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Why get private hospital insurance?

Major General Gerard Fogarty (Ret’d)
6th June, 2017

More than 13 million Australians hold private hospital cover. Many make enormous financial sacrifices to maintain their cover – around 25% of them have an annual income of less than $30,000 and 50% earn less than $50,000.

But when you can be treated in a public hospital for free, you might wonder why you need private health insurance. Is it worth it?

It comes down to choice. And the peace of mind knowing you can receive the health care you need, where and when you need it.

Public versus private

While Medicare pays benefits towards health services for all Australians, private hospital insurance gives you more flexibility about how and when you can access treatment, doctors and hospitals.

It’s easy to say, “I don’t need private health insurance” – until you need hospital treatment.

The public health system under Medicare will see that you get immediate, life-saving emergency care. But for any treatment that can be delayed at least 24 hours, you will need to join the public hospital waiting list.

That could take a while. The amount of time someone needs to wait for public treatment has increased by 37% since 2001-02.

Just waiting to see a specialist in the public system can take ages. Then there’s the wait for a hospital bed. In the quarter ending 31 March 2017, the number of people waiting for treatment in a Victorian public hospital was 2,042. Of these, 93 semi-urgent (category 2) patients had to wait longer than 90 days for their treatment.

With private hospital cover, these people would receive the treatment they need almost immediately. Currently, close to two thirds of all non-emergency surgery in hospitals is paid for by private health insurance.

But it’s so expensive

Yes, the choice of timely treatment in the private system comes at a cost. Premiums must be paid – just like car and house insurance – whether you make a claim or not.

In the 12 months to December 2016, private health insurers funded $8.93 billion in private hospital accommodation benefits and medical specialist benefits were $2.21 billion. The total value of hospital treatment benefits paid by the health funds was $14.29 billion.

Imagine if you had to wait months for surgery. You’re not an emergency – but you’re in pain and can’t work or play with your kids. Or what if it’s your child who has a lengthy wait for treatment? Private hospital cover would see you treated and back at work (or school) quickly. That’s what you’re paying for.

Excess and exclusions

It’s possible to reduce the premium you pay for hospital cover by agreeing to pay an upfront contribution (or excess) if you go to hospital. The excess is usually payable per adult (or per policy with some funds) and is applied once per year when there’s a hospital admission.

Some young and healthy people can also reduce their premium by choosing private health cover that excludes certain treatment (such as joint replacements, for example). This type of ‘exclusionary’ or budget cover is not recommended for older people or families who need comprehensive cover for everything from obstetrics to coronary care.

Our public hospitals face huge demand for their services. Private health insurance helps relieve the pressure and delivers tangible benefits for patients with private cover.

Major General Gerard Fogarty (Ret’d)
Chief Executive Office
Defence Health

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