Health insurance for seniors

Private hospital insurance covers some or all your healthcare costs in a private hospital when you’re admitted as a private patient. With hospital cover, you can be treated in a private hospital, choose your treating doctor (if they’re available), stay in a private hospital room (if one is available) and enjoy greater flexibility in scheduling your medical procedures. The services you have access to will depend on your level of hospital cover, but some inpatient treatments that may benefit seniors in particular include:

• Heart surgery, including bypass surgery, angiograms and stents
• Joint replacement, including surgery and replacement of joints
• Major eye surgery, including cataract surgery
• Cancer treatments
• Palliative care
• Renal dialysis.

This type of health insurance subsidises out-of-hospital care that Medicare doesn’t pay a benefit towards, such as dental work, prescription glasses and physio appointments. An extras policy can include:

• Optical services, which can cover prescribed glasses and contact lenses
• Physiotherapy and occupational therapy, which can include exercise programs, manual therapies and electrotherapy techniques
• Remedial massage to treat injuries and encourage recovery
• Chiropractic for the treatment of health issues related to nerves, muscles and skeletons
• Podiatry and orthotics
• Non-PBS prescription medicines
• Speech therapy (may include post-stroke treatment)
• Hearing aids, including the design, repair and replacement of aids
• Major dental treatment (may include dentures and partial plates)
• Health aids and appliances, like glucose monitors, crutches and blood pressure monitors.

When you take out a private health insurance policy, there may be certain exclusions and restrictions you’ll need to be aware of. Your policy’s exclusions are a set of medical services that your health fund won’t pay any benefits towards if you receive treatment as a private inpatient.

Restrictions are similar in that they’ll limit the extent to which your health fund will pay towards certain services. This could mean they only pay towards treatment as a private patient in a public hospital or they only pay a small portion of the cost for treatment in a private hospital. This could lead to high out-of-pocket costs.

For hospital cover, the restrictions and exclusions are regulated by the government and depend on your health insurance tier. However, with extras cover, the excluded services are at your health fund’s discretion. There are also some natural therapies that all health funds can’t provide cover for.

Some commonly excluded or restricted services that affect seniors are:¹

• Hip and knee replacements
• Cardiac related services
• Cataracts and eye lens procedures
• Rehabilitation and psychiatric services (can be offered as a restricted benefit on all policies except Gold).

These services aren’t excluded on all policies, so it’s worth shopping around. For a full list of exclusions and restrictions, consult with your health fund and read the relevant policy brochure.

Private hospital insurance offers great benefits to seniors when their treatment is completed as an inpatient in a private hospital (e.g. surgeries for knee replacements or cataract removal). Extras cover can help towards the cost of specific items that don’t have a Medicare subsidy, such as prescription glasses, hearing aids or dental work, including dentures or partial plates.

On the other hand, Medicare pays towards services such as:

• Visits to your GP
• Eye exams with your optometrist
• Consultations with a hearing specialist.

One thing to keep in mind is that private hospital insurance doesn’t cover services that aren’t listed under the Medicare Benefits Schedule (MBS), such as general medical check-ups that might be required when you take out a life insurance policy. To fully understand what is and isn’t covered by your health insurance, refer to your health fund’s relevant policy brochure.

When it comes to private hospital treatment, Medicare covers 75% of the MBS fee, which is the price for various treatments as set by the Australian Government. Private hospital insurance policies cover the remaining 25% if you’re treated as a private patient in a private or public hospital.

Certain medical or hospital charges may exceed what you can claim back from both Medicare and your health insurance, as some health practitioners will charge above the MBS fee – this is known as the ‘gap’. To help reduce these out-of-pocket expenses, some health funds offer gap cover by making arrangements and agreements with some hospitals and doctors.

Some services Medicare doesn’t pay towards include:

• Hospital accommodation costs for private patients
• Cosmetic surgery that isn’t considered medically necessary (private hospital insurance cannot pay towards this either)
• Ambulance services
• Most dental examinations
• Acupuncture
• Home nursing
• Glasses and contact lenses
• Hearing aids
• The majority of physiotherapy, chiro, podiatry and psychology services.

When you’re treated through the public system, the time you need to wait is based on the urgency of your procedure. So, if you have a condition that affects your quality of life, but isn’t life threatening, you may have to wait a considerable amount of time. This is less of an issue when you have private hospital cover. Instead, you only need to observe private waiting times, which tend to be much shorter.

For example, if you didn’t have health insurance and needed hip replacement surgery, you would be placed on a public waiting list that could take a month or even longer to be treated. On average across Australia, 50% of people who received a total hip replacement via the public health system in 2022-23 waited 175 days or more for their surgery.²

However, if you have the right level of private hospital cover, you may only need to wait a matter of days or weeks (provided you’ve served your waiting periods) to undergo surgery and get back to living life to the fullest.

In short, private health insurance can help you get back to your day-to-day activities much faster.

The cost of health insurance largely depends on the type of cover you choose. Luckily, seniors over 65 years old can get a higher government rebate than younger policyholders to help reduce the cost of their premiums, as shown in the table below.³

Families include single parents, couples and de facto couples. You may be eligible for a private health insurance rebate if you:

• Are eligible for Medicare
• Have a complying health insurance product (either extras or hospital cover)
• Have an income below tier three for MLS purposes.

Lifetime Health Cover loading (LHC) is a loading that applies to anyone that hasn’t taken out and continuously held private hospital cover before 1 July following their 31^st birthday. This loading is charged on top of your base hospital premium at 2% for each year you haven’t held hospital cover after the age of 30. If you were born on or before 1 July 1934, you’ll be exempt from ever paying the LHC loading.

This rate is capped at a maximum of 70% and is removed once you have held an eligible hospital policy and paid the LHC loading continuously for 10 years.

The Medicare Levy Surcharge (MLS) applies to high-income earners and is a surcharge of up to 1.5% of their annual income if they don’t hold private hospital cover. This is not to be confused with the standard Medicare levy, which applies to all taxpayers, as the MLS is charged on top of the levy. You’ll only have to pay the MLS if you earn more than $97,000 as an individual or $194,000 as a couple or family.

So, if you’re still working or making money from investments and earn over these thresholds in taxable income, private hospital insurance could help prevent this added cost.

A senior pays the same base premium as any younger individual in their state for the same private health insurance policy. This is because private health insurance is community rated, which means everyone – no matter their age or condition – can purchase the same policy at the same base price.

However, the amount you pay could still differ depending on your eligibility for the LHC loading, Australian Government rebate or an age-based discount.

Waiting periods prevent people from claiming on parts of their health insurance policy within a particular timeframe. Without them, someone could sign up, claim on an expensive treatment and then cancel after receiving their benefit – without paying anything substantial on their policy. Allowing this would disadvantage other members and would result in increased health insurance premiums for all fund members.

Standard waiting periods for hospital cover are regulated by the Australian Government and are as follows:

• 12 months for pre-existing conditions, except for psychiatric care, rehabilitation or palliative care (where the period is 2 months)
• 12 months for obstetrics (pregnancy)
• 2 months in all other circumstances.

While they’re often similar, extras policy waiting periods are set by individual funds. Make sure you’re fully aware of all the waiting periods that apply to you.

A pre-existing health condition is any illness, ailment or condition that, in the opinion of a doctor appointed by your health fund, you had signs or symptoms of in the six months before you took out a policy or upgraded to a higher level of cover. This condition does not need to have been diagnosed by your doctor for it to be considered ‘pre-existing’.

There’s usually a 12-month waiting period before any pre-existing conditions can be covered by a hospital policy, except for rehabilitation, psychiatric care or palliative care, which have a 2-month wait.

You can still get extras and hospital benefits in your cover that will help you obtain treatment for pre-existing conditions at no extra premium; the only limitation is the waiting period may be longer on hospital policies. Once you’ve served the relevant waiting period, you’ll receive the full benefit associated with your condition – as long as it’s covered by the policy and meets all relevant eligibility criteria, of course.