1 Overview Australian Public Health System Medicare May 2014
2 CONTENTS INTRODUCTION 1 The Public Healthcare System in Australia 1 MEDICARE 1 Medicare Benefits Schedule (MBS) 1 Medicare Services 1 What is not covered by Medicare? 1 Pharmaceuticals Physician Prescribed Drugs / Medicines 1 GP s and Specialist Doctors 2 PUBLIC AND PRIVATE HOSPITALS 2 PRIVATE HEALTH INSURANCE 2 INCENTIVES AND PENALTIES 2 Premium Penalty Lifetime Health Cover rating (LHC) 2 Tax Penalty Medicare Levy Surcharge (MLS) 1 SPONSORED EMPLOYEES IN AUSTRALIA ON 457 VISAS 3 Reciprocal Health Care Agreement (RHCA) Countries 3 Implications for Employees from RHCA Countries 3 Medicare Levy Surcharge (MLS) Exemption 3 SPONSORED EMPLOYEES WHO APPLY FOR PERMANENT RESIDENCY (PR) 4 Who is Covered 2 Excess or Deductible 2 Schedule of Benefits and Compensation 3 GLOBAL POLICIES 4 Medicare Legislation 4 Health Insurance Act 1973 Sect Health Insurance in Australia 4 Other Insurers Global or Australian based 4 BENEFITS AVAILABLE IN AUSTRALIA UNDER RECIPROCAL HEALTH CARE AGREEMENTS 5 PROPRIETARY NATURE OF DOCUMENT This document is prepared for the sole and exclusive use of the party or organisation to which it is addressed. Therefore, this document is considered proprietary to Willis Australasia Limited and may not be made available to anyone other than the addressee or person within the addressee s organisation. Willis Australasia Limited documents may be made available to other persons or organisations only with written permission of Willis Australasia Limited. COPYRIGHT 2013 All rights reserved. No part of this document may be reproduced or transmitted in any form by any means, electronic or mechanical, including photocopying and recording, or by information storage or retrieval system, except as may be permitted, in writing, by Willis Australasia Limited.
3 INTRODUCTION The aim of this overview is to provide you with some background and complexities of the Australian public health system Medicare. The Australian National Health Act legislation is a labyrinth of conflicting and confusing rules and regulations, with some financial traps for both individuals and also companies who wish to provide private health insurance for their employees. The Public Healthcare System in Australia The Australian public healthcare system, Medicare, is simple, provides very comprehensive health care to all Australian citizens but can also be quite confusing and costly due to legislation changes. The following endeavours to explain how the Australian public health system operates and; How it affects all Australian citizens and Permanent residents. The impact of our public health system on people from countries with whom Australia has Reciprocal Health Care Agreements (RHCA). The impact on employers wishing to provide private health fund benefits to Australian citizens. Why the provision of private health insurance to Australian citizens is restricted to Australian registered health funds. MEDICARE Medicare is the publicly funded Australian health system and is subsidised by a 1.5% Medicare levy payable by all taxpayers. This levy is included in the pay-as-you-go payroll system. It ensures a high level of health care for all Australians and permanent residents regardless of their level of income. Medicare is the sole provider of all medical benefits in Australia and provides access to GP s, specialists etc. and public hospital treatment. There are co-payments for a number of services and costs for Medicare services are set by the Government under a Medicare Benefit Schedule*. It is not available for the benefit of Temporary Residents or Overseas Visitors and they cannot receive any benefits under the Medicare system except for sponsored employees from RHCA countries. *Medicare Benefits Schedule (MBS) The Medicare Benefits Schedule (MBS) is the list of fees and charges established by the Commonwealth Government for the purpose of paying benefits under the national Medicare Scheme. The MBS covers all medical procedures and treatments provided by or on behalf of doctors (including specialists and general practitioners). The fees and charges are determined to be fair to both patient and doctor. MBS pays a benefit equal to 85% of the MBS fee for an outpatient service. It should be noted that most doctors choose to charge more than the MBS fee and in these instances the patient has to pay this cost in addition to the 15% difference. The difference between the actual cost and scheduled fee is totally uninsurable and, controlled through legislation, and is at the cost of the patient. There is a safety net in place for pensioners and unemployed or citizens on Government pensions due to disability etc. and limits are CPI indexed annually. Medicare Services Services covered by Medicare include the following: Consultation fees from doctors and specialists Eye tests performed by an optometrists Blood tests and x-rays Most surgical / therapeutic procedures performed by doctors Some surgical procedures performed by an approved dentist What is not covered by Medicare? Medicare provides comprehensive medical and public hospital benefits however many services are not covered by Medicare and these can be covered by private health insurance. Some examples of what Medicare does not cover: Private hospital accommodation Most dental services Ambulance services Home nursing Physiotherapy Occupational therapy Speech therapy Podiatry Chiropractic services Acupuncture Cosmetic surgery due to injury or illness Hearing aids and other appliances Glasses and contact lenses Prostheses Medication not covered by Pharmaceutical Benefits Scheme (PBS) [See below for details on PBS]. Cosmetic surgery Compensation claims Medical services which are not necessary Pharmaceuticals- Physician-Prescribed Drugs / Medicines All Australian citizens and Permanent Residents have access to a subsidised Pharmaceutical Benefits Scheme (PBS). The (PBS) is an Australian Government program that subsidises medicines to make them more affordable. All prescribed drugs and medicines dispensed via the PBS are free subject to a patient co-payment of a dispensing fee. Eligibility to the PBS is for; All Australian residents who hold a current Medicare card. Overseas visitors from Reciprocal Health Care Agreement (RHCA) countries eligible for a Medicare card (refer to page 4 for more details). Visitors from the Republic of Ireland and New Zealand are not eligible for full Reciprocal Health care benefits but are eligible for subsidised medicine. Visitors from all other countries are not eligible for PBS benefits. Overseas Visitors from non RHCA countries who do not have access to the PBS will have to pay full price as a private prescription. Medicine is not subsidised by the Australian Government. Physician-prescribed pharmaceuticals can be expensive items for overseas visitors hence it is important to "shop around" for the best price for your drugs and medicines. To assist you in assessing the costs which you may incur for drugs and medicines, visit the website of Pharmacy Direct Page No 1
4 GP s and Specialist Doctors For day to day routine medical care people are free to seek medical care from the doctor of their choice and they can go to any clinic. There are no preferred provider networks in Australia. In Australia, a distinction is drawn between General Practitioners (GPs) and Specialist Physicians, e.g. Dermatologists, Orthopaedic surgeons and Anaesthetists. A GP will refer you to a Specialist Physician or Surgeon if necessary and this GP referral will be accompanied by a case code. Direct access to a specialist is prohibited. They will not provide services without a referral from a GP. Non-compliance can jeopardise a claim. PUBLIC AND PRIVATE HOSPITALS There are both private and public hospitals in Australia. Public hospitals Governments. are funded and managed by State If you are admitted as a Medicare patient in a public hospital, care and treatment will be covered in full by Medicare with no out-of-pocket expenses by the patient The doctors and specialists attending to you will be nominated by the hospital. Private hospitals are owned privately and are run as businesses within the private sector. If you are admitted as a private patient in a private or public hospital you can choose which doctors will treat you. Medicare will pay 75% of the government determined scheduled fee and your private health fund will cover most of the outstanding fees. Private hospitals charge for services provided and these charges can be paid by the patient direct, or can be provided via private health insurance. *The scheduled fee for services is set by the Commonwealth Government. The Government determines the appropriate fee the doctors should charge for a particular service. Health practitioners can however choose to charge more than the set scheduled fee which is at your cost and cannot be insured. PRIVATE HEALTH INSURANCE Private health insurance is available to all Australian citizens and Permanent Residents to provide coverage for treatment in private hospitals. Private health funds are not allowed to pay medical expenses incurred as an outpatient. For inpatient treatment health funds are allowed to top up Medicare benefits to 100% of the scheduled fee and under new regulations may also cover up to 100% of the cost. Note: Most private health funds have agreements with hospitals as to what costs and treatments are covered by their insurance but it is important you ask if there are any costs not covered as outof- pocket expenses may still be substantial. The hospital and health funds will advise what is not covered and what your potential out-of-pocket costs may be. Private health insurance will also provide for the services not covered by Medicare such as ambulance, dental, optical and other ancillary benefits. INCENTIVES AND PENALTIES On July , the Federal Government introduced legislation reforms designed to increase the number of Australians purchasing Private Health Insurance by way of a Tax Rebate incentive and also tax and premium penalties. This legislation was introduced to encourage private health fund participation in an effort to reduce reliance on the public health system. A tax rebate was applied to all private health fund premiums paid for both hospital and ancillary expenses which, at the time was not means tested. However, effective 1 July 2012 the tax rebate incentive was renamed Private Health Insurance Incentives Tiers and is now means tested with the nominated thresholds in three tiers: Please refer to the below website to ascertain which tier would apply to you: harges/insurancerebate.htm If you are eligible to join a private health fund but decline to do so the Government has introduced two penalties which in the end means you either pay a premium and receive a benefit or you pay a tax penalty in lieu of benefits either way you pay. Premium penalty A) Lifetime Health Cover rating (LHC) The Lifetime Health Cover (LHC) premium penalty was introduced in July 2000 with a Certified Age of Entry (CAE) set at age 30. It involves a penalty for people aged over 30, who are eligible to join the private health system, but decline to do so. What this means is that for every year people are eligible to join after age 30, and decline to do so, a 2% premium loading (cumulative) is added to the cost of the private health insurance premiums up to a maximum of 70%. Example of penalty: A person is eligible to join at age 31 and elects not to join until age 40 will have a premium penalty of 20% 2%). This penalty was applied as a lifetime penalty when introduced, however a legislation change in November 2010 under section of the Private Health Insurance Act 2007 (the Act) has reduced this penalty to 10 years continuous membership. Those born before 1 July 1934 are exempt from the penalty. The private Health funds in Australia are required to be the tax collectors for this penalty hence health funds charge the loadings on top of premiums and charge different premiums based on the age of each particular member depending on when they first took out private health insurance. Clearance certificates from previous health funds now take on a different priority of importance. Tax Penalty B) Medicare Levy Surcharge (MLS), From 1 July 2000, in addition to the 30% tax rebate incentive and the premium penalty (LHC), the Commonwealth Government also introduced the Medicare Levy Surcharge (MLS) tax penalty. Individuals and families on higher incomes who do not have appropriate private patient hospital cover are liable to pay an additional 1% to 1.5% Medicare levy surcharge (MLS) on gross income earned including exempt income earned overseas. Page No 2
5 Unfortunately these penalties also apply to Temporary Visitors from countries with whom Australia has Reciprocal Health Care Agreements (RHCA). Under Australian Taxation Law, anyone who holds a Medicare Card, or who is entitled to hold a Medicare Card, and does not have "appropriate"* Private Health Insurance, has to pay the Medicare Levy Surcharge (MLS). This Tax penalty is levied by the Australian Taxation Office (ATO) after assessment of an individual's tax return at the end of each financial year. This levy applies to singles, couples and families with an income over a nominated threshold which is adjusted annually. For more information about the Medicare Levy Surcharge visit the ATO website: What is appropriate* private patient hospital cover? Private patient hospital cover is cover provided by an insurance policy which: is issued by a registered fund, and provides benefits in relation to fees and charges for hospital treatment provided in an Australian: hospital, or Day hospital facility. Private patient hospital cover does not include: travel insurance cover provided by an overseas or unregistered fund, or ancillary cover (commonly known as extras). Policies with a high annual front-end deductible (FED) or excess You will not be considered to have private patient hospital cover if you have an insurance policy for hospital cover that contains an annual FED or excess of: $500 or more for a policy covering one person, or $1,000 or more for all other policies. The exception to this statement is if you took out your policy before 24 th May 2000 and continuous cover has been provided since that date. SPONSORED EMPLOYEES IN AUSTRALIA ON 457 VISAS RECIPROCAL HEALTH CARE AGREEMENT (RHCA) COUNTRIES If you are a sponsored Employee recruited directly from a country with which Australia has a Reciprocal Health Care Agreement (RHCA) then for taxation purposes you will be treated the same as Australian citizens and will be subject to the same tax payments (Medicare Levy) and tax penalty the Medicare Levy Surcharge (MLS). On arrival in Australia you will be able to apply for a reciprocal Medicare card. RHC Agreements are currently in place for the following countries: Republic of Ireland New Zealand United Kingdom Sweden Finland Norway The Netherlands Malta Italy Belgium Slovenia Visitors are eligible for benefits for the duration of their stay, except in the cases of Italy and Malta, where benefits are for six months only. The Agreements cover necessary medical treatment, that is, treatment for any ill health or injury which requires attention before returning home. The Agreements provide: Public in-patient hospital care, Medicare benefits and drugs under the Pharmaceutical Benefits Scheme There are no benefits a provided as a private hospital patient (refer to schedule of benefits attached). The Agreements with Ireland and New Zealand are restricted to public hospital in-patient care and PBS drugs only. Any out-patient services are out-of pocket. IMPLICATIONS FOR EMPLOYEES FROM RHCA COUNTRIES Effective 1 July 2012 Individuals and families on higher incomes who do not have appropriate private patient hospital cover are liable to pay an additional 1% to 1.5% Medicare levy surcharge (MLS) on gross income earned including exempt income earned overseas. This levy applies to singles, couples and families with an income over a nominated threshold which is adjusted annually. For information on whether you may be in the bracket to pay the MLS, please access the Australian Health Industry Association (AHIA) calculator at: You may also wish to refer to the Australian Tax Office at If you fall into one of the income groups, having a Bupa Overseas Visitors Health Plan will not exempt you from the MLS tax penalty. Medicare Levy Surcharge (MLS) exemption Sponsored Employees from RHCA Countries, who lodge a tax return in Australia, are able to purchase a Reciprocal Health Care Agreement (RHCA) cover to eliminate the MLS for less than the cost of the surcharge. With this endorsement they will be issued with a Private Health Insurance Statement to accompany their tax return. It is advised that they seek their own independent financial advice before taking out the Reciprocal Health Care Agreement (RHCA) Cover. Reciprocal Health Care Agreement (RHCA) Cover (Medicare Levy Surcharge exemption) This cover is paid for by the employee as a deduction from their post-tax salary. This premium is subject to a rebate of up to 30% (depending on the level of income). Sponsored Employees from Non RHCA Countries are able to request a refund for the Medicare Levy Surcharge in arrears by calling Medicare on and requesting an "Application for Medicare levy exemption certificate" to accompany their tax return. A downloadable version of the "Application for Medicare levy exemption certificate" is available via the website: Page No 3
6 SPONSORED EMPLOYEES WHO APPLY FOR PERMANENT RESIDENCY (PR) Once sponsored employees lodge their Permanent Residency (PR) application and receive acknowledgement from the Department of Immigration and Border Protection (DIBP), they immediately become eligible for full Medicare benefits. When they enrol in Medicare they will be issued with a blue Medicare card marked interim which will be replaced with a permanent card on the granting of PR. This means that they will be affected by tax and premium penalties that apply to all Australians who are not appropriately insured. They can no longer be covered under an Overseas Visitors Cover health plan. When transferring to a registered Australian Health Fund plan full continuity benefits apply, however transfer must occur within 30 days. To avoid the Lifetime Health Cover loading (LHC*) penalty they must enrol into the domestic health system no later than; the 1 July following their 31st birthday, or if over age 31 the first anniversary of the date they became eligible for Medicare (PR application). * From 1 July 2014 the Private Health Insurance Incentives Tiers Tax rebate will not apply to LHC loading. GLOBAL POLICIES Many multinational companies have global policies. Why can t Australian employees be covered under global policies? As mentioned previously the provision of health insurance in Australia is strictly controlled by legislation under the Health Insurance Act 1973 and the National Health Act National Health regulations. MEDICARE LEGISLATION Medicare is the sole provider of all medical benefits in Australia and provides access to GP s, specialists etc. and public hospital treatment as legislated in the Health Insurance Act 1973 under; HEALTH INSURANCE ACT SECT 126 Prohibition of certain medical insurance (1) A person shall not make a contract of insurance with another person that contains a provision purporting to make the first-mentioned person liable to make a payment in the event of the incurring by the other person of a liability to pay medical expenses in respect of the rendering in Australia of a professional service for which a Medicare benefit is, or but for subsection 18(4)* would be, payable. A person who contravenes subsection (1) is, in respect of each day on which the person contravenes that subsection guilty of an offence punishable on conviction by a fine not exceeding: a) If the person is a body corporate, $20,000; or b) If the person is a natural person, $2,000 S67 (4) Health insurance business = fees for Australian hospital treatment or an ancillary health benefit OTHER INSURERS GLOBAL OR AUSTRALIAN BASED Complimentary insurance to Medicare is totally restricted to Australian insurers via National Health Act legislation as follows: National Health Act National Health regulations S67 (1) Health insurance business to be carried on only by registered organisations S67 (4) Health insurance business = fees for Australian hospital treatment or an ancillary health benefit * * Ancillary health benefit a) relevant health services b) services involving the supply, alteration, maintenance or repair of hearing aids, spectacles, contact lenses, artificial teeth,eyes or limbs(including part of the teeth or limbos)or other medical,surgical, prosthetic or dental aids, equipment or appliances. c) drugs or medicinal preparations d) ambulance services e) services by an attendant of a person who is sick or disabled or f) any other benefit, or benefit included in a class of benefits, prescribed for the purposes of this paragraph ; but does not include: Ancillary health benefit is not g) a professional service for which Medicare benefit is payable h) hospital treatment i) any other prescribed benefit *does not apply to accident and sickness insurance business liability insurance business (workers comp- motor vehicle) or prescribed business Penalty: $1,000 per event. *18(4) Medicare benefit not payable where compensation payable (Workers compensation) HEALTH INSURANCE IN AUSTRALIA Private health funds known as, Registered Health Benefits Organizations (RHBO) are the sole providers of complimentary benefits to Medicare. Section 67 of the National Health Act 1973 states; Subsection (1) A person (other than a registered health benefits organisation) (RHBO) shall not carry on health insurance business in Australia. Subsection (2) Page No 4
7 BENEFITS AVAILABLE IN AUSTRALIA UNDER RECIPROCAL HEALTH CARE AGREEMENTS (RHCA) Applies only to visitors from: Republic of Ireland New Zealand United Kingdom Sweden Finland Norway The Netherlands Malta (limited to 6 months from date of arrival ) Italy (limited to 6 months from date of arrival ) Belgium Slovenia NO CHARGE SERVICES Medical Expenses Medicare benefits for out-of-hospital medical treatment provided by doctors through private surgeries and community health centres. The doctor may charge medical expenses directly to Medicare and you will not have to pay anything or the doctor gives you a bill that may be claimed from a Medicare office and you will need to pay any part of the bill not covered by Medicare. Hospital Treatment Public hospital accommodation and medical treatment while in hospital are provided free of charge, provided you are not treated as a private patient. You must show your Reciprocal Health Care card to staff at the hospital when you arrive. SERVICES WHERE A FEE IS CHARGED Medical services not covered by Medicare medical or hospital treatment that is not immediately necessary medicines not subsidised under the Pharmaceutical Benefits Scheme dental work and chiropractic services treatment arranged before your visit to Australia accommodation and medical treatment in a private hospital accommodation and medical treatment as a private patient in a public hospital Hospital Treatment If you elect to be treated as a private patient in a public hospital or as a private patient in a private hospital for immediately necessary treatment, you will be charged for both medical treatment and accommodation. These fees cannot be claimed from Medicare Information obtained from: Willis Australia Ltd Berry Treffers Int l Employee Benefits Consultant - Expatriate Risk Phone: Fax: Page No 5
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