Self-Funding Private Healthcare in Australia: An Expert Warning
TL/DR –
Some Australians are choosing to self-fund their healthcare to reduce household expenses. Over 376,000 Australians self-funded their medical treatments in private hospitals in the 2021/2022 financial year. Those who opt for self-funding often set aside money regularly for healthcare costs, a strategy that is not recommended for everyone due to the potential risks and requirement of a stable income and long-term saving abilities.
More Australians Self-Funding their Healthcare to Manage Expenses
More Australians are choosing to self-fund their healthcare as a method to control household expenses. Data reveals over 376,000 Australians self-funded their medical treatments in private hospitals in the 2021/2022 financial year. The next increase in private health insurance premiums is anticipated this April.
Pauline Davies, who has always paid for her own healthcare, believes in directly paying service providers rather than health insurance companies. Like Davies, some Australians consciously decide to self-fund their healthcare, either waiting for care through the public system or paying upfront for private care.
This strategy requires a stable income, efficient long-term saving habits, and the assumption of remaining healthy. If one can afford it, investing in healthcare by setting aside money regularly for medical expenses can pay off.
Davies, a single mother with grown-up children, lived frugally and saved diligently. She has retired early at 59 and attributes some of her financial stability to not paying health insurance premiums for 40 years.
Switching from Insured to Uninsured
David, another Australian who self-funds his healthcare, echoes this sentiment. He and his wife maintain a high-interest savings account for medical expenses. After an unsatisfactory experience with a private hospital, they decided to self-fund their healthcare. They remind others considering this approach to have a contingency plan for unexpected major health events.
David believes that self-funding made him more proactive about his health. He has sought second opinions to ensure he receives the best value for his money.
The Australian Institute of Health and Welfare data for 2022 indicates 6.8 million admissions to public hospitals and 4.7 million to private hospitals. Of these, 37,921 were self-funded through the public system, and 376,481 self-funded in private hospitals.
Understanding the Fine Print
However, health economist Stephen Duckett warns against self-funding healthcare due to unpredictable health needs and potential risks. He advises this option only for those with a certain income level, organised temperament, and understanding of the tax system.
For example, the Medicare Levy, at 2% of a person’s income, supports the public healthcare system. The Medicare Levy Surcharge applies to individuals earning above a certain threshold without private health insurance, ranging from 1-1.5% of their income.
There’s also a Lifetime Health Cover, a loading charged to your hospital premium if you don’t have private hospital cover from the year you turn 31 but decide to get it later in life. These complexities need consideration when weighing the pros and cons of self-funding.
Despite these cautionary notes, Davies and her nurse daughter prefer self-funding their healthcare. However, they acknowledge this decision depends on personal circumstances and is a calculated risk.
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