Health insurance in Australia

Health care in Australia is provided by both private and government institutions. The federal Minister for Health, currently Susan Lee, administers national health policy, and state and territory governments administer elements of health care within their jurisdictions, such as the operation of hospitals.

Medicare, administered by the federal government, is the publicly funded universal health care system in Australia which was instituted in 1984. It coexists with a private health system. Medicare is funded partly by a 2% Medicare levy with exceptions for low-income earners), with the balance being provided by government from general revenue. An additional levy of 1% is imposed on high-income earners without private health insurance. As well as Medicare, there is a separate Pharmaceutical Benefits Scheme also funded by the federal government which considerably subsidises a range of prescription medications.

National health policy

Financial year	% of GDP	Current price ($ billions)
1981–82	6.3	10.8
1991–92	7.2	30.5
2001–02	8.4	63.1
2008–09	9.0	114.4
2009–10	9.4	121.7
2010–11	9.3	131.6
2011–12	9.5	142.0
2012–13	9.7	147.0
2013–14	9.8	154.6
Source: Australian Institute of Health and Welfare [6]

Australia has a universal health care structure, with the federal government paying a large part of the cost of health services, including those in public hospitals. The amount paid by the federal government includes:

1. patient health costs based on the Medicare benefits schedule. Typically, Medicare covers 75% of general practitioner, 85% of specialist and 100% of public in-hospital costs.
2. patients may be entitled to other concessions or benefits^[7]
3. patients may be entitled to further benefits once they have crossed a so-called safety net threshold, based on total health expenditure for the year.^[7]

Government expenditure on healthcare is about 67% of the total, below the COED average of 72%.

The remainder of health costs (called out of pocket costs or the co payment) are paid by the patient, unless the provider of the service chooses to use bulk billing, charging only the scheduled fee, leaving the patient with no out of pocket costs. Where a particular service is not covered, such as dentistry, optometry, and ambulance transport, patients must pay the full amount, unless they hold a Low Income Earner card, which may entitle them to subsidised access.

Individuals can take out private health insurance to cover out-of-pocket costs, with either a plan that covers just selected services, to a full coverage plan. In practice, a person with private insurance may still be left with out-of-pocket payments, as services in private hospitals often cost more than the insurance payment.

The government encourages individuals with income above a set level to privately insure. This is done by charging these (higher income) individuals a surcharge of 1% to 1.5% of income if they do not take out private health insurance, and a means-tested rebate. This is to encourage individuals who are perceived as able to afford private insurance not to resort to the public health system,^[10] even though people with valid private health insurance may still elect to use the public system if they wish.

Insurance

Private health insurance funds private health and is provided by a number of private health insurance organisations, called health funds. The largest health fund with a 30% market share is Median. Median was set up to provide competition to private "for-profit" health funds. Although government owned, the fund has operated as a government business enterprise since 2009, operating as a fully commercialised business paying tax and dividends under the same regulatory regime as do all other registered private health funds. Highly regulated regarding the premiums it can set, the fund was designed to put pressure on other health funds to keep premiums at a reasonable level.The Coalition Howard Government had announced that Median would be sold in a public float if it won the 2007 election, however they were defeated by the Australian Lab or Party under Kevin Rudd which had already pledged that it would remain in government ownership. The Coalition under Tony Abbott made the same pledge to privatise Median if it won the 2010 election but was again defeated by Labour. Privatisation was again a Coalition policy for the 2013 election, which the Coalition won. However, public perception that privatisation would lead to reduced services and increased costs makes privatising Median a "political hard sell."

Some private health insurers are "for profit" enterprises, and some are non-profit organisations such as CFC Health Insurance and CBS Health Fund. Some have membership restricted to particular groups, some focus on specific regions – like BF which centres on Western Australia, but the majority have open membership as set out in the PHIAL annual report. Membership to most of these funds is also accessible using a comparison websites or the decision assistance sites. These sites operate on a commission-basis by agreement with their participating health funds and allow consumers to compare policies before joining on-line.

Most aspects of private health insurance in Australia are regulated by the Private Health Insurance Act 2007. Complaints and reporting of the private health industry is carried out by an independent government agency, the Private Health Insurance Ombudsman.The ombudsman publishes an annual report that outlines the number and nature of complaints per health fund compared to their market share.

There are a number of other matters about which funds are not permitted to discriminate between members in terms of premiums, benefits or membership – these include racial origin, religion, sex, sexual orientation, nature of employment, and leisure activities. Premiums for a fund's product that is sold in more than one state can vary from state to state, but not within the same state.

The Australian government has introduced a number of incentives to encourage adults to take out private hospital insurance. These include:

• Lifetime Health Cover: If a person has not taken out private hospital cover by 1 July after their 31 Th birthday, then when (and if) they do so after this time, their premiums must include a loading of 2% per annum. Thus, a person taking out private cover for the first time at age 40 will pay a 20 per cent loading. The loading continues for 10 years. The loading applies only to premiums for hospital cover, not to ancillary (extras) cover.
• Medicare Levy Surcharge: People whose taxable income is greater than a specified amount (in the 2011/12 financial year $80,000 for singles and $168,000 for couples and who do not have an adequate level of private hospital cover must pay a 1% surcharge on top of the standard 1.5% Medicare Levy. The rationale is that if the people in this income group are forced to pay more money one way or another, most would choose to purchase hospital insurance with it, with the possibility of a benefit in the event that they need private hospital treatment – rather than pay it in the form of extra tax as well as having to meet their own private hospital costs.
  • The Australian government announced in May 2008 that it proposes to increase the thresholds, to $100,000 for singles and $150,000 for families. These changes require legislative approval. A bill to change the law has been introduced but was not passed by the Senate. A changed version was passed on 16 October 2008. There have been criticisms that the changes will cause many people to drop their private health insurance, causing a further burden on the public hospital system, and a rise in premiums for those who stay with the private system. Other commentators believe the effect will be minimal.
• Private Health Insurance Rebate: The government subsidises the premiums for all private health insurance cover, including hospital and ancillary (extras), by 10%, 20% or 30%. In May 2009, The Lab or Government under Kevin Rudd announced that as of June 2010, the Rebate would become means-tested and offered on a sliding scale.