Is Private Health Insurance Worth It?
I always had private health insurance from the very first paycheck it was the first thing I did. It had been demonstrated to me over and over again that private health insurance was essential for your long-term health. It ensured access to healthcare without waiting and without extra cost. Those days are gone. I no longer have a health insurance policy but I do have a form of insurance.
So currently in Australia, private health insurance covers your stay in hospital and anything that happens while a patient in hospital either for day surgery or as an inpatient. This includes pharmaceuticals, physiotherapist, and procedures by a surgeon with an anaesthetist and possibly an assistant if the surgery is complex.
But what about when you go and see a specialist – is this covered?
No. A consultation with a doctor, either a general practitioner or a specialist is only covered by Medicare in Australia. What drives how much you get back is the MBS – Medical Benefits Schedule. This is updated annually, but mostly the amounts you get back are way below what most consultants charge. For example the MBS fee for an initial consultation is $88.25 and Medicare pay 75% of this which is $75.05.*
A consultant will usually charge $200 and above for an initial consultation so you’re going to be out of pocket at least $120.00 on your first consult. Your follow up consultations will also be about $50.00 out of pocket each time you see the specialist.
Let’s talk about in hospital services that are supposed to be covered. These will only be totally covered with specialists who participate in the No Gap Scheme with the health funds. The specialists bill the health funds directly, and the fund pays them a higher rate for doing so, than if they charged the patient a gap payment. But more and more specialists are opting out of these agreements and charing the patient directly.
This means the patient has an out of pocket expense and this can range from anywhere between $200 to $10,000 or more depending on the type of surgery. You will also have an out of pocket expense for the anaesthetist, along the lines of $2,000.00 and you may also have an assistant in your operation who will also charge $500 or so out of pocket for major surgeries.
Your in hospital stay will be covered by the health fund, but your follow up appointments with your surgeon will not.
So, if you are like me, I paid into my health fund for my entire life. I rode the waves of increasing premiums until I just couldn’t afford them anymore. It was an extra mortgage payment per month and I was already struggling with the mortgage!
I also realised that if I did have to undergo an elective surgery, I wouldn’t be able to afford to even with insurance because of the out of pocket expenses. Anything that was an emergency would be dealt with in the public system, which where I am is quite good and I’m lucky to have access to it.
Because of the government pressure on hospitals to reduce their waiting times for elective surgeries, the wait isn’t as long as it used to be, although can sometimes go over a year which if you’re in pain is a long time no doubt.
I still don’t see it as worth it for patients with complex healthcare issues. These are usually prevalent from birth or early 20’s and most likely fall within the public healthcare system and can be managed there. The comfort of being admitted to a private hospital may be something to be ‘enjoyed’ once in a while but in the larger scheme of things, the extra out of pocket costs for this are not worth it.
Pregnancy is a popular item that people will join up for private insurance for to make sure they can choose their Obgyn and have a birth of their choosing in a private facility. Generally you need to be in the fund for at least 12 months before you fall pregnant and you will still have out of pocket expenses for seeing your ObGyn for each visit and also a labour management fee.
This is the way that ObGyn practitioners have found to get around the no gap payment that have been set by the private health insurance funds which disallow them from charging out of pocket costs. However, most private ObGyn do charge a labour management fee usually around $2000. So on top of your health insurance premiums you will be significantly out of pocket. You will also most likely have your baby seen by a paediatrician and those costs are also out of pocket and not covered by the fund.
The overriding benefit for this type of cover, is that your baby is immediately covered from birth so if they need extra medical attention you have some peace of mind but you will still have out of pocket expenses to consider. Generally if infants are unwell they take priority within the public system and most level 5 nurseries for really seriously ill babies are within the public hospital and have private beds available, so as a public patient you will still be in the same facility as a private patient as you would be as a public patient.
If you elect to become a patient in a private hospital the costs are significant and where the difficulty comes is when there is a complication. A mid-range procedure will see you anticipated to stay for two nights. That will be $4,500 at $1,500 a nigh. If you have a complication like an infection or have to go to surgery again, these costs are going to jump. So you need deep pockets just in case to cover the cost of being a patient in a private hospital.
Now I’m in my 50’s, it’s likely that something may break down and I will need some medical intervention so I put a plan in place.
Instead of paying the health insurance premiums, I opened up a separate savings account and put the cost of my last premium $270.00 after government rebate, into that account and don’t touch it. I act as if that was already debited from my account. That way if something happens, I at least have some money there to cover it, with the aim being that it will be build up over the next few years so that I will be completely covered.
For me, it works out far better than paying the same amount for a premium and then still being out of pocket to see a surgeon.
In my opinion, private health insurance is an unsustainable model in its current form and government policies to ensure that it stays viable and been worked around by practitioners to make sure that they get paid. The MBS is entirely inaccurate in valuing medical procedures. Doctors and consultants are not greedy, they are just trying to cover the costs of providing care. For example, a private health fund will pay $3,000 for a certain procedure. The cost of goods for providing that procedure by the doctor is $5,000 and then there is a profit margin for running his offices, after care etc of $2,000 so the charge is $7,000. He only does two of these a week because the procedure takes 4 hours. So if they charge directly to the fund they lose money each time in both costs of providing the procedure and their own time.
The funds argue that they are keeping in line with the MBS and the MBS stays firm on what healthcare should cost. The reality of both of these policies is far from the real world of actual medical costs. It’s a desperate attempt by the government to put all the blame on practitioners as being greedy and over-charging rather than admitting that they have under-budgetted healthcare costs significantly.
So no, private health insurance is not worth it. Instead start your own savings kept aside for healthcare and know that if there are out of pocket expenses above Medicare, you will have the funds to cover it.
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