It is not all bad news because it is possible to save hundreds of dollars just by shopping around. Check our Health Insurance guide (free for members).
A word of warning, however. Be cautious when changing funds - you may have to serve benefit limitation periods and waiting times.

It's important to remember that, under Medicare, all Australians are entitled to free treatment in a public hospital, regardless of their insurance status.

Private health insurance gives you:

access to a private hospital which might be more luxurious than a public hospital
greater choice of doctor than you would get if you were treated in the public system and:
possibly shorter waiting times for some forms of elective (non-urgent) surgery.
Another thing to consider are the government incentives:
Lifetime health cover penalises people who take out health insurance later in life with higher premiums. If you join after your 31st birthday you pay a 2% surcharge per year up to a maximum surcharge of 70%. So, for example, if you join at 45 you pay 30% more than someone who joined at 30.
Medicare levy surcharge: Singles earning more than $50,000 and couples/families with incomes over $100,000 (plus $1500 for each child after the first) pay an extra 1% Medicare surcharge -- on top of the 1.5% Medicare levy most people pay. That means at least an extra $500 or $1000 each year. You can avoid this by taking out hospital insurance.
Which policy should I choose?
Health funds brochures can be difficult to understand and to compare but there are some general things to remember.
You can save money on your premium by:

Buying a product with an excess (an excess is an amount of money a member agrees to pay for a hospital stay before benefits are payable).
Buying a product where you pay a co-payment if you go into hospital (the member agrees to pay an agreed amount each time a service is provided -- usually a set amount per day).
Buying a product that excludes treatment for some conditions.
Buying a product that only covers you as a private patient in a public hospital.
You should check how many times the excess applies per calendar year. Sometimes it applies once, sometimes three times. As a general rule it's better to save money by choosing a product with a high excess rather than choosing a product that excludes treatment for some conditions.

A number of policies also place limits on some treatments (which means that the fund will only meet part of the costs) and may exclude coverage for some treatments altogether.

Commonly limited and excluded treatments include:

Assisted reproduction
Coronary bypass and major heart surgery
Cosmetic surgery
Cataract surgery
Hip, knee and other joint replacements
Obstetrics and birth related care
Psychiatric Care
Rehabilitation
So remember, if you specifically want coverage for any of these things, make sure you check and double check with your health fund to make sure they aren’t excluded or limited in any way.

source:Choice - follow to view more information.