Health Insurance

Medical Insurance – Private – Extras – Is It Worth Having It?

In Australia, we do NOT have health “insurance”.  What we have is health “assurance”, ie, you are “assured” that the provider ( medicare or your private health insurance provider) “assures” you some kind of rebate or subsidy each time you see your practitioner. 

In Health “Assurance”, you pay for 3 moieties:

1.    The probability that you will see a practitioner and will want a “rebate”.  (Actually, they are only giving you your money back again).

2.    A money pool, so that the provider won’t go broke if there is a “run” on claims, or very big claims are being made.  This absolute dollar sum is regulated by the Federal Government.  ( So much for it being a private insurance fund.)

3.     A profit margin for the company.

So you are actually paying a whole heap of money to keep the system alive, and NOT for your health. 

Taxpayer funded medicare payments barely cover the cost of the bureaucracy needed to run the establishment.  The actual medicare rebate comes out of taxpayers funded consolidated revenue. Medicare Private is owned by the Federal Government (ie the taxpayer), and as such, its out of pocket running expenses are covered by the taxpayer.  Hardly a level playing field for the other "private insurers". 

There are really few exceptional times that you will ever need “extra private assurance”.  These will be for a private hospital bed to have your babies, acute surgery like appendicectomy, a brief medical stay, minor surgery. 

I am also not all that convinced that the medical care you get in a private hospital is any better than that you will get in a public hospital.  The only advantage of a private hospital is that you can skip the waiting list queues.  

Motor-car accident hospitalization will be covered by TAC.  Work injuries will be covered by Workcare.  

Really serious illnesses, eg heart attack, strokes,  usually need to be managed by large public hospitals where your care is already covered by medicare. 

So the only real private cover you need is “Hospital Bed Cover”.  Take your pick if you want a single or shared rooms.  If you choose a front-end deductible, this insurance becomes even cheaper. 

Now, what next?

Look at the most expensive private insurance cover you can or want to afford. 

Pay for the hospital bed part.

Now the magic part.

Place the balance of the cost of the policy into a bank account called “The Family Medical Insurance Account”.  You do this every year until you turn 65 – 70 years old. 

Now, when you need dental, physiotherapist, chiropractor, osteopath, naturopath, pharmacy, me, etc, you will have the money ready and available to you.  You will even have money to pay for the front-end deductible that reduces the cost of your hospital bed policy. 

Inside five years, you will be amazed by how money you will have saved up.  If you start doing this at an early age, eg, 30 years of age, by the time you turn 65 you will have saved up $50,000 plus. 

Remember.  This account is to cover all your medical costs exclusively.  It may not be used for any other purpose. 

No body over the age of 70 years should ever have private health cover.  You will never need it.  All illnesses that afflict folk over 70 years will need the intense, expert care that can only be provided in a public hospital. 

So now you are 65 years old and you have all this spare cash.  What to do? Decisions. Decisions. Decisions. Decisions.

I know what I’m going to do.  Around the world trip.  First class flights.  Five star hotels.  Chauffeur driven taxis.  Fantastic private tours.  Fabulous meals.  Great wines.  Just for starters.  But it is all your choice.

If you use the money to cover your health costs, that what this account is for.  But if you do not need the money, it’s all your choice, paid for by the money you didn’t give to bolster the profits of some phony insurance company. 

The actuarial companies estimate that the average expenditure on health by an Australian family over a life time is $20,000 per family per life-time. Therefore, on average, you will never need to have more than $20,000 in your medical bank account.  But don't cheat.  Keep paying yourself until you retire.  

The major risk is in the first few years at the start of the process. You will not have very much in the account.  Also, that's when you have big expenses like house and car loans, children's school fees, etc.  But if you start early, you will be way ahead.  And there is always the public hospital system to fall back on.