What Is the Medical Gap Scheme?

What is a medical gap? 

Medical gaps can be pretty expensive, even if you already have Private Health Insurance. Unfortunately, they can also be pretty confusing for anyone who doesn’t speak fluent jargon. So, let’s start by breaking down how private healthcare works. 

When you get treated at a private hospital, the Australian Government helps cover the costs. They pay a standard fee for a whole range of treatments on the Medicare Benefits Schedule (MBS). It usually happens like this: 

• 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.

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. You can also 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.

How do I avoid paying the medical gap? 

This is where Hospital Cover may help. Many insurers offer a medical gap scheme (also called ‘gap cover’) that can reduce your out-of-pocket expenses. In some cases, you might even be able to avoid the medical gap altogether! 

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 if 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.

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 Coach

What kind of gap cover can I get? 

This honestly depends on your insurer. Some insurers bat way above their average and have ‘no gap’ arrangements with around 90% of their preferred providers.¹Private Health Insurance Ombudsman – State of The Health Funds Report 2022 (Page 22) Others might be much better at limiting how much you’ll pay in medical gaps for different treatments. 

It’s all based on what kind of agreement the doctor or hospital has in place with your insurer. Whenever you’re eligible for gap cover, it usually comes in one of the two forms.

1. No gap cover 

This usually involves no extra fees on your medical treatments. Under these agreements, your insurer pays more than the standard amount on an 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.

Example

Tim’s been a chippie for many years, but all that hard work has taken a toll on his back. Now he needs a simple procedure to get one of his vertebrae fixed and he’s decided to get it done at a private hospital.

The standard MBS fee for this treatment is $842.55.²Australian Government | Department of Health and Aged Care – MBS Online | Item 51020 (Valid as of June 2024) But his doctor has let him know it’s going to cost $1200.00—that’s $357.45 extra! 

Fortunately, the hospital has a no gap arrangement with Tim’s insurer. His gap limit is also $400 which covers the extra amount. As a result, Tim doesn’t have to pay any additional fees for his medical treatment, he only had to pay his hospital excess. Nice one, Tim!

2. 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. 

Example

Sammy is in dire need of some dental surgery. She’s got an erupted tooth and needs it removed pronto. Her preference here is a cosy little private hospital. 

The standard MBS fee here is $181.35.³Australian Government | Department of Health and Aged Care – MBS Online | Item 75400 Her hospital charges extra for the procedure, but they also have a known gap agreement with her insurer where they won’t charge more than $280.45.

All up, Sammy has a known medical gap of $99.10 plus any excess on her hospital policy. Her Medicare and private insurer will pay the rest.  

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. 

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. We might just be able to find you a great deal!