With health insurance premiums about to rise, these people decided to “self-fund” their private healthcare

Pauline Davies has never skimped on healthcare. He has also never had private health insurance.

“Not having health insurance has never made me question the value of paying for health services,” she says.

“I have had a few minor procedures and value paying for services directly to the provider rather than a health insurance company.

“When it hasn’t been funded by Medicare, I’ve been happy to pay the full amount.”

Ms Davies is one of what is believed to be a small number of people who make the conscious decision to self-fund their healthcare.

They will then choose to wait and receive their care through the public system or, if they don’t want to wait, choose to pay upfront and be seen as a private patient.

It’s a strategy that doesn’t suit everyone because it involves taking risks to stay healthy and not end up chronically ill. It also requires a stable income and being a good long-term saver.

Pauline Davies said it didn’t make financial sense for her to get health insurance.(supplied)

Typically, self-funded people set aside money at regular intervals. This money is then used to pay for medical care, including doctors, specialists, procedures, hospital stays, therapies and medical devices.

Mrs Davies’ children are now adults, but for much of her life she was a single mother. She also estimates that she earned an average or slightly above average income for most of her working life, but has always lived frugally and been good at saving money.

“It’s a gamble I decided to make,” he said.

“I was able to retire early at only 59. I attributed that to hard work and careful living, but also 40 years without paying health insurance, I think, contributed to my strong financial position.”

It’s a decision he said he’s never regretted, especially as he’s seen the cost of living and health insurance premiums rise.

The next premium increase is expected in April.

Change from insured to uninsured

It’s a similar situation for David, who also self-funds his health care.

For decades, he and his wife have made regular payments into a high-interest savings account that they dip into only when they, or their children, have to pay medical expenses.

The family started with insurance, but decided to drop it after the birth of their second child in the late 1990s, when they were in their 30s.

“My wife went in as a private patient at a public hospital here in Canberra, and the obstetrician we expected to be there for the delivery was not available,” he said.

They had already paid for that obstetrician’s services, so not having him available and then being left with more out-of-pocket medical expenses made them question whether private health coverage was for them.

A woman in a doctor's uniform is standing with a stethoscope around her neck.

Some Australians are making a conscious decision to self-fund their healthcare.(Unsplash: Jeshoots)

“We ended up with, yes, a wonderful healthy baby, but there was a bit of a sour taste in my mouth about that particular episode.”

David is now retired, but previously worked in health policy. He believes that background gave him a good understanding of the health care system, which came in handy when he and his wife were weighing their options.

They also talked about the fact that they should only self-fund if they had a safety net, to cover the worst case scenario if a major health event arises. In this situation, they agreed that they would use their mortgage offset account to cover large unforeseen medical costs.

Become a more active partner in your health care

David believes his decision to self-fund made him more proactive about his health and more likely to seek second opinions to ensure he was getting the best advice and value.

“If you’re paying for something, you generally have a more interested view of what you’re getting for your money,” he said.

“There was one case where I went to a specialist and I wasn’t very happy with the advice I got.

“So I actually paid to go see another specialist. I don’t think I would have done it otherwise [saved for my own] health fund, because I wanted to get value for money.”

The idea of ​​self-financing health care is not new. But it is a concept that is not usually considered.

The most recent data from the Australian Institute of Health and Welfare shows that the number of public patients using public hospitals, meaning the costs of which are fully funded by the government, has increased steadily between 2017 and 2022.

In the year to 2022 there were 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 where, as a patient in a private hospital, you can pay to ensure you are treated by a specialist or doctor of your choice and to have your own room. Another 376,481 self-financed in private hospitals.

Watch out for the small print

Self-financing health care is not a strategy health economist Stephen Duckett endorses.

He believes the potential risks far outweigh the benefits.

“It’s very difficult to predict what your health needs might be a year, two or five years from now,” Dr. Duckett cautioned.

“Everyone, if things go wrong, they can go to a public hospital.

Stephen Duckett

Health economist Stephen Duckett said self-financing health care is not a strategy he supports.

“But if you’re a little bit older and you have a chronic condition and you might have hip pain or knee pain and you need a hip replacement, you might have to wait a little bit in pain to get into your surgery if” we just trust in the public sector”.

In his view, self-financing healthcare is something that should only be attempted by people with a certain earning capacity, temperament and strong organizational skills.

“Not everyone has that personality,” he said.

The other consideration is around taxes and various fees.

The first is the Medicare tax. It is levied at a rate of 2 percent of a person’s income and helps the public health system.

Then there’s the extra Medicare Levy, which is levied on some people who earn more than a certain amount each year and don’t have private health insurance. This rate is usually between 1% and 1.5% of a person’s income.

“Because of the way the Australian tax system works, it’s cheaper for many people to get health insurance than pay a tax penalty, the so-called Medicare Levy Surcharge,” he said.

There is also lifetime health coverage; a charge against your hospital premium if you have not had private hospital cover since the year you turn 31 but decide to get it later.

bupa

One way to avoid paying the Medicare fee is to get private health insurance.(ABC News: Nic MacBean)

Ms Davies said that when the tax was first introduced in 1984, she weighed her options and concluded that it did not make financial sense for her to get health insurance.

He also decided that if he ever had to pay the fee (surcharge) he would rather have his money go to public health than to an insurer.

“I did the maths and chose to gamble on my good health, knowing that I work hard and have always lived very carefully and had a surplus,” Ms Davies said.

His two children are now adults. His son is in the defense forces, so he automatically gets private health insurance.

However, her daughter, a registered nurse, has decided not to take out private health insurance.

At the end of the day, Ms Davies said it really came down to one thing; “I understand that we’re betting on not having health insurance, but that’s a personal decision that everyone makes for themselves.”

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