What is Gap Cover and What Fees are Involved?

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What is a medical gap?

What is medical gap insurance?

How do I avoid paying the medical gap?

How will I know if I have to pay a medical gap?

What kind of medical gap cover can I get?

What happens if I don’t have gap cover?

Why does the medical gap exist?

Where can I find and compare health insurance?

Long story short

The medical gap is your out-of-pocket cost after rebates

Doctors can charge more than the standard government MBS fee. The difference between the two is the ‘medical gap’ you pay out of pocket.

Gap cover schemes help reduce or remove this cost

Many health funds have special agreements with doctors to limit or even get rid of the gap for their members.

There are two main types of gap cover

No gap’ means you pay zero extra, while ‘known gap’ means you’ll pay a capped amount.

Using gap cover isn’t automatic; you have to ask

It’s up to the doctor to use your fund’s gap scheme. It’s a good idea to ask them up-front if they’ll participate in it.

What is a medical gap?

A medical gap is the difference between the doctor’s fee and the Medicare Benefits Schedule (MBS) fee for a procedure.

When you get treated at a private hospital, the Australian Government helps cover the costs. They set a standard fee for a whole range of treatments on the MBS. This is how it works:

• Medicare pays 75% of the MBS fee.
• Your insurer pays 25% of the MBS fee.

However, doctors can choose to charge more than 100% of the standard MBS fee. If this happens, you might end up paying quite a bit from your own pocket – on top of all those insurance premiums, too! This extra amount is called a ‘medical gap’ because it’s a gap your insurance policy might not cover.

Medical gaps can be pretty expensive, even if you already have private health insurance. Luckily, you might be able to access a gap cover scheme.

What is medical gap insurance?

Medical gap insurance isn’t a specific type of insurance product; rather, it’s a scheme that many insurers offer, more commonly known as ‘gap cover’.

If your health fund offers a medical gap scheme, it can help bring down – if not totally get rid of – out-of-pocket expenses during your hospital stay by paying specialists higher rates for most MBS item numbers. It helps you skip copping the medical gap when your doctors charge more than the MBS fee.

There are a few caveats, though.

Gap cover usually kicks in for inpatient specialist services (when you’re admitted to the hospital), but it doesn’t cover diagnostic services like X-rays and ultrasounds. It also won’t pay for medical services outside the hospital (only in-hospital ones), anything that your health fund doesn’t cover, hospital excess, or co-payments.

The key thing to know is that using gap cover is up to the doctor. They decide whether to take part in your insurer’s gap cover arrangement, so it’s handled on a case-by-case basis, unfortunately. And if you have a medical team looking after you, say a surgeon and an anaesthetist, then each one makes their own decision whether to use gap cover.

How do I avoid paying the medical gap?

This is where hospital cover may help.

It works like this: most insurers have special agreements with certain doctors, specialists and hospitals. These are their preferred providers. Depending on what kind of agreement they have with your insurer, these providers will either charge no gaps or a limited gap amount.

So don’t forget to ask your doctor whether they participate in your insurer’s gap scheme. It’s up to them whether they’ll accept your gap cover, so it’s best to get a clear answer before any treatment starts. That way, you can sidestep any nasty surprises and keep your budget intact.

How will I know if I have to pay a medical gap?

Let’s start with the easy way. Talk to your doctor and ask them about all the costs involved before your treatment begins. They can give you a written estimate of all the costs involved. This estimate may include a list of all the MBS items for your treatments and how much the doctor will charge for each of them. This is also called Informed Financial Consent.

Another way is to look up the standard fees for these treatments on MBS Online. If the doctor charges more than any of the standard fees listed, then you might end up paying the medical gap for these treatments.

Helpful tip

Hospital cover isn’t the only kind of health insurance where you can potentially avoid or reduce out-of-pocket expenses. Some insurers also offer no-gap cover for dental check-ups, prescription lenses, and a range of other services as part of extras cover. This means you might be able to get 100% back on what you pay with certain healthcare providers! You’ll just need to check that they’re one of your insurer’s preferred providers. Limits can apply when it comes to how many times you can get your extras covered each year.

Dr. Jill Gamberg

GP, Coach, and Lifestyle Medicine Physician

What kind of medical gap cover can I get?

This honestly depends on your insurer, your specialist/s and what procedure you are having. Some insurers perform way above the industry average in your state. While this is a good indicator, it’s always best to ask your health fund and your specialist/s.

It’s all based on what kind of agreement the doctor or hospital has in place with your insurer. When you’re eligible for gap cover, it usually comes in one of two forms: no-gap cover and known-gap cover.

No-gap cover

This usually involves no extra fees for your medical treatments. Under these agreements, your insurer pays more than the MBS fee.

However, they’ll usually have a gap limit: a maximum amount that they’ll pay. So long as the doctor charges more than the MBS fee but less than the gap limit, you’ll be covered with no extra fees to pay.

Our fictional friend Tim needs a femoral hernia repair after having a chronic cough for years.

The standard MBS fee for this treatment is $541.95. But his doctor has let him know it’s going to cost $1,000.00—that’s $458.05 extra!

Fortunately, the hospital has a no-gap arrangement with Tim’s insurer. His gap limit is $500, which covers the extra amount. As a result, Tim doesn’t have to pay any additional fees for his medical treatment, just his hospital excess. Nice one, Tim!

Known-gap cover

If your doctor participates in a known-gap scheme, then you’ll have some out-of-pocket expenses for each procedure they perform.

This is because your doctor charges more than the gap limit. However, they have also agreed to keep this amount below a certain threshold, which will be communicated with you. That’s why they call it a known gap.

Here’s another fictional scenario. Sammy has suffered from chronic migraines for years. After all sorts of medications failed to work, her doctor recommended getting Botox injections. (That’s right, Botox isn’t just for fine lines and a more youthful appearance. It’s got medical uses too!)

The standard MBS fee here is $145.65. However, Sammy’s specialist usually charges $300 for the treatment. Luckily, her specialist participates in a known-gap scheme with her insurer. This means that while the specialist charges more than the MBS fee, they’ve agreed to cap the extra amount at a set threshold. In this case, the cap is $245.

Under this agreement, Medicare and Sammy’s private insurer pay the MBS fee of $145.65. Sammy’s known gap – which she’ll need to pay out of pocket – is $99.35 (the difference between the capped amount of $245 and the MBS fee of $145.65), plus any excess on her hospital policy.

What happens if I don’t have gap cover?

If your doctor or your specialist doesn’t participate in your insurer’s gap scheme, then you’re going to need to pay the medical gap yourself. Sorry!

But here’s the silver lining: Medicare will cover part of your fee. And your insurer will also pay 25% of the standard MBS fee – so long as you’re covered for the treatments. It’s just those extra treatment charges you’ll need to pay, and the hospital excess.

Why does the medical gap exist?

Australia is lucky enough to have universal health care in the form of Medicare. This means that public patients in a public hospital won’t usually have any out-of-pocket expenses. It’s a pretty sweet deal, honestly!

However, most private hospitals and clinics aren’t owned by the government. They’re private businesses and they’re legally allowed to set their own prices.

So, while Medicare sets a standard fee for most treatments, doctors and private hospitals can still charge what they like. It would also make public healthcare a lot more expensive to fund if Medicare had to fill in every medical gap that private hospitals charge.

Where can I find and compare health insurance?

Finding health insurance doesn’t need to involve hours of research and deciphering the nitty gritty. Instead, you can compare a whole range of policies from different providers with iSelect! Get started today with our online comparison tool or give our friendly team a call on 1800 784 772.