Australia’s Healthcare System – Medicare, PBS & Private Health


Medicare is Australia’s universal tax-funded healthcare system, created in 1984.  It aims to provide access to adequate healthcare at little or no cost to all Australians in need of treatment, regardless of their age or income.

Covered by Medicare

  • GP consultation fees and specialist consultation fees if referred by GP
  • tests and examinations needed to treat disease (e.g. X-rays, blood tests, etc)
  • eye tests from optometrists
  • most procedures performed by a doctor
  • admission as a public patient in a public hospital

NOT Covered by Medicare

  • admission as a private patient
  • ambulance costs
  • dental services
  • home nursing
  • physiotherapy, occupational therapy, speech therapy, chiropractic services, podiatry, psychology (unless accessed in hospital care)
  • alternative therapies
  • glasses, contact lenses, hearing aids or other appliances
  • elective or cosmetic surgeries


Medicare is funded through taxation:

  • Medicare levy: all Australians pay a levy of 2% of their taxable income, unless their income is below a threshold.
  • Medicare levy surcharge: on top of the levy, high income earners without a certain level of private patient hospital cover (private health insurance) pay an extra 1-1.5% of their taxable income, depending on their income.
  • General taxation.

How Medicare Works

The government pays for all or most of the services used (if they are covered services).

Some services are bulk billed, so the customer pays nothing and the government is billed directly by the service cost.  Otherwise, the customer pays for the service and then lodges a claim with medicare to receive money back for the service.

When the government does not pay for all of the fee charged by a health service, the additional money is regarded as an out-of-pocket expense, as this is how much the patient pays for directly.

Medicare and PBS Safety Net

Once a certain amount of out-of-pocket expenses have been incurred in one year, individuals or families can receive additional assistance with their health service payment.

The Pharmaceutical Benefits Scheme (PBS)

The PBS is basically Medicare for medicines – the government subsidises essential medicines to make them more affordable.   It’s a Federal Government scheme that subsidises the cost of a wide range of prescription medicines, providing all Australians with access to vital and cost-effective medicines at an affordable price.

Private Health Insurance

Private health insurance is where individuals or families choose to pay a premium to an insurance fund, which offers financial benefits for additional healthcare services that aren’t covered by Medicare, depending on the type of insurance you buy and how much you’re willing to pay.  It also gives people the opportunity to be treated in a private hospital by the doctor of their choice.

The government wants high income earners to take out private health insurance to help reduce the burden on the public Medicare system, which lower income earners need to be able to access.  So, the government has introduced some incentives to take out PHI cover:

  • higher income earners without adequate private hospital cover must pay an extra 1-1.5% levy
  • the government provides people with a rebate (refund) on their premiums, based on their income
  • lifetime health cover: this encourages people to take out hospital insurance early in life, and maintain cover; if people don’t have hospital cover, and then take it out later in life, they pay an extra 2% on top of the premium for every year aged over 30 when they take out cover