that participate in your health fund
  • Any cost reduction options including co-payment, excess, premium packages, per-night caps

Relying solely on your Medicare cover for treatment in hospitals may not be sufficient. When you need comprehensive cover without having to look at lengthy waiting lists on non emergency surgery, you need private health insurance. Private hospital and Extras cover will enable you to obtain treatment at the hospital of your choice, from a doctor of your choosing, at a time that is more convenient to you.

Disclaimer: The above information is correct and current at the time of publication.

Disclaimer: The above information is correct and current at the time of publication

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