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Understanding universal health care: Cost- Sharing for Patients in Australia, Part 1

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Understanding universal health care: Cost- Sharing for Patients in Australia, Part 1

The first blog post of this series documented the widespread adoption of patient cost-sharing requirements by 22 high-income countries with universal health insurance coverage. This is unsurprising in light of economic evidence that overwhelmingly indicate that cost-sharing mechanisms can reduce the use of outpatient care without necessarily resulting in adverse consequences when accompanied by protections for vulnerable populations.

However, Canada remains among a small minority of only six countries that eschew such requirements for core medical services. This is unfortunate since economic theory suggests such “first-dollar” coverage can lead to excess demand for medical care and a loss of social welfare. The result, in the absence of a pricing mechanism, contributes to rationed care—something all too familiar for Canadians who’ve experienced long delays in accessing medical professionals for care.

Clearly, Canadians would benefit from learning how other countries employ cost-sharing mechanisms while simultaneously protecting the vulnerable. The next several blog posts in this series will therefore outline precisely how patients are expected to share the cost of their care in eight countries with well-regarded, high-performing universal health-care systems: Australia, Belgium, France, the Netherlands, New Zealand, Norway, Sweden and Switzerland. Each of these countries routinely ranked among the top-five performers in numerous reports published between 2010 and 2020, generally report shorter wait times for specialist consultations and elective treatment, and share Canada’s goal of universal access to medical care.


Australia’s health-care system can be described as a primarily tax-funded public system that’s deeply integrated with a parallel private system. Medicare, Australia’s public insurance scheme, provides universal coverage for a list of benefits known as the Medical Benefits Schedule (or MBS). The country’s private sector plays a significant role in the provision and (to a lesser extent) financing of health-care services. Private hospitals can, among other things, provide services to private patients while private insurance companies offer coverage for both complementary and core services.

The expectation of cost-sharing in Australia for health-care services will, for the most part, depend on where a patient receives care and if they choose to be treated as a private patient. While visits to a general practitioner in Australia are covered at 100 per cent of the MBS fee by the public plan, general practitioners can set their fees above the MBS rate. When this occurs, the patient is responsible for making a “gap payment”—that is, the difference between the set fee and reimbursement. Co-insurance payments are the norm for visits to specialists in Australia, as only 85 per cent of the MBS fee (which specialists can also charge in excess of) is reimbursed with the patient responsible for the remainder. In 2020, the average patient contribution for a specialist visit was AU$80 (C$74).

Australian patients can choose to be treated in hospital as either a public or private patient. While public patients are covered at 100 per cent of the MBS, those treated as private patients (in a public or private hospital) only receive coverage at 75 per cent of the federally determined medical services fee. Unless private patients have private insurance, they will be expected to cover the remaining fee out-of-pocket. While Medicare does provide coverage for drugs listed under the Pharmaceutical Benefits Schedule, patients are generally expected to share in their cost through fixed co-payments. In 2022, Australian patients could expect to pay up to AU$42.50 (C$37.75) for most medications.

Australia has adopted several protections to ensure vulnerable populations are not disproportionately affected by out-of-pocket costs including the “Greatest Permissible Gap” (GPG), Original Medicare Safety Net (OMSN) and the Extended Medicare Safety Net (EMSN). The GPG applies to all out-of-hospital services and places a fixed cap on the maximum difference between an MBS fee and the standard 85 per cent Medicare payout. Indexed in November, the gap couldn’t exceed (AU$87.90 or C$82.80 in 2021) and applied to services with an MSB fee of more than AU$586.20 (C$552.20).

The OMSN shields patients who have accumulated outpatient “gap payments” beyond a set threshold (AU$495.60 or C$440.3 in 2022). Once crossed, the OMSN reimburses 100 per cent of the scheduled fee for the rest of the calendar year. The EMSN provides an additional rebate of 80 per cent of out-of-pocket costs for eligible out-of-hospital Medicare services once expenses for singles and families reach AU$2,249.80 (C$1,998.70). This threshold is lower for certain vulnerable groups ($AU717.90 or C$637.80).

Australians also benefit from additional out-of-pocket protections for pharmaceutical costs through the Pharmaceutical Benefits Scheme Safety Net. Once applicable payments for patients reach the general patient Safety Net threshold of AU$1,542.10 (C$1,370) in 2022 they are able to apply for a Safety Net Concession Card and thereafter only pay the concessional rate of AU$6.80 (C$6.05) per prescription. Concession card holders are eligible for a Safety Net Entitlement Card once they reach the concessional Safety Net threshold of AU$326.40 (C$290), which entitles holders to receive pharmaceutical benefits without co-payments for the remainder of the calendar year.

This post has provided a snapshot of the Australian universal health-care system, the cost-sharing requirements for patients who use it, and the safety nets it employs to ensure the most vulnerable are not adversely affected. In following blog posts, we’ll discuss how seven other high-performing countries similarly employ cost-sharing mechanisms and patient protections within their respective universal health-care systems.

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