Health Care: On Location

The Aussies

Once again in my favorite spot for interviews, I engaged a smart-looking, 30something Australian couple in conversation while we waited to board our plane. Ms. Aussie had spent 3 years living in Vancouver and was familiar with both the Canadian and Australian health care system. “I loved the Canadian system!” she exclaimed enthusiastically.

In Australia, she told me, private health insurance plays a much larger role in the health care system. There is an Australian publicly funded universal health care system called Medicare, which covers everyone for medically necessary doctor’s services and hospitalization. Medicare is funded partly by a 1.5% income tax levy and partly out of general revenue. But 45% of Australians also carry private insurance – hospital coverage, ancillary coverage, or a combination of the two. Hospital coverage enables policyholders to go to private hospitals, choose their doctor when hospitalized, schedule elective surgeries more promptly, stay in a private room, and make up some of the difference between the amount the government payment schedule will cover for doctors’ charges whilst an in-patient and what the doctors actually charge (called the "gap"). Private "ancillary" insurance covers some of the extended services, like physical therapy, optical, and dental, the way the private extended coverage does in Canada.

In contrast with Canada, 1/3 of hospital beds are in private hospitals. According to Ms. Aussie, public hospitals are not so desirable. Private hospitals are more attractive cosmetically, have better food, and one can usually stay in a private room. Many public hospitals, on the other hand, are better equipped. Emergency rooms are almost exclusively found at public hospitals.

Interestingly, some folks who have private hospital coverage still opt to use a public hospital. They can choose to go to a public hospital either as a private insurance patient or a public patient. For patients not using private insurance, Medicare will pay for all the expenses incurred in the hospital. A private patient, even in a public hospital, will be scheduled for elective procedures with a shorter wait, will be able to choose their physician, and may be able to get a private room. For a private patient, Medicare will cover 75% of in-patient medical procedures in accordance with the Medicare Benefit Schedule (MBS). The private insurance picks up the remaining 25% plus the hospital accommodation costs. If the doctor charges more than the MBS fee, the private insurance may pick up the “gap”, depending on the policy.

Ms. Aussie's sister had used private insurance and a private hospital when she needed back surgery. She would have had to wait a year for the surgery had she used the public system, according to Ms. Aussie. Ouch! But she ended up paying $7,000 out-of-pocket due to the "gap" despite her private insurance. Oooouch!

The Australian government provides incentives for individuals to purchase private insurance; they believe it is better to relieve the government of as much of the business of health care coverage as possible. First of all, they provide a 30% subsidy to everyone who purchases private insurance and a higher subsidy for the elderly. Secondly, there is a 1% tax on the income of anyone earning more than $77,000 per year ($154,000 for couples) who doesn’t purchase private insurance. A bit similar to the US's impending individual mandate. And finally, if Australians don’t purchase private insurance by their 31st birthday, they pay an additional 2% to purchase insurance for every year beyond that time. So if you don’t start purchasing insurance until you’re 40, you pay an extra 20%. This protects the private insurers, who are not allowed to charge more for preexisting conditions, from having everyone wait until they are older and sicker to start purchasing insurance. Furthermore, private insurance isn’t terribly expensive in Australia. For Ms. and Mr. Aussie, this is a no brainer. Their income is over $154,000 so they’d be paying the government 1% of their income anyway. The private insurance they purchase only costs $90 per month for the two of them.

Ms. Aussie had no complaints about the care she had received in either country but she seemed to prefer the Canadian system. I guess more people end up paying more out-of-pocket for the Australian system. By the way, she mentioned, as have several of the Canadians I’ve spoken to, how important it is for them to purchase travel health insurance before coming to the US. Wouldn’t dare leave home without it!