Navigating Australian Medicare, Australian Health Insurance and Global Health Policies
Did you know?
As an Australian expatriate, you should not disregard the implications for Australian Medicare and your Australian Private Hospital Insurance coverage. Common questions for Australians leaving Australia:
1. Am I covered for Australian Medicare as an Australian expatriate?
2. What Private Hospital Insurance should I have as an Australian expatriate?
3. Should I consider an International Health Insurance plan?
Am I covered for Australian Medicare as an Australian expatriate?
What is Medicare and what is Private Hospital Insurance?
Individuals residing in Australia who are Australian citizens, Permanent Residents or New Zealand citizens are entitled to full Australian Government Medicare benefits. Medicare provides a scale of medical fees and doctors can either “bulk-bill” Medicare or can choose to charge patients directly (and for fees in excess of Medicare prescribed fees) and patients can apply to Medicare for a rebate within the prescribed fee schedules. Public hospitals are generally free to Medicare cardholders but are generally subject to “waiting periods” and “no choice of doctor”.
Private hospital insurance cover is generally divided into hospital cover, general treatment cover (also known as ancillary or extras cover) and ambulance cover. Ambulance cover may be available separately, combined with other policies, or in some cases is covered by your state government.
There are different types of cover that offer different benefits. Check with your health fund to be sure of exactly what you are covered for.
Hospital Cover
With hospital cover you have the right to choose your own doctor, and decide whether you will be treated at a public or a private hospital that your doctor attends. If you are a private patient at a private hospital, you may also have more choice as to when you are admitted to hospital. If you are a private patient in a public hospital, public hospital waiting lists still apply.
When you are admitted to hospital, you can choose to be treated under either the public Medicare system or in the private system:
Private hospital cover insures you against some or all of the additional costs of being a private patient in either a public or private hospital.
Medicare will cover 75% of the Medicare Benefits Schedule (MBS) fee for associated medical costs. Provided you have the appropriate private hospital insurance policy, your health fund will cover the remaining 25% of the MBS fee.
You will be charged any amount above the MBS fee the doctors have chosen to charge. Depending on the extent of your private cover, you may also be charged for some or all the costs of hospital accommodation, theatre fees, intensive care, drugs, dressings and other consumables, prostheses (surgically implanted), diagnostic tests, pharmaceuticals, and any additional doctor’s fees.
Some funds also offer ‘gap cover’ to cover some or all of the difference between the doctor’s fee for services provided in the hospital and the combined Medicare benefit and hospital insurance benefit. Some also provide cover for alternatives to hospital treatment known as Broader Health Cover.
As with any other insurance policy, you can manage your coverage by choosing comprehensive coverage with higher premiums, or pay lower premiums for reduced coverage. You can also reduce your premiums by opting to pay some of the costs through an excess or co-payment.
General Treatment Cover (ancillary cover)
General treatment cover (also called ancillary cover or extras cover) provides insurance against some or all costs of treatment by ancillary health service providers (such as Dental, Chiropractic, home nursing, podiatry, physiotherapy, glasses/contact lenses and prostheses ie hearing aids). The extent of your coverage depends on the type of policy you select and may include services such as Ambulance.
Ambulance
Medicare does not cover the cost of emergency or other ambulance services. You can organize cover for this service as part of your hospital or general treatment plan or as a stand-alone cover.
The options for ambulance cover vary depending on what State you live in.
For more detailed information on the Australian Government Private Hospital Insurance Ombudsman Web site https://www.privatehealth.gov.au/
Understanding the “tax rules”
The first step to understanding Medicare and Private Hospital Insurance coverage starts with understanding whether you are an Australian resident for tax purposes.
If you remain an Australian tax resident for tax purposes whilst living abroad then you will remain liable for the Medicare Levy based on your taxable income as if you were living in Australia.
Additionally, you will remain liable for the Medicare Levy Surcharge on your taxable income, if your income exceeds approximately $90,000 (Single) and $180,000 (Couples), subject to a number of adjustments and rules.
The surcharge is calculated at the rate of 1% to 1.5% of your income for Medicare Levy Surcharge purposes. It is in addition to the Medicare Levy of 2%, which is paid by most Australian resident taxpayers.
In order to take the pressure off the State Government running public hospitals, the Australian Government provides a 30% rebate for Health fund premiums (in addition to the 1.5% Medicare surcharge liability) to encourage “high income” earning singles and couples to join the private hospital system to contribute towards the cost of our private hospital health insurance. A feature of this Surcharge is that an individual MUST take out adequate private cover for themselves and ALL THEIR DEPENDENTS (including the spouse). There is also a “lifetime” health cover penalty of an additional 2% premium for each year after age 30 that an individual commences private cover (see further on). You can avoid the Levy surcharge by maintaining Private Hospital Insurance cover in Australia for you and ALL your dependents while living overseas.
Importantly, if you become a non-resident of Australian for tax purposes, whilst living overseas then you will not be liable for the Medicare Levy or the Medicare Levy Surcharge. The Australian Tax Office website (www.ato.gov.au) provides more details on the Medicare Levy and Private Hospital insurance rebate.
Eligibility for Medicare
What Health Insurance should I have as an Australian expatriate?
If you remain an Australian tax resident you may still want to maintain your Private Hospital Insurance. As an Australian tax resident, you remain liable for the Medicare Levy surcharge (1-1.5% if your taxable income exceeds certain thresholds and you and ALL your dependents do not have cover with an Australian Registered Health Fund).
You might be surprised to know that as an Australian citizen, you retain full Medicare entitlements for up to 5 years where you do not reside in Australia. Importantly where you have retained private hospital insurance, you are entitled to the 30% rebate on premiums so long as you are also entitled to Medicare benefits (ie your Medicare card has not expired).
International Health Insurance Policies are not Australian Registered Health Funds and so you may want to maintain a Complying Australian Hospital Insurance policy to avoid the Medicare Levy Surcharge, which could be quite substantial depending upon your income.
You will of course need International Health insurance coverage which will cover your overseas medical and hospital needs, for yourself and your family, in the event they don’t remain in Australia during your overseas assignment). You will not be able to claim Medicare or your Australian Private Hospital insurance for overseas medical and hospital expenses (it is unlikely your foreign policy will cover any such costs in Australia). Unless your family is staying in Australia (and therefore may need cover above the free public system), you could consider reducing your Private Hospital Insurance coverage by increasing the claims excess level on your policy and or reducing the insurance coverage (i.e. removing cover for physiotherapy or dental work etc).
There are minimum levels of insurance coverage you must maintain to avoid paying the Medicare Levy Surcharge and your Private Hospital Insurance can advise you. Be aware that if you reduce your insurance coverage you may then need to sit out waiting periods when you return to Australia and adjust your level of cover.
Non-residents of Australia for tax purposes are not liable for the Medicare Levy Surcharge and therefore do not need to maintain Private Hospital Insurance to avoid paying the Surcharge.
If you want to stop paying your Private Hospital Insurance premium you have two options:
Cancel Your Membership; or
Suspend Your policy.
Cancelling Your Australian Private Hospital Insurance
It is possible to cancel your Private Hospital Insurance membership if you plan to move overseas for more than one continuous year without affecting your Lifetime Health Cover, however, you will then need to serve any waiting periods when taking out a new policy when you return to Australia.
If you do not take out Australian Private Hospital Insurance when returning to Australia it may impact your Lifetime Health Cover and increase your Private Hospital Insurance premiums.
LifeTime Health
Life Time Health Cover “LHC” was implemented by the Australian Government to encourage people to take out Private Hospital Insurance when they are young and maintain that cover over their life.
If you do not take out cover with an Australian Registered Health fund on your “Lifetime Health Cover” base day and then decide to take out cover later in life you will pay 2% loading on your premium for every year over the age of 30. The base day for most people is the later of 1st July, 2000 or the 1st July following your 31st birthday.
Suspend Your Membership.
You can ask your Private Hospital Insurance Fund to suspend your membership while overseas (and for up to two years).
The advantages of suspending your membership include:
You are not required to pay premiums while living overseas.
You won’t need to preserve any waiting periods already completed.
During the suspension period, you are considered to have cover for lifetime Health Cover purposes (i.e. you will not be required to pay any age based loadings on your premiums) provided you resume your cover when you return to live in Australia.
Every Health Fund has its own policies regarding to suspending membership and the length of time, cost and conditions for suspension are likely to vary between funds. If your insurer will not offer a suspension you can check with other insurers to see if they offer it to you. Also be aware, that while your policy is suspended you are not covered by your health insurer and cannot make claims.
When you return to Australia you generally have between 30-60 days to reinstate your membership otherwise it may affect your Lifetime Health cover and policy waiting periods. You may also be asked to provide evidence of the dates you left and returned to Australia.
Should I consider an International Health Insurance plan?
International Health Insurance is designed for people who intend to move overseas for an extended (as opposed to temporary travel insurance) and it will generally cover you both for routine and emergency medical and will often provide you with both routine and emergency medical care. Additionally, the policy will often provide you with flexibility in the choice of doctors and hospitals, with the ability to receive treatment anywhere in your region of cover. InterRetire professional advisors have often said you should ensure global health policies cover you for at least current Australian cover but always check directly or via your Advisor, the detail.
How InterRetire Can Help You
If you’re an Australian expatriate who is considering moving back to Australia, we can help you maximise your assets, minimise your tax obligations and help you transition smoothly.
Disclaimer: This article provides general information on avoiding double taxation in Australia and should not be considered as professional tax advice. It is recommended to consult with a qualified tax advisor or accountant for personalised guidance based on your specific circumstances.
