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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 both Medicare and your private health insurance. Regardless of whether you’re a public or private patient, Medicare will subsidise some of the cost of your treatment. However, if you’re treated as a private patient, there can sometimes be a gap between the hospital fees and what Medicare will cover, which you may have to pay yourself.

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. Together, Medicare and private health insurance cover 100% of this scheduled fee, as well as the cost of your accommodation and theatre fees (if 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

As an example, say the above example is a hospital admission (as a private patient) for heart surgery. You’ll notice that Medicare covers part of your fee, and so does your private health insurance policy. If your doctor charged only the scheduled fee for your treatment, you might pay nothing!

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

When you receive treatment, you have a right to informed financial consent. This means that your health care provider must inform you of all medical costs before you’re treated so you know exactly how much you may or may not have to pay. The only exception to this is for emergency department treatment as a public patient where 100% of the costs are covered by Medicare.

Medicare rebate amounts for private and public patients

Medicare does contribute a significant amount towards medical services in Australia, 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 when you are a private patient in 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 medical specialist or surgeon as an outpatient and may bulk bill you 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; 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.

Family with no out of pocket medical expenses with gap payment cover

Can I avoid out-of-pocket expenses?

In many cases, yes! 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, including:

  • No-gap. If your insurer has a no-gap agreement, it means your health fund covers any costs subsidised by Medicare that are more costly than the MBS fee, and you won’t pay a gap.
  • 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.

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. You also need to keep in mind any excess or co-payments that you might need to pay as part of your health insurance.

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; that way, you can choose a provider that won’t leave you with out-of-pocket costs.

It’s important to note that while your health fund may have an agreement with a specific doctor, 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 whether they will participate in the scheme for your specific situation.

Frequently asked questions

How do 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:

  • Choose a treating doctor with a no-gap agreement with your health fund
  • Ensure you’re treated in a hospital that has an agreement with your health fund
  • Before going in for a private hospital procedure, ensure that every doctor (anaesthetist, assisting surgeon, etc.) involved is part of your insurer’s gap cover scheme
  • Take out an appropriate level of cover for the treatments you need.

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

Why are we charged out-of-pocket expenses?

While the treatment fees 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, so 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
  • Your health insurance policy doesn’t cover the treatment.

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 instead. Bulk billing can cover some GP visits, x-rays, pathology tests and eye tests that meet certain criteria.

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. Sometimes, you might find that choosing a higher excess lowers your premium, and vice versa.

Anthony Fleming, General Manager

Top tips for managing gap payments from our health insurance expert, Anthony Fleming

  1. If you’re considering claiming, it’s a good idea to contact your health fund for a list of doctors and specialists who align with their gap cover agreements. In many instances, you’ll only incur a minimal gap or potentially no cost at all if the healthcare provider is part of the agreement.
  2. It’s quite common for people to be confused about the differences between medical gaps and hospital contributions (either an excess or co-payment), and it’s important not to mix them up. Excess and co-payments are an amount you agreed upon when taking out your cover (often in exchange for a lower premium) and which you pay when you make a claim or are admitted to hospital.
  3. Doctors and specialists are legally obligated to disclose any gap costs you may incur as part of your admission, so make sure you ask them. It’s also good idea to ask if there will be any other doctors or specialists involved and if you can expect a gap for their treatment as well.

Looking for health insurance? We can help!

Whether you’re after a hospital policy or an extras policy to cover out-of-hospital treatment, private health insurance can help reduce your expenses for private care, provide more choices for treatment, and give you peace of mind. However, it can be difficult to know which policy is a smart purchasing decision.

Our free health insurance comparison service lets you weigh up available options within minutes. It’s easy to use and has tools to help you filter results based on what’s covered, price and additional features. If you see a policy you like, you can apply through us. Simples!


1 Doctor’s Bills. Private Health Insurance Ombudsman, Commonwealth Ombudsman, Australian Government.

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