Medicare is Australia’s universal healthcare system, designed to provide residents with access to essential medical services at low or no cost. However, many Australians wonder if they have to pay for Medicare and, if so, how much. This blog post clarifies how Medicare is funded, what costs Australians may incur, and recent changes affecting affordability in 2025.
Is Medicare Free for Australians?
Medicare covers a wide range of medical services, including visits to general practitioners (GPs), specialists, hospital treatments as a public patient, diagnostic tests, and subsidised prescription medicines under the Pharmaceutical Benefits Scheme (PBS). Many of these services are bulk billed, meaning the healthcare provider bills Medicare directly and patients pay nothing out of pocket.
However, not all services are fully covered. Some doctors and specialists charge fees above the Medicare rebate, resulting in a gap payment that patients must pay themselves. Additionally, services like dental care, ambulance, and some allied health treatments are generally not covered by Medicare.
How Is Medicare Funded?
Australians contribute to Medicare primarily through the Medicare levy, which is a tax of 2% of taxable income collected via the Australian Taxation Office. Most taxpayers pay this levy, which directly supports the funding of Medicare services.
- Low-income earners and certain groups (such as seniors or those with specific medical conditions) may be exempt or pay a reduced levy.
- Higher-income earners without private hospital insurance may also pay the Medicare Levy Surcharge (MLS), an additional tax designed to encourage private health coverage.
Out-of-Pocket Costs and Safety Nets
While many services are bulk billed, some Australians do face out-of-pocket expenses. To help with these costs, the government provides Medicare Safety Nets that increase rebates once a patient’s out-of-pocket expenses reach certain thresholds in a calendar year.
- From 2025, the Original Medicare Safety Net (OMSN) threshold has been lowered to $500 for most families, meaning after spending this amount on gap fees, Medicare covers 100% of the scheduled fee for out-of-hospital services for the rest of the year.
- Those not meeting the $500 threshold have a higher safety net at $1,000 but still receive an 80% rebate on costs above that.
These measures aim to reduce the financial burden on low-to-middle-income families and improve access to necessary healthcare.
Recent Government Initiatives to Reduce Costs
In 2025, the Australian Government has committed $8.5 billion to increase bulk billing incentives, aiming for 90% of GP visits to be bulk billed by 2030. This means more Australians will be able to see their doctor for free, reducing out-of-pocket expenses significantly.
Additionally, from January 2026, the maximum cost for medicines under the PBS will drop from $31.60 to $25, making essential medications more affordable.
Summary: What Australians Pay for Medicare
- Medicare levy: Most taxpayers pay 2% of their taxable income to fund Medicare.
- Out-of-pocket costs: Some services are not fully covered, leading to gap payments.
- Bulk billing: Many services are free at the point of care when providers bulk bill Medicare.
- Safety nets: Help reduce costs for those with high medical expenses.
- Private health insurance: Can help cover services not included under Medicare and avoid the Medicare Levy Surcharge.
Australians do contribute financially to Medicare through the Medicare levy, but many medical services remain free or low cost due to government subsidies and bulk billing. Recent reforms and investments in 2025 aim to make Medicare even more affordable, ensuring broader access to healthcare without excessive out-of-pocket expenses. Understanding how Medicare is funded and what costs you may face helps you make informed decisions about your healthcare.