AUSTRALIAN MEDICARE SYSTEM

The Australian health-care system does provide world-class standards of care for all Australian citizens. At the same time, like most comprehensive social security systems - think France or the United Kingdom - it is complex and does not adapt well to expatriates needs. Given the number of Australian expatriates we represent, we see this as a significant issue which deserve clarifications.

Every year, 100,000+ Australians leave Australia to work outside the country for at least 12 months. In total, more than half a million Australians are living outside of their country at any given time. All this from a total population of just 22 million! When you realise that 1 Australian in 50 is living abroad, you would certainly expect the system to cater for Australian expats.

Unfortunately, it does not. The Medicare Australia system was designed to serve Australians living in Australia only. As a result, there is a substantial disconnect between Australian expat needs and assumptions, and how the system effectively works. We will start with a description of the Australian health-care system. Then we will explore specific solutions we can provide to cater to the needs of Aussie Expatriates.

THE AUSTRALIAN HEALTH-CARE SYSTEM

Medicare Principles
Medicare as we know it, was established in 1984. It is a publicly funded universal health care system, which aim is to provide all Australian citizens and permanent residents with access to quality, affordable treatment by doctors and in public hospitals in Australia.

Medicare Reimbursment
Each Medicare procedure follows the Medicare Benefits Schedule fee defined by the government.

  1. In-hospital treatment - If you are a public patient in a public hospital, you will be fully reimbursed by Medicare. The downside is that you may face a considerable waiting list if you need to undergo elective surgery. If you chose to short-cut the waiting list, you change category and switch from being a public patient, to being a private one. Should you decide to stay in a public hospital, Medicare will reimburse you 75% of the MBS Fee. Your doctor has the option to charge above the MBS fee if they choose to. You then pay the difference personally or via additional insurance. Should you decide to use a private hospital, you will only be reimbursed 25% of the MBS Fee, with you paying the balance of your hospital charges and accommodation (unless you have additional insurance cover).
  2. Out-of-hospital treatment - When you visit your general practitioner you will be reimbursed 100% of the MBS fee. Specialist consultations are reimbursable at 85% of the MBS fee.
  3. Medicine - Certain prescribed pharmaceuticals are fully subsidized for Medicare participants. They are defined under the Health Insurance Commission (HIC) which was created in 1948 and is now administered by Medicare Australia. Subsidies for other pharmaceuticals are zero or partial.

Funding
The Medicare system is financed largely by contributions based on the taxable income of residents. This is known as the Medicare Levy, which is currently set at 1.5%, with an exception for low earners. There is an additional 1% surcharge if you are a high earner - more than 50,000 AUD / year - unless you have a private insurance for you and your family. In practice the system is grossly underfunded and the government subsidise most of it. Recent calculation sets the break-even levy at about 8%. As a result, the government is pushing strongly for private insurances with some rebate programmes if you get private insurance and penalties should you chose to delay or defer private insurance arrangements.

Private Insurance
The proportion of Australians with private health insurance has increased in recent years to reach approximately 43%. Once insured by a private insurer, not only do you get reimbursements for the 25% practitioner fees which Medicare does not cover, but you also enjoy (1) The liberty of choosing between private and public hospitals and practitioners; (2) a wider choice of accommodation such as semi-private and private rooms; (3) a shorter waiting list for elective surgery - which can make a huge difference when you need to undergo surgery for a non-emergency heart bypass; for which there are long waiting times in public hospitals; and (4) ancillary treatment cover such as dental, optical, chiropractic and other for which Medicare has limited cover if any.

Medicare Abroad
Medicare benefits are not available for treatment received overseas. However, Medicare has signed Reciprocal Health Care Agreements with the United Kingdom, Malta, Finland, Sweden, Norway, Italy, New Zealand, the Netherlands and Ireland. When visiting these countries, you are generally covered for medically necessary treatment in a public hospital. While these agreements are a great way to ensure you are not left alone in a foreign country, Medicare do still strongly recommend all Australians to get a travel insurance when visiting a foreign country - and yes, New Zealand is also counted as foreign.

The bottom line for expatriates
From the start, the Australian system was defined for Australians living in Australia. As soon as you step on a plane and live abroad, the system does become a bit blurry. To maintain your Medicare benefits, you need to keep filing an Australian tax return. If you do so you can remain eligible for Medicare for up to five years. However, do keep in mind that you won't be reimbursed for medical services rendered outside of Australia.

If you have stopped filing tax returns in Australia, it is much more straight-forward - you simply are no longer eligible for Medicare.

In the end, you truly have but one choice: get a private health insurance.

YOUR INSURANCE OPTIONS

As you saw previously, Medicare may be a great system for Australians living in Australia, but it makes for a disappointing experience once you are posted internationally. Not only will you not be properly covered once you cease paying Australian taxes, and/or visit destinations outside the Medicare Agreements; you also run the risk of being penalised by Medicare when you return if you didn't maintain a suspended membership with an Australian insurer while living overseas.

Before you look at your choices, you do need to consider how long you are likely to be living overseas:

  • If short-term (1-2 years): options 2 or 3 would be most suitable
  • If medium-term (2-5 years), then options 1, 2 or 3 would be suitable
  • If longer-term (5+ years), then option 1 or 2 would be suitable

  1. Start an International Healthcare plan, and forego Medicare altogether. This ‘choice' is largely the default position for most Australian expats. Upon your return to Australia, whenever that might be, you then deal with the Medicare system issues at that time, and will probably need to maintain your international coverage for a year or so while you fulfil the Medicare re-entry requirements.
  2. Start an International Healthcare plan, but maintain your private Australian Healthcare Plan in a ‘dormant' state (annual maintenance fee). While this option is more expensive than option 1, it does mean that, should you return to Australia, you will not be penalised by Medicare and can immediately re-enter the system (and thus can cease your international coverage).
  3. Secure international coverage from an Australian insurer. Upon returning to Australia you can easily transfer to a domestic plan, and with no re-entry restrictions/penalties. Certainly this is an expensive option by comparison, but the benefit levels are usually quite comprehensive (mirroring Medicare benefits). You should note that few Australian insurers offer this facility on an individual or family basis (many are Group only), and many of these insurers have begun exiting this segment due to poor take-up.

As you can see above, while you do have choices, there are many other factors you will also need to consider too. So, making ‘the' final choice is rarely clear-cut or simple. Fortunately, Lighthouse already has a large contingent of Australian clients all over the World, so we do have lots of experience helping Australians determine which choices are the most suitable according to their individual circumstances.

If you have questions, or need some guidance, give us a buzz.