Worked Examples and Checklists
Choosing a hospital excess: $0, $250, $500 or $750 worked out
How hospital excesses work in Australia, per-admission versus annual excesses, the limits for the surcharge, and a break-even calculation for choosing a level.
A hospital excess is the amount you agree to pay towards a hospital admission before your insurer pays, in exchange for a lower premium. The right level comes down to one calculation: how much premium you save each year compared with how much extra you would pay in a year when you are admitted. If a $750 excess saves $240 a year compared with $250, you would need to be admitted more often than about once every two years for the lower excess to pay off. To keep avoiding the Medicare Levy Surcharge, the excess must be no more than $750 for a single or $1,500 for a couple or family policy.
This guide is part of how to compare policies step by step.
How excesses work
- The excess is paid to the hospital when you are admitted as a private patient, even at a hospital that has an agreement with your insurer.
- Some policies charge it per admission, others once per year or once per person per year. On a couple or family policy it may be capped per policy.
- Many policies waive the excess for children on family policies, and some waive it for same-day admissions or readmissions within a set period.
- A co-payment is different: a fixed amount per day in hospital, usually capped per admission.
- The excess applies only to hospital cover, not extras or ambulance.
Check the Private Health Information Statement for which rule applies.
Break-even calculation
Worked example (illustrative, single, after rebate).
| Excess | Annual premium |
|---|---|
| $0 | $2,150 |
| $250 | $1,960 |
| $500 | $1,830 |
| $750 | $1,720 |
$250 versus $750: saving $1,960 − $1,720 = $240 a year. Extra excess if admitted = $500. Break-even = $240 ÷ $500 = 0.48 admissions a year, roughly one admission every two years. If you expect to be admitted less often, the $750 excess is cheaper over time.
$0 versus $250: saving $190 a year to take on $250 of risk per admission. Break-even = 0.76 admissions a year. Most healthy people are admitted far less often, so a $0 excess is usually poor value unless you expect regular admissions, such as planned treatment.
Over five years
| Scenario (illustrative) | $250 excess total | $750 excess total |
|---|---|---|
| No admissions | 5 × $1,960 = $9,800 | 5 × $1,720 = $8,600 |
| One admission | $9,800 + $250 = $10,050 | $8,600 + $750 = $9,350 |
| Two admissions | $10,300 | $10,100 |
| Three admissions | $10,550 | $10,850 |
The $750 excess stays cheaper unless there are three admissions in five years. You can test your own figures in the hospital policy comparison tool.
Annual versus per-admission excess
If you might need several admissions in a year, such as a series of procedures, an excess payable once a year can make a large difference.
Example (illustrative). Two admissions in one year on a $500 excess:
- Per admission: $500 + $500 = $1,000
- Once a year: $500
Couples and families
A $1,500 excess on a family policy often applies as $750 per adult, capped at $1,500 per year. If both adults might be admitted in the same year, a family's worst case is the full $1,500.
When a lower excess makes sense
- You have planned treatment after waiting periods, such as a joint operation or pregnancy.
- You have a condition likely to need repeated admissions.
- You would struggle to pay $750 at short notice. Having cash available matters as much as the arithmetic.
When a higher excess makes sense
- You are young and healthy, buying mainly to avoid the surcharge and loading.
- You have savings to cover the excess.
- The policy waives the excess for children or same-day admissions, which reduces your real exposure.
Watch outs
- A single policy with a $1,000 excess does not avoid the surcharge.
- Raising your excess is usually treated as a downgrade with no waiting period, but lowering it can be an upgrade with waiting periods on the reduced excess. Ask your insurer.
- The excess is on top of any gap fees charged by doctors. See the surgery gap fees example.
When to consult a professional
How likely you are to be admitted is a health question. If you have an ongoing condition or planned treatment, ask your GP or specialist what to expect before choosing an excess.
FAQ
Do I pay the excess for emergency department visits?
No. Attending a public emergency department as an outpatient is free under Medicare. The excess applies if you are admitted as a private patient.
Is the excess paid to the insurer or the hospital?
Usually to the hospital, which deducts it from what the insurer pays.
Can I change my excess mid-year?
Usually yes. Increasing it lowers the premium straight away; decreasing it may involve waiting periods.
Does the excess apply to day surgery?
It depends on the policy; some charge a reduced excess or none for same-day admissions.
Sources
- PrivateHealth.gov.au — excess and co-payment definitions, policy statements
- Australian Taxation Office — excess limits for the Medicare Levy Surcharge
- Commonwealth Ombudsman — disputes about excess charges
