Medicare vs Private Health Insurance
While Medicare provides essential health services, private hospital cover can provide more options for your healthcare.
Learn more about how Medicare and private health insurance work independently and together below.
How the Australian healthcare system works
In Australia, we’re lucky to have access to a range of health services that can be accessed through both the public healthcare system, known as Medicare, and the private health sector.
Medicare allows people to access essential healthcare services at low or no cost, and is available to all Australian citizens, permanent residents, and some visitors on a reciprocal rights visa.
Private health insurance works alongside Medicare by providing benefits for members towards the cost of services that are not funded or only partially funded by Medicare, helping to reduce your out-of-pocket expenses. Read on to learn more about how the two health care systems can work together, and how they differ.
How private health insurance works with Medicare
Private health insurance hospital cover plays a key role in Australia’s healthcare system, offering people more choice and coverage than public hospital care alone. It allows people to access treatment as a private patient in both public and private hospitals, offers choice in your treating doctor, and typically faster access to elective surgery.
Most private health insurers also offer extras cover, which is health insurance that covers you for non-hospital services and treatments that aren’t normally covered by Medicare like chiropractic care, physiotherapy, and remedial massage.
Understanding Medicare
Medicare is funded by taxpayers through the Medicare Levy and the Medicare Levy Surcharge (MLS) for higher-income earners. It provides Australians, permanent residents, and eligible visitors on a reciprocal rights visa with access to public hospital treatment at low or no cost.
However, there are some limitations:
- You can’t choose your treating doctor or hospital.
- Wait times can be long, especially for non-urgent or elective procedures.
What Medicare covers
- Emergency or essential healthcare
- Most surgeries and procedures (wait times may apply for non-emergencies)
- In-hospital medicines
- Follow-up care related to your hospital treatment
In hospital services in a public hospital are free of charge for public patients covered under Medicare.
- Visits to GPs (general practioners), most specialists, and some other healthcare providers.
- Most prescription medicines through the Pharmaceutical Benefits Scheme (PBS).
- Some services are fully covered, like eligible eye tests or appointments with bulk-billing GPs (where the doctor bills Medicare directly and you pay nothing).
- You may need to pay a gap fee (out-of-pocket cost) for some services where Medicare does not cover the full amount.
- Ambulance and emergency transport (some Australian's are covered through their state government).
- Non-essential services, like physiotherapy or chiropractic care (except where a health care plan is in place with a GP) .
What private health insurance covers
GMHBA's hospital cover will pay benefits towards:
- Elligible medical and hospital accomodation costs (giving you the choice to be treated as a private patient in both public and private hospitals, this may include your choice of treating doctor, choice of hospital, and a private room where available).
- Upgraded cover in the event of an accident
- Excess waiver for same day stays
- Emergency ambulance cover
It's important to note that not all costs are covered as part of your private health insurance and you may still have out-of-pocket costs. What's covered under your hospital cover can vary depending on the type and level of cover you choose.
GMHBA's extras cover can provide benefits towards health services not generally covered by Medicare such as:
- General dental
- Physiotherapy
- Chiropractic
- Osteopathy
What's covered under your private health insurance extras cover will vary depending on the type and level of cover you choose. You can choose to combine your extras cover with hospital cover, or choose extras only, depending on your needs.
- Visits to your GP (general practitioner)
- Specialist consults outside of hospital
- Diagnostic imaging done outside of hospital (e.g. X-rays, MRIs)
- Pathology tests done outside of hospital (e.g. blood tests)
- Fees for emergency department visits (if you're not admitted to hospital)
- Non-medically neccessary proceedures (like cosmetic surgery)
- Alternative or natural therapies unless they meet specific clinical standards (e.g. reflexology)
- Other services (like TV hire, WIFI, newspapers, parking and guest meals)
There will be exclusions to what is covered by private health insurance depending on the type and level of your cover.
GMHBA offers three types of health insurance cover:
Health insurance that helps pay towards costs when you are admitted to hospital as a private patient. This applies whether you choose a public hospital or a private hospital.
It helps to pay for allied (or anxillary) health services that are generally not covered by Medicare.
Combined cover gives members access to private hospital care plus a range of out-of-hospital allied health services.
Pros and cons of public healthcare
Private health insurance and Medicare work together to offer Australians greater flexibility and access to more healthcare options, although there are some key differences on what each offers.
- Universal healthcare system available to every Australian citizen or permanent resident
- Access to low or no cost healthcare in a public hospital setting
- Low-cost or bulk-billed treatment by a general practitioner (GP)
- Reciprocal healthcare for some overseas visitors covered under Reciprocal Healthcare Agreements
- Access to other services under a GP Health Care Plan
- Some services and health care treatments are not covered by Medicare, like podiatry (without a chronic condition management plan)
- Elective surgery may have longer wait times; patients are prioritised on how urgent their treatment is
- Little choice in your own doctor, hospital, or when you will receive treatment
- Higher income earners may face an additional tax called the Medicare Levy Surcharge (MLS) if they do not hold an appropriate level of hospital cover
Pros and cons of private health insurance (combined hospital and extras cover)
Choosing to use private health insurance for a private hospital stay can help reduce out-of-pocket costs by covering expenses that Medicare doesn’t usually pay for such as accommodation, theatre fees, or specialist charges, provided those services are included in your policy.
Choosing to use private health insurance for a private hospital stay can help reduce out-of-pocket costs by covering expenses that Medicare doesn’t usually pay for such as accommodation, theatre fees, or specialist charges, provided those services are included in your policy.
- Private health insurance is community rated which means premiums are not based on factors like your health status, claims history (or your need to claim) or pre-existing conditions
- Typically shorter wait times for elective surgery in a private hospital
- The age-based discount for 18-25 year olds, which is a 2-10% reduction on premiums for each year that a person is aged under 30 when they purchase eligible hospital cover.
- Avoid paying the Medicare Levy Surcharge (MLS) with appropriate hospital cover if you are a higher income earner
- Flexibility of choosing a health cover that suits your healthcare needs
- More choice of your treating doctor or specialist and hospital
- Australian health funds review premiums annually to ensure they can meet future member claims. Due to rising healthcare costs, this sometimes results in premium increases
- You may need to serve waiting periods before you can claim on certain services
- Lifetime Health Cover (LHC) loading. If you take out hospital cover after turning 31, a 2% loading is added to your hospital cover premium for every year you didn't have cover. This is capped at 70% and removed after 10 years of continuous cover.
- With any level of hospital cover there can be gap fees. The benefits private health insurance can pay towards treatment may vary depending on your cover, and what your doctor or specialist charges
- There may be exclusions on benefits towards some treatments or services depending on your policy
Why choose private health insurance?
There are many reasons why you may choose to take out private health insurance, including:
- Peace of mind – confidence knowing you are covered and can access treatment when you need it
- More choice – greater freedom to choose your doctor, specialist, or healthcare provider
- Private hospital access – be treated in a private hospital, often with access to private rooms and shorter wait times
- Extras services – get help with the cost of services not normally covered by Medicare, such as dental care, physiotherapy, optical, and chiropractic treatments
- Avoid additional costs – taking out hospital cover earlier on in life if your a high income earner can help you avoid the MLS, and choosing hospital cover before you turn 31 can help you avoid the Lifetime Health Cover (LHC) Loading, which adds extra costs if you delay getting private health insurance
Deciding between private vs public can come down to personal preference and individual healthcare needs.
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Differences between hospital and extras cover
- Choice of hospital (hospital waiting lists still apply)
- Choose to be treated as a private patient in private and public hospitals
- Where available you may get your own room
- Choice of doctor and the timing of your admission (based on doctor availability)
- Helps cover some of the costs of extras services not generally covered by Medicare. This includes physio, optical, dental, chiro and more
- Choose which level of extras cover suits you best and whether you would prefer to get your benefit as either a set amount or a percentage amount back for each visit, up to your annual benefit limits
- Can be purchased as standalone extras-only policy, or as part of a combined hospital and extras package
Why choose GMHBA cover?
Accidents happen. That’s why when you take out any new GMHBA hospital cover you get accident protection.
All GMHBA hospital covers come with emergency ambulance cover as standard for eligible states.
In 2025, GMHBA has claimed the Canstar Outstanding Value Award – Hospital & Extras Insurance: Victoria.
Since 1934, we’ve believed that health insurance should be run to benefit members, not shareholders.
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FAQs
Yes, all Australians are covered by Medicare for essential healthcare services under the public system, regardless of whether they have private health insurance.
There may be times when you choose to claim Medicare benefits alone as a public patient, and times when you may use your private health insurance as well.
Private health insurance gives you more options when it comes to your healthcare, especially for services that Medicare doesn’t cover.
Hospital cover offers:
- More choice over your treating doctor for inpatient hospital treatment
- Access and coverage for care as a private patient in a public or private hospital, which can mean access to your own room or shorter waiting lists for elective surgery
Extras cover offers:
- Cover for benefits towards extras services like dental, physiotherapy, and optical care
The Australian government encourages and incentivises taking out private health insurance hospital cover to help reduce pressure on the public health system through the aged- based discount, Lifetime Health Cover Loading (LHC), and avoiding the MLS for high-income earners.
Medicare provides access for Australians to essential health services, but there are several areas it does not cover. These include:
- Dental care (except for some services for eligible children under the Child Dental Benefits Schedule)
- Optical, such as glasses and contact lenses (except for those eligible under MBS)
- Extras like chiropractic care, physiotherapy, podiatry, and myotherapy. (The exception is when these may be included and deemed clinically necessary under a GP management plan)
- Ambulance services (coverage does vary by state and eligibility for concession transport)
- Private hospital accommodation and choice of doctor (unless you have private health insurance)
Private health insurance in Australia gives people more control over their healthcare, with hospital cover offering access to private hospitals, choice of doctor, and potentially shorter wait times for elective surgeries. Additionally, hospital cover can provide financial benefits through government rebates and tax incentives. Extras cover helps cover services not included under Medicare, like dental, optical, and physiotherapy. For some people, taking out private health insurance is about peace of mind and knowing they are covered for those just in case moments.
Many Australians feel there is value to having private health insurance cover. But the worth of health insurance ultimately depends on personal circumstances and healthcare needs. Many people choose to take out private health insurance for the added peace of mind, access to more care options, or to avoid paying extra tax through the Medicare Levy Surcharge if you are a higher income earner.