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You may think that between health insurance and Medicare, all your medical expenses are covered. However, this isn’t always the case.

What are gap payments?

A gap payment is an out-of-pocket expense you have to pay when you receive medical treatment that costs more than what you can claim back from Medicare or your private health insurance. Regardless of whether you’re a public or private patient, Medicare will subsidise some of the cost.

Let’s go into a bit more detail. When you are treated in a hospital, there is a ‘scheduled fee’ charged as outlined in the Medicare Benefit Schedule (MBS) for each different Medicare Item Number.  Medicare and private health insurance cover 100% of this scheduled fee, as well as the cost of your accommodation and theatre fees, provided you’re treated in a hospital that has an agreement with your Health Fund.

The medical gap is the amount above the scheduled fee that your specialist charges.

Medical Gap Payments

Take a hospital admission (as a private patient) for heart surgery, for example. You’ll notice in the graph above that Medicare covers part of your fee, and so does your private health insurance policy (PHI). In fact, if your doctor only charged the scheduled fee for your treatment, you might pay nothing!

In the example above though, this doctor charges more than the standard scheduled fee, and you need to pay the gap to make up the difference.

Medicare rebate amounts for private and public patients

Medicare does contribute a significant amount towards your treatment, regardless of whether you have private health insurance or not. Here’s what Medicare will cover when it comes to treatment.1

  • Getting treated in a hospital? Medicare pays 75% of the MBS fee for treatment where you are a private patient in a hospital, and 100% of the MBS fee for treatment where you are treated as a public patient in hospital
  • Seeing a Specialist? Medicare covers 85% of the MBS amount for seeing a specialist or surgeon as an outpatient, and may bulk bill if you’re seen in a public hospital outpatient clinic.
  • Getting treated by your GP. Medicare pays 100% of the schedule fee for a General Practitioner, and if your doctor bills Medicare directly (bulk-billing) you will not be out of pocket. However, not all GPs bulk bill and their fees can vary. In this instance, you will pay the consultation fee in full and receive a rebate from Medicare for the amount to which you are entitled.

Can I avoid out of pocket expenses?

In many cases, yes! If you’re privately insured, get in touch with your health fund and ask for a list of healthcare professionals (e.g. hospitals, doctors) with gap cover arrangements. If you’re treated by someone on the list, your treatment will have reduced or no out of pocket costs.

Some health funds have agreements with certain hospitals and doctors to help reduce your out-of-pocket costs. There are different types of gap cover schemes, a few examples are:

  • No-gap: if your insurer has a no-gap agreement, this means any fees subsidised by Medicare that are more costly than the MBS are covered by your health fund, and you won’t pay a gap.
  • Partially covered gap: with partial gap cover, your insurer covers some of the gap payment, but not all of it.
  • Known gap: if your health fund has a known gap agreement, they will cover the gap payment to a capped amount. Before you receive treatment, your insurer will let you know what your gap payment is expected to be.

N.B. You may still need to pay your health insurance excess or co-payment.

Depending on your treatment, you may have multiple health professionals treating you. If they have their own fees, these might not all have arrangements with your insurer, which might mean you pay out-of-pocket expenses for some of your treatment.

It’s also important to note that while your health fund may have had an agreement with a specific doctor in the past, it’s generally up to that doctor whether they will participate in the fund’s scheme on a case by case basis. It’s always a good idea to confirm with your doctor before seeking treatment as to whether they will participate in the scheme for your specific situation.

Can I avoid out-of-pocket expenses?

There are some ways to avoid or reduce the gap payments you may face when receiving medical treatment. For example:

  • get treated by a doctor with a no-gap agreement with your health fund;
  • ensure you’re being treated in a hospital that has an agreement with your health fund;
  • look for healthcare professionals who keep their fees in-line with the MBS; and
  • take out an appropriate level of cover for the treatments you need.

Keep in mind, you may still need to pay an excess or co-payment, depending on your policy and the treatment you’re receiving.

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Why are we charged out-of-pocket expenses?

While the fees for treatments covered by Medicare are listed in the Benefits Schedule, doctors aren’t required to cap their prices and can charge prices above what Medicare and private health insurance will cover. This means you may be charged an out-of-pocket expense.

Prices vary between clinics and between doctors and they’re obligated to reveal these costs to you if you inquire about the doctor’s fees before you receive treatment.

There are multiple reasons why you may have to pay a gap payment. Those reasons could be:

  • the doctor’s fees are above what the MBS will cover;
  • Medicare doesn’t cover the treatment;
  • your health fund doesn’t have a no-gap agreement;
  • you have a no-gap agreement through your private health insurance, but the hospital or doctor treating you isn’t a part of the gap cover scheme; and
  • your health insurance policy doesn’t cover the treatment.

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How does bulk billing work?

Bulk billing is when a doctor or healthcare professional doesn’t charge you for treatment but sends the medical bill direct to Medicare. Bulk billing can cover some GP visits, x-rays, pathology tests and eye tests that meet a certain criteria.

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Are excess payments and gap payments the same thing?

No, an excess payment isn’t the same as a gap payment. An excess payment occurs when you make a claim on your health insurance for treatments covered by your policy. This means you may have to pay an excess payment and gap payment if you have private health insurance.

You agree to this excess amount when you take out a policy, but you may have the option of choosing your excess.

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Can you claim tax back on medical expenses?

No, you can’t claim tax back on medical expenses. Australians used to be able to claim their net medical expenses when submitting tax refunds. However, this tax offset was phased out in the 2018-2019 financial year after being reduced to cover disability aids, aged care and attendant care expenses.

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  1. Doctor’s Bills. Private Health Insurance Ombudsman, Commonwealth Ombudsman, Australian Government – http://www.ombudsman.gov.au/__data/assets/pdf_file/0016/35611/Doctors-Bill-DL-Fyler-Web.pdf

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