Gap payments, explained

A gap is what you pay yourself when a doctor charges more than Medicare and your fund pay between them: Medicare pays 75% of the MBS fee, your fund at least the other 25%, and anything above that is the gap. If your doctor bills under your fund’s no-gap or known-gap arrangement, the gap shrinks or disappears.

General informationThis page explains out-of-pocket costs in general. It is not financial or medical advice. The official explanations are on privatehealth.gov.au and the Department of Health’s out-of-pocket costs page; your doctor, hospital and insurer can tell you your own figures.

Where a gap comes from

When you are admitted as a private patient, each doctor involved in your care may charge a fee: surgeons, assistant surgeons, anaesthetists, pathologists, radiologists and others. These medical fees are separate from what the hospital charges for accommodation and theatre time.

For each item on the Medicare Benefits Schedule, Medicare pays 75% of the MBS fee and your insurer pays the remaining 25% if your policy covers it. There is no cap on what a doctor may charge, and if the fee is above the MBS fee, the extra can be yours to pay. Fees for the same type and quality of care can vary with who you see and where they are.

Three receipts for the same operation

Example only · invented figures

To show how the arrangements work, here is one fictional operation with an MBS fee of $1,000, billed three ways. In this example the fund has set a no-gap limit of $1,300 (Medicare’s $750 plus $550 from the fund), pays the same $550 under its known-gap arrangement, and has a known-gap limit of $1,500. Real limits are set by each insurer; real MBS fees are on MBS Online.

A. No-gap arrangement

Charged$1,300.00
Medicare−$750.00
Your fund−$550.00
You pay$0.00

B. Known-gap arrangement

Charged$1,450.00
Medicare−$750.00
Your fund−$550.00
You pay$150.00

C. Above the known-gap limit

Charged$1,600.00
Medicare−$750.00
Your fund−$250.00
You pay$600.00

Arithmetic: Medicare pays 75% × $1,000 = $750 in all three. In C the fund pays only 25% × $1,000 = $250, so the gap is $1,600 − $750 − $250 = $600.

The rules behind the three slips come from the Department of Health:

No-gap cover. Your insurer pays a set amount above the MBS fee. If the doctor charges no more than the insurer’s no-gap limit, you have no out-of-pocket cost.
Known-gap cover. The doctor charges above the no-gap limit but no more than a second limit set by the insurer. You pay the difference between the doctor’s fee and what the insurer agrees to pay.
Above the known-gap limit. The insurer won’t pay more than 25% of the MBS fee, and you pay the whole gap.

Slip C is the one to notice: a fee $150 higher than in slip B adds $450 to what you pay, because the fund’s benefit falls back to the 25% minimum.

No doctor has to take part in an insurer’s gap cover scheme, and doctors can decide case by case whether to use it. An insurer can’t usually guarantee full cover for that reason. privatehealth.gov.au’s gap cover doctors page shows where to find each insurer’s arrangements.

A paper receipt curling out of a printer on a dark counter, warm light blurred behind it — Photo by Joao Viegas on Unsplash

The hospital’s lines

Hospital charges are separate from doctors’ fees. They can include accommodation, operating theatre fees, medical devices such as plates, screws and artificial joints, medicines and dressings, and therapies in hospital. Medicare pays no benefit towards them; what your fund pays depends on your policy and on whether it has an agreement with the hospital.

With an agreement, you have either no out-of-pocket cost for hospital charges or you are told the details of what you will pay.
Public hospitals don’t have agreements with particular insurers but are generally treated as though they are agreement hospitals.
In a hospital without an agreement, you may face significant costs. Some hospitals are eligible for second-tier default benefits, which must be at least 85% of the average charge for similar treatment in a hospital of the same category.
An excess or co-payment on your policy is still yours to pay, even at an agreement hospital.

For an implanted device, your insurer must pay at least the minimum benefit set for it on the government’s list of medical devices and human tissue products, if you have the right cover. If that benefit doesn’t meet the cost, you may pay some or all of the difference.

It is your right to get an estimate of costs from your doctor or hospital before you agree to treatment. This is called informed financial consent. The Ombudsman’s site suggests asking for the MBS item numbers and an estimate of your costs, preferably in writing, then checking with your insurer what your policy pays for those items.

Two things can still surprise you. Other doctors may be involved, so it helps to ask who they are and how to get their estimates. And a booking or administration fee charged by a specialist can’t be claimed from Medicare or your insurer.

The Department of Health also describes bill splitting, where a doctor sends one bill to Medicare and your insurer and a second bill to you. It suggests asking for a written estimate in advance and expecting a final invoice that reflects all the costs.

To check whether an estimate looks typical, the government’s Medical Costs Finder shows what people have paid for common specialist procedures in different places.

If the bill is higher than you expected

The Ombudsman’s site suggests starting with the doctor’s office: check whether you agreed to the charges and ask about the reasons for them. If the charge still seems unfair, it suggests paying at least part of the bill and sending a letter that sets out what you are paying and why, what you expected to pay, and what you would be prepared to pay. Disputes about in-hospital fees can go to the Private Health Insurance Ombudsman; the complaints receipt lists who handles what.