Private Health Insurance Purchased as Supplement

In Australia, people can purchase private health insurance to supplement their in-hospital coverage under Medicare (see Psychiatric Patients Fare Well in Australia's Health System). Currently, some 40 percent of Australians have such coverage.

Private health insurance plans offer perks that Medicare does not. For example, people who are treated in public hospitals can choose their doctor, which is not otherwise the case. Also, people can be treated in a private hospital instead of in a public hospital. Certain surgical procedures—coronary bypass surgery or a hip replacement—can be obtained more quickly if patients have private insurance to supplement their Medicare coverage. And for people who elect to be treated in a private hospital, private insurance helps cover the gap between Medicare reimbursement and out-of-pocket costs.

The Australian government promotes the purchase of private health insurance because it wants a hybrid public-private health insurance system and because it wants to take some of the strain off public hospitals. For instance, if people in higher-income brackets do not purchase private health insurance, they have to pay a penalty tax. And if people purchase private health insurance, they receive a 30 percent rebate from the government.

The rebates were introduced in 1999. Some Australians believe that the rebate might be better invested in the Medicare system. And as Denzil Fiebig, a professor of economics at the University of New South Wales, reported on the university's Web site on July 17, 2006: “While private health insurance coverage in Australia has increased by 50 percent as a result of the rebate, that is not necessarily easing pressure on the public hospital system.”