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Monday, 12 May 2008

Will it be worth having private hospital insurance any more?

The Australian Federal budget for 2008/9 will be unveiled tomorrow, but a lot of the details have already been "leaked" by the government in advance. One of the changes will apparently be an increase in the threshold at which the "medicare surcharge" (tax) kicks in. Currently if a couple has a combined income over $100,000 and doesn't have private hospital insurance they have to pay an extra 1% medicare surcharge (on top of the normal medicare levy).

When DW was working full time this meant that taking out basic hospital cover didn't cost much more than the extra tax liability would have cost (if we didn't have insurance). However, over the years I've been less than impressed with the benefits of having private hospital cover. When DS2 was born we weren't even able to use our private hospital cover for the birth as there were no beds available in the private hospital. In any event, there are so many "gaps" in private hospital insurance that we would have ended up paying a few thousand dollars "out of pocket" if we hadn't used the public hospital for the birth. Each year the cost of private hospital insurance goes up, so that it now costs me $153 per month for the most basic level of family cover. I recently looked into enhancing our cover to included dental costs (in case DS1 or DS2 need braces), but the extra $70 a month is unlikely to be worthwhile (especially since having insurance doesn't cover 100% of the cost of all expenses).

Now that DW is working part-time (and I'm using salary sacrifice to contribute pre-tax into my superannuation account) our combined taxable income is too low for us to be liable for the surcharge if I dropped our insurance cover. If the proposed budget change takes effect we also wouldn't be in danger of exceeding the threshold when DW returns to work full-time. I'm giving serious thought to cancelling our private hospital cover and saving the extra $1,836 pa and relying on the public health system. There are plans to build a new public hospital less than one kilometer from where we live (if the State government ever allocates the required funding), so even if we keep our private hospital insurance we'd probably end up using the public hospital in case of emergency!

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