Medical gap fees

How are medical fees paid in the private health system?

To avoid surprises about costs in the private health system, it first helps to understand who pays the fee.

There are 3 main funders:

  • the Australian Government
  • private health insurers
  • the patient
The Australian Government

The Australian Government’s Medicare Benefits Schedule (MBS) is a list of medical services along with the amounts the Government and private health insurers will contribute to them. Generally, the Government will pay the following (known as a Medicare rebate):

  • 100% for services provided by a GP
  • 85% for services provided by all other medical practitioners
  • 75% for services provided by a medical practitioner for treatment in a private hospital
Private health insurers

Private health insurers must by law pay 25% of the MBS fee for numerous private health services in hospital.

The patient

The patient pays the difference between the doctor’s fee and Medicare and private health insurance payments. If Medicare or private health insurance does not cover a certain medical service, the patient pays the doctor’s fee in full.

Why does my doctor charge if I have Medicare and private health insurance?

Medicare and private health insurance may only contribute a limited amount towards a doctor’s service because they only need to pay the Medicare Benefits Schedule (MBS) fee. The MBS fee does not always reflect the value and expense of delivering the service. This is because the MBS aims to make it easier to pay for medical care, not cover the entire cost. Further, the Government has not raised the MBS fees in line with the consumer price index (a measure of the change in cost of goods and services) for many years. This means that the gap between the doctor’s fee and the set contributions from the Government and insurers continues to grow.

This shortfall is called a gap fee or out-of-pocket cost, which is paid for by the patient. However, your insurance may cover some or all of the gap fee, depending on the insurance company, your policy, plus certain arrangements. Check your insurance policy to learn the coverage it provides you.

Calculating payments

Doctor’s fee  Fee type Medicare pays Insurer pays You pay What it means
$1,000Up to or equal to MBS fee $750 $250 $0You are fully covered because Medicare pays 75% of the MBS and  your insurer pays 25%.
$1,500Up to or equal to the insurer’s “no-gap” threshold* $750 $750 $0You are fully covered because Medicare pays 75% of the MBS and your insurer pays the rest.
$2,000Equal to the insurer’s “known-gap” threshold* $750 $750 $500Medicare pays 75% of the MBS, you pay $500 and your insurer pays the rest.
$2,001Greater than the insurer’s “known-gap” threshold** $750 $250 $1001Medicare pays 75% of the MBS, your insurer pays 25% of the MBS and you pay the rest.

 

* This is the medical fee when the doctor participates in your insurer’s no-gap or known-gap arrangement. This means the doctor may be charging less than the value of the service.

** This is the medical fee when the doctor does not participate in a gap arrangement and the cost is more than the MBS fee. This means the doctor may be charging the true value of the service.