Some years ago in Australia it was possible to claim a certain amount of out-of-pocket medical expenses on one’s tax return at the end of the year.
A few years ago, this changed. It was replaced with a system of higher rebates once a certain level of out-of-pocket expenses had been reached for the calendar year. This is beneficial, as the patients don’t have to wait for that money to be received once a year at tax time.
I have discerned some confusion about how this all works, so this article is an attempt to put “how it all works” in simple terms.
The one aspect I think is MOST important is registering as a family or couple, especially if you have a person in your family with a chronic or underlying condition. Watch out for that heading below!
Please note if you are reading this article after 2022, you may need to locate current links. The links given herein are current as at the time of writing, for 2022.
PBS and Medicare Thresholds
The Pharmaceutical Benefits Scheme (PBS) and Medicare Benefits Schedule (MBS) are managed differently and have different safety nets thresholds. It is important that both are understood.
Medicare is managed centrally and the details and your current status is easily accessed in your Medicare app if you have it installed on your phone or via MyGov/Medicare.
Pharmaceutical thresholds are tracked by your pharmacist, so if you get prescriptions from different pharmacies on a regular basis, you could be missing out.
Medicare Safety Nets Thresholds
The Medicare Safety Net Thresholds are set every year for the calendar year. Once you reach the threshold applicable to you, you get a higher rebate. What can this mean in dollars? Please note the below example is across two different years, so the rebates shown may have moved slightly. Also, different item numbers may attract the same consultation fee but have different rebates based on the item number. For example, a psychology consultation fee may also be charged at $210, but as it is a different item number than a GP consultation, the rebate will be different.
Given the above caveat, the below is sufficient for illustration purposes and the examples are actual transactions of mine.
|Before I reach my threshold (from start 2022)||210.00||75.75||134.25|
|After I reach my threshold (from end 2021)||210.00||183.05||26.95|
As you can see, after I reach my threshold, my out-of-pocket is reduced by $107.30 (for this consultation fee for this MBS item number).
Note all of these refer to “out of hospital” services. If you receive a service in a private hospital as an inpatient, the out-of-pocket costs will not count towards reaching your threshold (although the graphic above doesn’t state that), nor will you receive the higher rebate for any services you receive as an inpatient. I know this from personal experience!
Remember imaging and pathology fall under this scope.
Verified & Unverified Costs
In most cases these days, you pay for a consultation at the time of the consultation and the practitioner’s staff submit your Medicare claim for you. In that case the cost is a verified cost. However, if this does not happen, be aware there will be extra steps.
Verified costs are when you pay your doctor’s fee before you make a claim from us. When this happens, your gap amount and out of pocket costs count towards your thresholds.
Unverified costs are when you don’t pay your doctor’s fee before you claim from us. When this happens, your gap amount and out of pocket costs don’t count towards your thresholds.https://www.servicesaustralia.gov.au/verified-and-unverified-costs?context=22001
Once you pay the doctor the balance and provide that receipt to Medicare, then the gap payment will be considered verified. Make sure you do that!
Registering as a Family or Couple
Why is this important? Let’s assume you are an Aged Pension couple. If you are not registered as a couple, you each, individually, have to reach that magic $717.90 out-of-pocket expenditure to receive the maximum increased rebates. That is, together you need to reach a total of $1,435.80 before you both get increased rebates. One of you may receive increased rebates before the other, if one of you has higher medical costs.
If you are registered as a couple, then you both contribute to a single threshold: $717.90.
Being on the same Medicare card does NOT mean you are registered as a couple or a family. I suspect this is a result of the transition from the old tax deduction method to the thresholds. You need to actually register.
If you’re part of a family or couple, you can register as a family to combine your costs. This means you’re more likely to reach the thresholds sooner. Even if all family members are on the same Medicare card, you’ll still need to register.https://www.servicesaustralia.gov.au/how-to-register-for-medicare-safety-nets?context=22001
You can see if you are, perhaps, a family of five, especially if a family member has high medical costs, registering as a family for the Safety Net is a very sensible move. There is a BIG difference between reaching $2,249.80 per year for each of you, or for all of you combined.
Pharmaceutical Benefits Scheme Safety Net
Please note that the PBS Safety Net is a little more complex than the MBS. The thresholds for 2022 are $1,542.10 for General patients and $326.40 for Concessional patients. Note that if you have private scripts, these do not count towards the threshold. Private scripts are those where the patient doesn’t qualify for the Government Subsidy, but is still able to be prescribed the medication – this could, for example, be for “off-label” use. That link also has good “The Real Cost of Medicines” examples illustrating how it works.
The scheme requires pharmacists, on request by patients, to record the supply of PBS and RPBS items on prescription record forms. When a patient reaches the Safety Net threshold within a calendar year, they qualify to receive PBS or RPBS items at a cheaper price or free of charge for the rest of that year. Any applicable special patient contributions, brand premiums or therapeutic group premiums must still be met by the patient.
The Safety Net threshold is reached by accumulating eligible patient contributions for PBS prescriptions supplied through community pharmacies and private hospitals and for out-patient medication supplied by public hospitals.
Pharmaceutical benefits (including authority items) can only be counted towards the Safety Net threshold when prescribed and supplied according to PBS conditions. A medicine supplied by a pharmacist not approved to supply pharmaceutical benefits cannot count towards the Safety Net.https://www.pbs.gov.au/info/healthpro/explanatory-notes/section1/Section_1_5_Explanatory_Notes
I strongly recommend if you or a family member has high medication costs, you ensure you are availing yourself of the benefits.
The confusion I have noticed among members of the general public is I suspect partly due to the transition from the tax deduction days. I don’t remember how well the “new system” was publicised at the time.
I recommend couples and families ensure they are registered because if someone suddenly does become unwell, the last thing anyone thinks of AT THAT TIME is registering with Medicare. With the risk of Long Covid currently, best to be prepared.
If you do have high pharmaceutical costs, please check with a pharmacist. I never hit the PBS Safety Net so I do not know nearly as much about how it works.