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 fee¹ 
• Your insurer pays 25% of the MBS fee² 

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.³

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.⁴ 

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.⁵ 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 good Hospital Cover can 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.⁶ 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.⁷ That way, you can sidestep any nasty surprises and keep your budget intact. 

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 more than 90% of their preferred providers.⁸ Others are 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.⁹

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.¹¹ That’s why they call it a known gap. 

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. 

Why does the medical gap exist? 

Australia is lucky enough to have universal health care in the form of Medicare.¹³ This means that public patients in a public hospital won’t usually have any out-of-pocket expenses.¹⁴ 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.¹⁵ 

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 with great gap cover 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.

^{Sources:
1 Australian Government | Department of Health and Aged Care - Medicare costs 
2 As above 
3 Commonwealth Ombudsman - Choosing a Health Insurance Policy 
4 Australian Government | Department of Health and Aged Care - Out of pocket costs 
5 Australian Government | Department of Health and Aged Care - MBS Online 
6 Australian Competition & Consumer Commission - Private health insurance 
7 PrivateHealth.gov.au - Gap cover doctors 
8 Private Health Insurance Ombudsman - State of The Health Funds Report 2020 (Page 20-21) 
9 Australian Government | Department of Health and Aged Care - Out of pocket costs 
10 Australian Government | Department of Health and Aged Care - MBS Online | Item 51020 
11 Australian Government | Department of Health and Aged Care - Out of pocket costs 
12 Australian Government | Department of Health and Aged Care - MBS Online | Item 75400 
13 Australian Government | Department of Health and Aged Care - The Australian health system 
14 Australian Government | Department of Health and Aged Care - Out of pocket costs 
15 Australian Government | Department of Health and Aged Care - Medical Services Advisory Committee | What is the MBS and Medicare?}