Lifestyle and Leisure
Australian health system explained
The Australian health system is recognised as a system which efficiently combines both the public and private sector health service providers
The Australian public health system is essentially funded through Medicare and the private health system through private health insurance.
Who is eligible for Medicare?
You are eligible to enrol for Medicare if you reside in Australia and are an Australian or New Zealand citizen or the holder of an Australian permanent resident visa. It is important to understand that the eligibility to enrol for Medicare does not extend to holders of an Australian temporary resident visa, irrespective of the length of the stay they're under. One exception to this non-eligible class of persons is the holder of a United Kingdom passport – under certain reciprocity arrangements with the NHS a holder of an Australian temporary visa under a UK passport will be eligible to enrol for Medicare. Examples of eligible Australian permanent visa holders include skilled-based visas, business-based visas and the family-based visas. Examples of ineligible Australian temporary visa holders include the initial entry student skilled-based visas, the initial entry employer sponsored and contractor type visas and the provisional entry business-based visas and the family-based visas.
What does Medicare cover?
In the case of in-hospital services Medicare covers:
If you choose to be treated in a public hospital, Medicare covers the whole cost including the accommodation and all treatment by doctors and specialists.
If you choose to be treated in a private hospital, Medicare covers 75 per cent of the Medicare Schedule fee for doctors and specialists. You will need private health insurance for the hospital accommodation costs and the gap between other full medical service billings over the Medicare Schedule refund amounts.
In the case of out-of-hospital services, Medicare will again cover 85 per cent of the Medicare Schedule fee and you are responsible for the excess which is generally covered by your private health insurance. Such services include: Consultation fees for doctors and specialists, supporting medical procedures, including X-rays and pathology tests and eye tests performed by optometrists. Generally excluded from the abovementioned are most dental procedures, contact lenses and private hospital cover – again to be covered by private health insurance.
Do you pay for Medicare cover?
There is no direct fee charged to join the national Medicare system. Instead, the cost to run the national Medicare system is recovered indirectly by levying each Australian taxpayer a base rate of 1.5 per cent of his or her taxable income. Employers in Australia recover this base rate through the periodic PAYG tables.
In addition, although the taking out of private health insurance covers is voluntary, if an Australian taxpayer fails to take out such cover (and is a so-called high income earner) a further 1 per cent Medicare levy surcharge will be added to such taxpayer's liability. An important planning tip is for those entering Australia under an Australian temporary resident visa to apply for exemption from the Medicare levy charge. If you don't apply for the exemption certificate, you will not be refunded the Medicare levy collected, notwithstanding you did not and were not eligible for Medicare benefits. The exemption application form is also available from the Medicare website.
What incentives are available for private health cover?
As noted above, for holders of an Australian permanent resident visa it is voluntary whether you wish to take out private health insurance. So the issue of the incentives is relevant to this class of visa holder. However, also important to recognise in the case of an Australian temporary visa holder, is that it is generally a condition imposed by the Department of Immigration that such a visa holder must take out private health cover. The three main incentives available for persons who take out private health insurance in Australia are the 'lifetime health cover' concession, the federal government rebate benefit and the waiver of additional Medicare levy surcharge.
How does the lifetime health cover concession operate?
In order to lock in the lowest premium for life, a person needs to take out hospital insurance cover by 1st July following their 31st birthday. Thereafter, for each and every year that person fails to take out such cover, a loading for life is added to the premium at the cumulative rate of 2 per cent per year. For example, if a new Australian permanent resident migrant enters Australia at the age of 39 and fails to take out hospital insurance cover until the age of 45, they will pay 30 per cent more in premiums (as calculated to the default 30 years of age), even though his or her residence in Australia has only been for six years.
How much is the federal government rebate benefit?
For persons under the age of 65 the rebate is 30 per cent, for persons between the ages of 65-69 the rebate is 35 per cent and for persons over 70 is 40 per cent. The rebate is applied annually as a reduction to the health insurance premium then payable.
When is the Medicare levy surcharge of 1 per cent applied?
The Medicare levy surcharge of 1 per cent is applied to high income earners who fail to take out health insurance cover in any particular tax year. A high income earner is a single person deriving annual taxable income of greater than AUS$50,000. In the case of a family or couple the threshold is annual taxable income greater than AUS$100,000 combined.
Can I obtain a tax deduction for my medical expenses?
No. You do not obtain a tax deduction of net medical expenses incurred or for private health insurance cover paid. However, you are entitled to a tax offset determined at the flat rate of 20 per cent for all medical and pharmaceutical expenses incurred annually in excess of the present AUS$1,500 medical threshold.
What are the planning tips on entry to Australia?
Personally, I would recommends the following planning points:
Check your visa class, and if eligible enrol the visa holder and the family unit for Medicare at the earliest time of entry;
If you are not eligible for Medicare apply for an annual exemption certificate.
Obtain advice on any prescribed waiting periods and register for 'safety net benefits' if medical expenditures are likely to be high.
Irrespective of visa class, take out private health insurance at the earliest time of entry in order to access all the concessions.
Check with Private Health Insurance Administration for all the health insurance providers in the area you settle in and obtain two quotes for comparative purposes (cost and extent of cover); and finally, retain medical expense vouchers for the tax year end claiming of the tax offset, where applicable.
Written by Orlando J Fernandes, the principal of Passport to Australia, a migration consultancy based in Perth
For further information:
Medicare
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