Health Insurance

What is Medicare and What Does it Cover?

Written by:

Katie Douglass


September 24, 2020

Last updated

August 12, 2022

Reading time

5 minutes

Katie Douglass

Katie Douglass is the Communications Manager at Oiyo and a writer. In recent years, Katie’s work has appeared in publications such as Marie Claire, InStyle, and THE ICONIC. She has a Bachelor of Creative Industries in Fashion Communication & Journalism from the Queensland University of Technology. At Oiyo, Katie is responsible for overseeing editorial strategy.

A simple guide to Australia’s Medicare system

Every year, Aussies make more than 150 million visits to a GP while 1 in 8 visit a hospital emergency department — and Medicare Australia helps pay for the cost of these visits. That’s a lot of free healthcare! Considered one of the most efficient universal health insurance models, Medicare ensures healthcare is affordable for everyday Aussies.

However, navigating what is and isn’t covered under Medicare can be overwhelming. Below, we’ve put together a comprehensive guide on Medicare in Australia including how it’s funded, who can apply, and how it works.

What is Medicare?

First introduced in 1975 as Medibank by the Whitlam Government, Medicare is Australia’s public health insurance system. The scheme gives Australians (and some people from overseas) free or subsidised access to healthcare. Funded by a Medicare levy, Medicare Australia covers three areas — hospital, medical, and pharmaceutical. If you have a Medicare card, the cost of your treatment as a public patient at a public hospital will be covered. It also subsidises the cost of certain health services and approved medication.

How is Medicare funded?

Medicare is funded by a combination of government tax revenue and a levy on Australian taxpayers. The Medicare levy is 2% of your annual taxable income, in addition to the income tax you pay. Depending on the circumstances, you may be able to reduce the levy or be exempt from it altogether. For example, you only pay part of the Medicare levy if you earn between $22,801 and $28,501.

The Australian Tax Office (ATO) states you are exempt from paying the Medicare levy if you are:

  • A foreign resident
  • A Norfolk Island resident
  • Not entitled to Medicare benefits
  • Earning equal to or less than $22,801 (or $36,056 for seniors and pensioners)

Medicare Levy Surcharge (MLS)

If your income is over a certain amount and you don’t have an appropriate level of private health cover, you may have to pay the Medicare Levy Surcharge (MLS). The MLS was introduced by the Australian government to encourage those who could afford it to take out private health cover. It was also designed to reduce the cost and demand of the Medicare Australia system. If you are required to pay the surcharge, it will be in addition to the Medicare levy.

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To work out your Medicare Australia levy, head to the ATO website and use the Medicare Levy Calculator.

Who can apply for Medicare?

You are eligible to apply for Medicare if you:

  • Are an Australian or New Zealand citizen
  • Are an Australian permanent resident
  • Have applied for permanent residency (some conditions may apply)
  • Have a temporary residency covered by a Ministerial Order
  • Are a citizen or permanent resident of Norfolk Island, Cocos Islands, Christmas Island, or Lord Howe Island
  • Are covered by a Reciprocal Health Care Agreement (RHCA) with another country

Reciprocal Health Care Agreement

Medicare covers people visiting from certain countries overseas under the Reciprocal Health Care Agreement (RHCA). A citizen of a country that has a RHCA with Australia is eligible for certain cover under Medicare. The countries included in the RHCA are:

✓ Belgium ✓ Malta ✓ Slovenia
✓ Finland ✓ Netherlands ✓ Sweden
✓ Ireland ✓ New Zealand ✓ United Kingdom
✓ Italy ✓ Norway

It’s important to note each country has a different arrangement with the Australian government. Make sure to check what exactly you will be covered for and what the circumstances are before opting for Medicare as part of travel insurance.

How does Medicare work?

If you’re eligible to apply for Medicare, you will need to enrol to access it. After you enrol, you’ll receive a Medicare card and number. A Medicare card shows your family name, individual reference number, and a single Medicare number. Whether you go to a hospital or see a doctor, you’ll need to present your Medicare card to receive a wide range of medical services for free or at a lower cost. Some examples of when you’ll need a Medicare card include:

  • Making a Medicare claim for a doctor’s appointment
  • Visiting a doctor who bulk bills
  • Receiving treatment as a public patient in a public hospital
  • Filling a PBS prescription at a pharmacy

How to make a Medicare claim

Whether it’s through a Medicare online account or even via mail, there are many ways you can make a Medicare claim. Here are some of the key methods for claiming your Medicare benefits:

1. The doctor’s office

To make a claim at your doctor’s office, you’ll need to be enrolled in Medicare and have a Medicare card. Often, you can make an electronic claim which will then be processed. The Medicare benefit will be paid into either the account for the EFTPOS card you used to pay or the bank account you’ve registered with Medicare. However, if your doctor bulk bills, you won’t need to pay anything.

2. Your Medicare Online account

You might be able to make a Medicare claim online. First, you’ll need to have a myGov account linked to your Medicare online account to make a claim. After you submit a claim online, it will usually take within seven days to receive your benefit.

3. The Express Plus Medicare App

You can make a Medicare claim via the Express Plus Medicare mobile app. To use the app, you will need a myGov account linked to Medicare. To make a Medicare claim on the app, you will need your account, receipt, and details of the service. Usually, you will get your benefit within seven days.

4. Mail

If you can’t claim at the doctor’s office, online, or via the app, you can claim by mail. Fill out a Medicare claim form and post it to the address on the form. It can take within twenty eight days to receive your benefit.

5. Medicare Service Centre

You can make a claim at a Medicare service centre. After you fill in a form and drop it off at the centre’s dropbox, they will pay straight into your bank account. You’ll get your benefit within twenty eight days.

What is covered by Medicare?

Medicare Australia provides free or low cost healthcare across three main areas — hospital, medical, and pharmaceutical. Before we explore each of these areas, it’s important to understand how the government determines the cost of these services.

The benefits you receive on Medicare are based on a schedule of fees set by the Australian government. The Medicare Benefits Schedule (MBS) lists all the medical services subsidised by the Australian government, including consultations, procedures, and tests. Each item on the schedule is allocated a ‘schedule fee’. The fee is an amount the government considers appropriate for each service. For some services, Medicare will cover the entire schedule fee, but for others it will only subsidise the cost.

However, a doctor or specialist can choose to ignore what the MBS recommends and charge a higher fee. There are a few reasons why this might happen. The Australian Medical Association (AMA) and some health policy experts have argued that government rebates are both too low and don’t reflect the true cost of the service.

Below, we’ve detailed what is and isn’t covered by Medicare under each category:


Medicare covers the full cost of a public patient admitted and treated at a public hospital. As a public patient, the hospital will choose the doctor, the day you undergo treatment or surgery, and you might be placed on a waiting list. Whereas, if you have private health insurance you can choose where you want to stay and which doctor you want to be treated by.

Below, we’ve listed the hospital services fully covered by Medicare:

✓ Treatment by doctors, specialists, and nurses

✓ Tests and examinations including x-rays and blood tests (pathology)

✓ Eye tests carried out by an optometrist

✓ Some allied health services including psychologists, psychiatrists, chronic disease management

✓ Certain necessary dental surgeries

✓ Cleft Lip and Cleft Palate Scheme treatment

✓ Surgeries and other therapeutic procedures performed by doctors

If you’re admitted as a private hospital patient, Medicare will cover 75% of the MBS fee for treatment, anaesthesia, and diagnostics. However, it doesn’t cover accommodation, surgery theatre fees, or medication. The remaining cost will need to be paid either (or a combination of) out-of-pocket or by your health insurer.

Medical services

For a visit to a general practitioner (GP) at a medical practice outside of a hospital, Medicare Australia will cover 100% of the schedule fee. If you visit a specialist, Medicare will cover 85% of the fee. If a specialist charges a fee higher than the MBS fee, the patient will then have to pay the gap.

Below, we’ve listed the non-hospital services that Medicare covers:

✓ Consultations i.e. general practitioner and specialist consultations

✓ Examinations and tests i.e. treatments for an illness that doesn’t require hospitalisation (x-rays and pathology tests)

✓ Out-of-hospital surgery e.g. procedures performed at a doctors surgery

✓ Eye tests performed by optometrists

✓ Dentistry + Cleft Lip and Cleft Palate Scheme (including orthodontic procedures, tooth extraction, prosthodontics services, and maxillofacial surgery)

✓ Optometrist e.g. initial consultations and eye examinations

✓ Chronic disease management i.e. treatment of chronic or terminal illness through a GP management and Team Care Arrangements

✓ Specific items under the Enhanced Primary Care (EIC) program

If you or your family visit a doctor or specialist a certain amount of times in a calendar year, you might be eligible for the Medicare Safety Net scheme. The scheme helps reduce out-of-pocket medical expenses and provide financial relief for individuals or families with high medical costs. If you are single, Medicare will automatically provide the higher benefit when you reach the threshold. For spouses and families, you will need to register with Medicare to keep track of your total medical expenses.

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What is bulk billing?

Bulk billing refers to when your doctor bills Medicare directly and accepts the Medicare benefit as full payment. This means you won’t have to pay anything. To find a doctor, hospital, or allied health provider who bulk bills, you can search on the Health Direct government website.

Pharmaceutical Benefit Scheme (PBS)

The Pharmaceutical Benefit Scheme (PBS) is a government program that subsidises the cost of a wide range of prescription medication for people covered by Medicare Australia. The PBS helps reduce the cost of medication listed in the PBS. However, if your medication isn’t listed in the PBS, you will be required to pay the full cost. You will need to present your Medicare card to fill in a PBS prescription at a pharmacy.

If you have an eligible concession card, you might be able to pay even less for PBS-approved medication. You are entitled to extra concessions through the PBS if you have a:

  • Australian Seniors Health Card
  • Health Care Card
  • Pensioner Concession Card
  • Department of Veterans’ Affairs (DVA) Gold, Orange, or White card

If you or your family spend a certain amount on PBS-approved medication in a calendar year, you might be eligible to apply for a PBS Safety Net Card. The PBS Safety Net helps you or your family pay even less for prescribed medication.

What isn’t covered by Medicare?

It’s important to understand Medicare Australia doesn’t cover everything. There may be specific treatments, services, and medications excluded. Below, we’ve created a table that lists the hospital and medical costs not covered by Medicare:

Hospital Medical
✖ Ambulance services

✖ Overseas medical and hospital costs

✖ Private patient costs e.g. accommodation and theatre fees

✖ Unnecessary hospital procedures and cosmetic surgery e.g. botox and liposuction

✖ Emergency department administration or facility fees

✖ Medical exams required when applying for a job, life insurance, superannuation, memberships, or government bodies

✖ Most dental examinations and treatments

✖ Dental services — other than those covered under the Cleft Lip and Cleft Palate Scheme

✖ Most physiotherapy, occupational therapy, speech therapy, eye therapy (including prescription eyeglasses and contacts), chiropractic services, podiatry, acupuncture, and psychology services

✖ Glasses and/or contact lenses (optical)

✖ Hearing aids and other health aid appliances

✖ Home nursing

✖ Ambulance services

✖ Prostheses other than items covered by the External Breast Prostheses Reimbursement Program

What’s the difference between Medicare and private health insurance?

There are some important differences between Medicare and private health insurance in Australia. While Medicare is designed to give Australians access to free or low cost healthcare, it doesn’t cover everything and is often subject to long waiting lists. This is where private health insurance may come in handy.

If you have private health cover, you are still entitled to Medicare benefits. As a private patient, you have more of a say in where and who you want to be treated by. Depending on your private health policy, you can also take out cover for medical services such as physiotherapy, podiatry, most dental treatment and examinations. You will have to pay regular premiums to your insurer if you take out private health cover. On the other hand, if you don’t have private health you may be charged a Medicare levy surcharge if you earn above a certain amount.

If you’re wondering whether Medicare or private health insurance is better, there is no right answer. Everyone’s circumstances are different and what might be right for you, might not be right for some. Consider the pro’s and con’s when weighing up between the two.

Want to learn more?

To learn more about health insurance, check out our other articles on Oiyo! From comprehensive guides to the true cost of ignoring your health problems, there are plenty of helpful reads for you to uncover.

Oiyo is a consolidated online resource, we are not financial advisors. We work with a range of industry professionals and compliance check our articles to ensure factual accuracy. However, we do not provide professional financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented in this article relate to your unique circumstances.


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