Medicare vs Private Health Insurance

What are they, how they work together, and how to make the most of both.

Understanding Medicare and Private Health Insurance

Medicare and private health insurance both play an important role in Australia’s healthcare system – but they don’t work in the same way. Medicare provides access to essential medical services, while private health insurance can offer more choice, flexibility, and cover for services Medicare doesn’t include.
 
Understanding how these two types of cover differ – and how they can work together – is a key step in making informed decisions about your health.

What is Medicare?

Medicare is Australia’s public healthcare system. It gives eligible Australian citizens and residents access to a wide range of medical services at low or no cost.
 
Medicare generally covers:
 
  • Free treatment as a public patient in a public hospital
  • GP visits and specialist consultations (fully or partly subsidised)
  • Tests, scans, and imaging like x-rays and blood tests
  • Prescription medicines through the Pharmaceutical Benefits Scheme (PBS)
If your doctor bulk bills, Medicare may cover the full cost of your visit.
 
Learn more about Medicare at health.gov.au

What does Medicare not cover?

While Medicare provides strong essential cover, it doesn’t include everything.

Common gaps include:
 
  • Most dental, optical, and physiotherapy services
  • Ambulance services in most states
  • Private hospital accommodation and choice of doctor
  • Some out-of-hospital services and elective procedures
These gaps are where private health insurance may add value.

What is Private Health Insurance?

Private health insurance helps cover healthcare costs that Medicare doesn’t and can give you more control over how and when you’re treated.
 
There are two main types of cover:
 
  • Hospital cover – for treatment as a private patient in hospital
  • Extras cover – for services like dental, optical, and physio

What does Private Health Insurance cover?

Depending on your policy, private health insurance can help with:
 
  • Treatment in a private hospital or as a private patient
  • Choice of doctor or specialist (where available)
  • Shorter wait times for elective surgery
  • Extras like dental, optical, physio and more
  • Private room accommodation (subject to availability)
Many people use private health insurance to complement Medicare rather than replace it.

What’s the main difference between Medicare and Private Health Insurance?

Put simply, Medicare provides essential healthcare cover, while private health insurance gives you additional choice and flexibility.
 
See the table below for a breakdown of how they differ:
Medicare VS Private Health Insurance
Public system funded by taxes Paid insurance through a private provider
Free or subsidised care Covers additional services and costs
Limited choice of doctor or hospital Greater choice and control
May involve waiting lists for non-urgent care Typically shorter wait times
Doesn’t cover many extras Covers services like dental and physio, depending on cover type

How do Medicare and Private Health Insurance work together?

Medicare and private health insurance aren’t designed to replace each other – they’re designed to work alongside each other.
 
Medicare can cover essential services, such as GP visits and public hospital treatment. Private health insurance can then help cover additional services or give you more choice, such as being treated as a private patient in hospital or claiming benefits for extras like dental or physio.
 
In many cases, you can choose how you’re treated depending on your situation – using Medicare for some services and private health insurance for others. This flexibility is why many people choose to have both.

Do you need Private Health Insurance if you have Medicare?

Medicare alone may be enough if you:
 
  • Are comfortable using the public system
  • Don’t mind waiting for non-urgent procedures
  • Don’t need extras like dental or physio
Private health insurance may be worth considering if you:
 
  • Want more choice and flexibility in your care
  • Prefer shorter wait times
  • Regularly use services not covered by Medicare
Reviewing your options can help you feel more confident that your cover matches your needs, now and into the future.

Compare your health cover options today

Understanding how Medicare and private health insurance work together is a great first step, but the right choice comes down to your needs, preferences, and life stage.
 
Exploring your options now can help you feel more confident about your healthcare and avoid gaps in cover later.
 
Discover how AIA Health could help cover the gaps Medicare doesn’t and give you more choice in how you’re treated. Get a quote today.

Frequently asked questions

Yes – many people use both. Medicare can cover essential healthcare, while private health insurance can help with additional services or give you more choice in how and where you’re treated.

If you choose to be treated as a private patient, Medicare may still contribute to some costs, while your private health insurance can help cover hospital and treatment expenses depending on your policy. This can also allow you to choose your doctor where available.

It depends on your needs and preferences. If you value greater choice, shorter wait times, or access to services not covered by Medicare, private health insurance may offer additional peace of mind.

You may still have some out-of-pocket costs, depending on your cover and provider. This could include excess payments or gaps between what your insurer pays and what your doctor charges. For more information, visit our What is Private Health Insurance resource page.

The Medicare Levy Surcharge (MLS) is an additional tax some higher income earners may pay if they don’t have eligible private hospital cover. Taking out hospital cover may help reduce or avoid this surcharge, depending on your circumstances. For more information, visit our Medicare Levy Surcharge resource page.

People often review their cover when their circumstances change – such as starting a family, increasing their income, or wanting more control over how they access healthcare.

Yes – even with private health insurance, you can often choose to be treated as a public or private patient depending on your situation, preferences, and availability. 

It can help to consider:
 
  • What’s included and excluded
  • Waiting periods
  • Benefit limits
  • Out-of-pocket costs
  • Flexibility to change cover
Understanding these factors can make it easier to choose cover that suits your needs. For more information, visit our Getting Started with Private Health Insurance resource page.