Should I Have Private Health or Not?

The Money: Faith and Finance Team crunch the numbers of the costs of keeping us well

Key points:

• Private health insurance can offer faster access to care and cover costs not included in Medicare.
• Government policies such as the Medicare Levy Surcharge and Lifetime Health Cover influence decisions.
• While it provides peace of mind, rising premiums mean it may not always make financial sense for everyone.

As costs of living continue to bite, you might be weighing up what to do about paying for health care.

Australia is blessed to have Medicare that subsidises so much for citizens, permanent residents and our New Zealand friends.

But more than 15 million Australians (according to most recent figures) hold some level of private health insurance.

On Money: Faith and Finance, Hope Mornings Ben McEachen and Sydney accountant Pete Burrows broke down the profit and loss of private health.

“The Federal Government likes to encourage people to use the public system but not to overburden it,” Pete said.

One of the ways it does this is by applying the Medicare Levy Surcharge to those without “appropriate level of private patient hospital care” or if you earn more than $101,000 (as an individual) or more than $202,000 (household total).

This is on top of the Medicare Levy that uses 2 per cent of every Australians’ taxable income to fund Medicare.

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Also, Lifetime Health Cover Loading means if you don’t have private health insurance before you turn 31, it becomes more expensive as you get older. 

“In a sense, the Government does slug you for not being in a health fund,” Pete said.

“Some of my clients have had the conversation around: ‘Well, shouldn’t I just be in a health fund anyway?'”

Benefits of Private Health Cover

Private health can cover what Medicare does not.

Even though 3 to 4 per cent of policies had exclusions in 2000 but “now it is around 65 per cent”, extras and benefits of private health remain.

From reduced wait times to choosing a specialist or being able to stay at a private hospital, insurance can be valuable or crucial to your specific conditions.

Plus, the difference in financial outlay can be significant depending on the healthcare you require.

Put another way, private health can foot bills which you might be unable yourself to pay.

Despite how you often must pay an excess, your insurer may spend eye-watering amounts on what you need.

Pete gave the example of someone experiencing ongoing pain who requires surgery. 

“The cost of getting elective surgery and you had to pay for it yourself, would blow most people’s [finances] out of the water.”

Costs of Private Health Cover

Like any insurance, private health is paying money for some things which may or may not happen.

Ben had private health cover until his mid 30s when he and his wife discussed it more seriously.

“I had the insurance because it is what my parents did, but I came to realise what I was paying into it did not seem worth it,” Ben said.

“People sometimes stay in it out of habit,” Pete added.

Ben barely used the benefits and coverage of his private health insurance and it “felt like paying money for nothing”.

Ben recognised that his health overall has not demanded major medical expenses, but that could change. Still, his family budgets for health care in light of previous and possible expenses.

Appreciating every individual person’s needs are different, Pete said that his personal opinion is “it’s hard to make private health insurance stack up on a purely financial level”.

Health insurance tends to rise with inflation, according to Pete, yet Health Minister Mark Butler approved an average 4.41 per cent increase – the biggest jump since 2017. 

Alongside rising cost, Pete noted that retirees and those not working must pay private health insurance from a fixed income. 

“Being in a private health fund will give you peace of mind but it’s going to take a piece of your wallet,” Pete said.

Listen to the full episode in the player above.

Feature image: Canva Pro