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What is Medicare?

Medicare is the backbone of the Australian healthcare system – but it doesn’t cover everything, which is why private health insurance can help.

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James Martin

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Key takeaways

  • Medicare is a public healthcare scheme that gives Aussies (and some overseas visitors) access to health and hospital services at low or zero cost.
  • It pays for treatment in public hospitals and subsidises other health services and medicines.
  • Dental, optical and physio are 3 examples of services not covered by Medicare.

What is Medicare?

Medicare is Australia's universal health system. It ensures that all Australians, permanent residents and some overseas visitors have little or no out-of-pocket expenses when they need to go to the hospital or visit a doctor.

However, Medicare won't cover everything — Medicare doesn't cover most dental work, for example. That's part of why more than half of all Australians also take out private health insurance.

Finder survey: How many people worry that Medicare will not be enough?

ResponseFemaleMale
Yes54.41%48.33%
No23.95%28.54%
Not sure21.65%23.13%
Source: Finder survey by Pure Profile of 1006 Australians, December 2023

What does medicare cover?

Medicare benefits can be placed in 3 main groups: cover for hospital treatment, cover for treatment outside a hospital and subsidies for medications.

Hospital treatments
Out of hospital
PBS

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Hospital treatments

Key features of hospital treatments

Medicare provides you with free treatment at a public hospital. Keep in mind that:

  • The hospital will appoint you a doctor. The Australian public hospital system is world-class, and in most cases the doctor who'll be appointed to you will have years of experience. Private hospital insurance allows policyholders to select who treats them and have some control over when they're admitted to hospital. Other perks can include a private room, if available.
  • If you choose to be treated as a private patient, either in a public or private hospital, Medicare generally covers 75% of the cost of your treatment. The other 25% needs to be paid out-of-pocket, either by you or your health plan, or a combination of these.
  • Ambulance costs aren't covered (unless you're a resident of Queensland or Tasmania). Medicare doesn't pay a benefit to cover the cost of ambulance transportation and treatment on the way to a hospital. Most health insurers and state ambulance services offer affordable policies or subscriptions to cover these costs.

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Out of hospital

Out of hospital

Medicare will cover the cost of going to see a doctor or general practitioner. If you need to see a specialist, Medicare will pay a benefit up to a percentage of the specialist's fee. The non-hospital related services that are eligible for benefit payments are outlined in more detail below.

Medical service typeWhat's covered
Consultations
  • General practitioner and specialist consultations.
Examinations
  • Treatments for an illness that doesn't require hospitalisation (for example, X-rays and blood tests).
Out-of-hospital surgery
  • Procedures performed at a doctor's surgery.
Dentistry and the Cleft Lip and Cleft Palate Scheme
  • Medicare pays a benefit for dental procedures performed at a hospital. Out-of-hospital dental procedures are not covered except for diagnostic imaging services or administration of anaesthesia for dental procedures.
  • The Cleft Lip and Cleft Palate Scheme includes orthodontic procedures, tooth extraction, prosthodontics services and maxillofacial surgery.
Optometrist
  • Initial consultations and eye examinations.
Chronic disease management
  • Treatment of a chronic or terminal illness through a GP management and Team Care Arrangements.

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PBS

PBS

Medicare also covers the cost of some prescription medications under the Pharmaceutical Benefits Scheme (PBS).

  • The PBS Schedule outlines which medications are subsidised by the government and the price of the drug. Dentists and optometrists have a schedule for patients too.
  • Even with the PBS, you may be responsible for paying part of the cost of the medication. The amount that's covered by the PBS varies depending on the medication.
  • In many cases, you will be able to choose between 2 versions of the same drug, although the benefit will remain the same so if one is more expensive than the other you will have to make up the difference.
  • You're eligible for further concessions on the price of medication under the Medicare Safety Net if your out-of-pocket expenses reach the safety-net threshold.

What doesn't Medicare cover?

There are a number of hospital and non-hospital related services and treatments that aren't covered by Medicare. These include as follows:

Hospital
Out of hospital

How do out-of-pocket expenses work?

An out-of-pocket expense, also known as "the gap", is essentially the difference between how much a doctor charges and the rebate you get from Medicare.

Medicare rebates are paid as a percentage of the overall bill for a health service. This fee can be up to 100% for consultations provided by a GP.

To avoid out-of-pocket expenses, you can restrict your doctor's visits to medical centres and practices that offer bulk billing. Alternatively, you could take out private health insurance, which reduces or in some cases fully covers these extra costs.

The Medicare benefit for getting specialist treatment only covers 75-85% of the overall cost. In this case:

  • You'll have to pay "the gap" amount, and
  • Any out-of-pocket expense, if the consulting specialist charges more than the schedule fee

The Medicare Benefits Schedule (MBS) lists all the Medicare rebates available for medical services in Australia.

What exactly is "bulk billing"?

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Bulk billing

A doctor sets their fees according to the benefit costs outlined in the MBS, meaning there won't be any cost to the patient. There's no out-of-pocket expenses or gap payments to worry about. Ask if a GP offers bulk billing before you make a booking.

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Non bulk-billing

Many GPs and specialists won't offer bulk billing, and will usually charge a fee higher than that listed in the MBS. You might get discounted rates if you're a concession or pension card holder. The gap between your rebate from Medicare and the consultation fee is the amount you must pay.

Who is eligible for Medicare?

General Dental

Australian citizens

Medicare is available to all permanent residents (including holders of Resident Return visas) and Australian citizens living in Australia.

Major Dental

Citizens from other countries

You're eligible for some cover under Medicare if you're a New Zealand citizen living in Australia, applying for Australian permanent residency, or from a country that has a Reciprocal Health Care Agreement with Australia.

Medicare vs private health insurance

Having access to top-quality health care for free, or at a subsidised price, is not something that's available everywhere in the world, and the Australian public health system does a good job if you need urgent medical treatment.

On the other hand, you can typically enjoy more choice and flexibility as a private patient, and private health insurance can make your treatment much more affordable. Benefits include your choice of doctor, admittance when you need it, a private room, and more, as our guide to public vs private healthcare explains.

Pros and cons of private health insurance

Pros

  • Benefit from a more individual level of care as a private patient.
  • Surgery wait times can be much lower if you go private, instead of opting for public treatment.
  • You can claim money back on health services that aren't covered by Medicare.
  • Some can avoid government surcharges, such as the Lifetime Health Cover Loading and the Medicare Levy Surcharge (see below), by having private cover.

Cons

  • Top tier plans, such as Gold insurance, can be very expensive.
  • To cut the cost of many out-of-hospital expenses, you'll need to have Extras cover which will add more to your premium.
  • Policies have a number of excluded treatments you won't be able to claim against.
  • Even with insurance, you could still meet a range of out-of-pocket costs.

Tax and private health insurance

The Australian Government has adopted a carrot-and-stick approach by implementing tax levies and loadings for not being insured by a health fund, while offering rebates for taking out a policy.

Find out how you could get as much as 33% back on your premiums by claiming the private health insurance rebate. And get more details on how to avoid the Lifetime Health Cover Loading and the Medicare Levy Surcharge, if applicable.

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Editor

James Martin was the insurance editor at Finder. He has written on a range of insurance and finance topics for over 7 years. James often shares his insurance expertise as a media spokesperson and has appeared on Prime 7 News, WIN News, Insurance News, 7NEWS and The Guardian. He holds a Tier 1 General Insurance (General Advice) certification and a Tier 1 Generic Knowledge certification, both of which meet the requirements of ASIC Regulatory Guide 146 (RG146). See full bio

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James has written 218 Finder guides across topics including:
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