Medicare gap explained: out-of-pocket costs as a private patient

Where the gap comes from

If you are treated as a private patient in hospital in Australia, three parties can contribute to each doctor's bill: Medicare, your private health insurer and you. The part left for you is the gap, also called the out-of-pocket cost.

It starts with the Medicare Benefits Schedule (MBS), the government's list of services with a schedule fee for each. Each service has an item number.

• Medicare pays 75% of the MBS fee for each item in a private in-hospital episode, according to the government's privatehealth.gov.au site and the MBS notes.

• Your insurer pays the remaining 25% of the MBS fee, if your policy covers that item.

• Your doctor sets their own fee. Privatehealth.gov.au says there is no cap. Anything above the MBS fee is a gap, unless a gap cover arrangement reduces it.

A worked example

Privatehealth.gov.au gives this example: a doctor charges $1,000 for a service with an MBS fee of $700. Medicare pays $525 (75% of $700), the insurer pays $175 (25% of $700), and you pay the $300 gap.

Here is a synthetic statement showing the same pattern:

Sample account · Northgate Orthopaedics (synthetic)

Patient: private, in hospital · MBS item XXXXX · Surgeon's fee $3,200.00

Medicare benefit $1,092.30 · Health fund benefit $364.10 · Balance payable by patient $1,743.60

Read it as: the MBS fee in this sample is $1,456.40. Medicare paid 75% of it and the fund paid 25%, together covering the MBS fee exactly. The $1,743.60 is the surgeon's fee above the MBS fee. The amounts are illustrative, not real fees.

Gap cover: no-gap and known-gap

Some insurers have agreements with particular doctors to cover some or all of the gap for in-hospital treatment. Privatehealth.gov.au says doctors aren't required to take part, so ask each doctor whether they will treat you under your insurer's gap cover scheme for this procedure. You may hear the arrangements called "no gap" (you pay nothing above the benefits) or "known gap" (a set amount).

More than one doctor, more than one bill

A hospital procedure usually means several accounts: the surgeon, the anaesthetist, sometimes an assistant surgeon, plus pathology and imaging. Each can charge its own gap. Privatehealth.gov.au suggests asking about other providers involved in your care and how to get their fee estimates.

You may also pay hospital costs, depending on your cover: an excess or co-payment, and possibly a gap for prostheses or if the hospital has no agreement with your insurer.

Before treatment: informed financial consent

Informed financial consent means knowing the likely costs before you agree to treatment. Privatehealth.gov.au suggests asking each doctor for:

• the MBS item numbers they expect to bill;

• their charge for each service;

• a written estimate of your out-of-pocket costs;

• whether they take part in your insurer's gap cover scheme;

• which other providers will be involved, such as the anaesthetist, and how to get their estimates;

• how and when you will be billed.

Then call your insurer with the item numbers and ask how much it will pay for each and whether the hospital has an agreement with the fund. Privatehealth.gov.au gives an example: a $1,200 quote with a $500 insurer benefit leaves $700 out of pocket.

In an emergency, there may not be time for this. You can still ask for the information as soon as practical.

Use the Medical Costs Finder

The Australian Government's Medical Costs Finder shows typical costs for specialist services and procedures across Australia. You can search by procedure or MBS item number, and where available see indicative fees from participating specialists. The site says the information is a guide only, not a quote.

Reading the bills when they arrive

For each account, check:

1. Patient and date of service are correct.

2. Item numbers match the estimate you were given.

3. Fee for each item matches the estimate.

4. Medicare and fund benefits have been applied, or the account says they will be claimed.

5. Balance payable matches what you were told.

6. Who bills you. An account from a doctor you didn't expect, such as an assistant surgeon, is worth asking about.

If the bill is higher than you were told

Talk to the provider first

Ask the practice to explain the difference. Perhaps an extra item was billed, a different procedure was done, or the gap cover arrangement wasn't applied.

Put your position in writing

If the charge still seems unfair, privatehealth.gov.au suggests you consider paying at least the MBS fee, with a letter explaining your position and asking for a written response.

Re: Account [number] · Date of service [date]

Before my procedure, I was given a written estimate of $[amount] for item [number]. Your account shows $[amount]. Please explain the difference in writing and confirm whether my insurer's gap cover arrangement was applied.

Know where to complain

Privatehealth.gov.au lists several bodies, each with its own role:

• Private Health Insurance Ombudsman: disputes about health insurance, including doctors' fee disputes for in-patient treatment and hospital gap fees.

• State and territory health complaint bodies: complaints about health care, including medical bills.

• ACCC: competition and fair trading issues.

• Ahpra: complaints about health practitioners' professional standards.

For questions about what Medicare paid, privatehealth.gov.au lists the Medicare number, 132 011.

Out-of-hospital care is different

These percentages apply to private in-hospital treatment. Specialist visits and tests outside hospital are paid at different Medicare rates, and the 25% insurer share above does not apply in the same way. Ask the practice for an estimate and check your Medicare statement for what was paid.

Have your specialist account checked

When EasyToDecode opens, you'll be able to upload a specialist or hospital account and see the item numbers, fees and benefits explained in plain English, quoted from the page, with any gap above your estimate flagged and questions ready for the practice or your insurer. See how it works or join the waitlist.