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Australian health system: how it works

how hospital billing works

The healthcare system in Australia is a complex mix of Commonwealth and State Government funded services and services funded by private health insurance. How do doctors, physiotherapists, optometrists, dentists and other health professionals fit into this framework of public and private health services? Which health services are funded by the governments and which are privately funded? Read on to understand more about the Australian healthcare system.

Compared with health systems in other developed countries, the Australian health system delivers us above-average health outcomes. Spending on health is on a par with other prosperous countries. And despite the poor life expectancy of our indigenous people, Australia still ranks well for healthy life expectancy. According to the World Health Organization, Australians can expect to live an average of 74 healthy years.

So, how do we achieve these health outcomes? Let’s take a look at the various components of the health system and how they fit together to deliver healthcare to the Australian population.

At the core of the health system is the National Health Act. This was passed in 1953 to regulate the provision of pharmaceutical, sickness and hospital benefits and of medical and dental services. The Act covers nursing homes, the Pharmaceutical Benefits Scheme and registration of health funds.


Medicare has been the Commonwealth Government’s universal health insurance scheme since 1984. Medicare provides Australian residents with free treatment as a public patient in a public hospital and free or subsidised treatment for some optometrist services, some dental care services, some psychology services, and treatment by doctors. In some circumstances, Medicare rebates are available for a certain number of treatments by allied health professionals such as physiotherapists, dietitians and speech pathologists.

Medicare is partially funded by an income tax surcharge — all Australian taxpayers earning over a certain threshold pay a Medicare levy (currently 1.5 per cent of their taxable income or 2.5 per cent for those on high incomes who don’t have private health insurance).

Medicare pays a benefit to the user for various healthcare costs including:

  • doctors’ and specialists’ consultation fees;
  • tests and examinations your doctor orders for you;
  • eye tests carried out by optometrists;


  • most surgical procedures.

For people with chronic conditions and complex care needs, Medicare gives rebates for visits to allied health professionals, including physiotherapists, psychologists, dietitians and occupational therapists. You can claim for only a certain number of visits per year. The allied health professional must be registered with Medicare, and your GP must refer you to them. Your GP must also draw up a special care plan for you stating that you have a chronic (long-lasting) medical condition and complex health needs and that you need these allied health services.

Rebates for a certain number of dentist visits per year are also available for people with chronic conditions and complex care needs, but only under a GP care plan. To be eligible, your dental problem must be making your chronic medical problem worse.

Medicare Schedule fee

Medicare benefits are based on a list of standard fees for medical services — the so-called ‘Schedule fees’.

Despite these Schedule fees, doctors are free to set their own fees for consultations and procedures. They are covered by the Trade Practices Act. After all, just like hairdressers and plumbers, they need to cover their costs of being in business and hopefully make a profit, too!

Many doctors follow the Australian Medical Association’s list of suggested fees. This list has been indexed to keep up with costs and recommends higher fees than the Medicare Schedule fees.

Medicare benefits

General practice

For most general practice consultations, meaning interactions with your doctor in which he or she asks you questions, examines you and discusses a plan of treatment, Medicare now rebates 100 per cent of the Schedule fee. Even so, you may still have to pay a certain amount (a ‘gap fee’), as many doctors charge more than the Schedule fee. For most other GP services, such as procedures like removing skin lesions or injecting joints, the rebate is 85 per cent of the Schedule fee.

For an example of how this works in practice, a GP might charge $50 for a standard consultation. The Medicare rebate for this is $36.30, leaving a gap of $13.70 for you to pay.

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