Medicare Australia Safety Net: Levy, Surcharge & Private Cover
In Australia, we’re lucky enough to have Medicare — a tax-funded public health system that covers most of the basics without making you sell your kidney.
But there’s a lot more to it once you scratch the surface.
Medicare: Your Public Health Safety Net
Medicare covers GP visits, public hospital stays, part of specialist consults, and part of your prescription meds.
You help fund it through the Medicare Levy — 2% of your taxable income if you earn over a certain amount.
(You’re paying for it whether you use it or not, mate.)
If you go to a bulk-billing doctor, your visit costs you zero dollars — no tapping, no awkward "do I pay now?" moments.
But if your doctor doesn’t bulk bill?
You’ll meet the gap fee — that awkward amount between what Medicare covers and what the doctor actually charges.
What’s the Medicare Levy Surcharge?
If you’re earning over $97k (single) or $94k (family) and you don't have private hospital insurance, you’ll cop an extra 1–1.5% tax called the Medicare Levy Surcharge.
It’s the government’s way of saying “Get private insurance or pay up, champ.”
Private Health Insurance: Do You Need It?
Private insurance in Australia comes in two main flavours:
Hospital cover (for private hospital treatment, surgery, etc.)
Extras cover (for the stuff Medicare won’t touch — like dental, physio, glasses, and sometimes ambulance)
Having private hospital cover can:
Let you dodge public hospital waitlists
Let you choose your doctor and hospital
Save you from paying the Medicare Levy Surcharge
Sometimes make you feel very smug in a hospital gown
Extras cover is for the everyday bits that add up — dental checkups, new glasses, physio visits and so on. It’s optional, but a lot of people get a combo deal (hospital + extras) to make it worthwhile.
Key Terms You’ll Hear (Much Less Convoluted Than In The US)
Premium: Your monthly payment to the insurance company.
Excess: A set amount you’ll pay upfront when you are admitted to the hospital (higher excess = cheaper premium).You pay it before the health insurer starts throwing bucks for your hospital treatment. You agree with you insurer about this amount before you sign up for your insurance plan.
Co-payment: A daily fee for each day you're in hospital, depending on your policy.
Waiting periods: You can't claim for everything straight away. Usually 2 months for basics, 12 months for pregnancy and pre-existing conditions.
Lifetime Health Cover (LHC) loading:
Didn’t get private hospital cover by July 1st after turning 31?
You’ll pay 2% extra on your premiums for every year you delayed. It stacks up to a 70% penalty. Ouch.Don’t Forget: The Government Helps Out
If your income is below a certain threshold, you might qualify for a Private Health Insurance Rebate, meaning the government will cover part of your premium.
You’ll either get it as a discount upfront, or back at tax time. (Not too shabby.)
Also, thanks to the Pharmaceutical Benefits Scheme (PBS), prescription meds are a lot cheaper through the public system than if you bought them retail. From 1st January 2025, you may pay up to $31.60 for the medicine which is included on the PBS list (and just $7.70 if you have a concession card). The rest will be paid by the Australian Goverment, even if one vial/box of tablets costs a few thousands dollars.
Quick Example:
You're 35, earning $100k, and don’t have hospital cover.
You’re paying 2% Medicare Levy
You’re also paying ~1.25% Medicare Levy Surcharge
You’re racking up Lifetime Health Cover loading every year you delay getting hospital cover
Moral of the story? Even if you don't think you need private health insurance, sometimes it's cheaper overall just to have it.