Medical Gap

If you receive doctors' services in hospital as a private patient, Medicare will usually cover 75% of the Medicare Benefit Schedule fee for doctors' charges and your health insurance will usually cover the remaining 25% of that schedule fee. In effect, you will usually be covered for 100% of the Medicare Benefit Schedule fee.

The Medicare Benefit Schedule fee (MBS fee) is determined by the Government and is the basis on which Medicare and health funds calculate your benefits. Many argue that this schedule has been inadequately indexed and now fails to accommodate increases in medical service providers expenses, in particular Medical Indemnity Insurance's. As a result, your doctor or specialist may charge more than the Scheduled fee.

'Medical gap' is the expression commonly given to the scenario where doctors charge in excess of the MBS fee. A patient may experience 'out of pocket expenses' when the fees charged by doctors for medical services in hospital exceed the combined Medicare and health insurance benefit.

Closing the Gap

Given that Medicare covers the first 75% of the MBS fee, there has been significant resistance by the Government to address the gap issue by increasing the MBS fee for medical services.

In 1995, legislation was introduced to allow health funds to cover doctors' charges above the MBS fee for in-hospital services. This legislation enables health funds, doctors and hospitals to negotiate the benefits that will be paid to health fund members, and establish agreements to cover all or part of the gaps for doctors' services provided in hospital.

You should check with your health fund if they have any agreements with hospitals and/or doctors that could reduce or eliminate the gap for doctors' services provided in hospital.

Another means by which health funds can cover the gap for doctors' services received in hospital was introduced in August 2000, called 'gap cover schemes'.

Gap cover schemes vary from the above mentioned agreements in that they do not require a contract to exist between a fund and a doctor. This in itself makes gap cover schemes an attractive proposition to many medical practitioners.

The Minister for Health and Ageing must approve all gap cover schemes before they come into operation, and receives annual reports from funds on scheme operations. Schemes are also independently monitored by the Private Health Insurance Administration Council (PHICA) to determine the extent to which they genuinely reduce or eliminate gap payments by health fund members.

Where an agreement or scheme is in place the health fund is permitted to provide a higher level of benefit and, you will have either no out-of-pocket expenses for doctors' services provided in hospital (no gap), or you will know in advance what costs you will incur (known gap).

All health funds now offer gap cover

On the introduction of legislation for the Federal Government Rebate on private health insurance, great incentive was given to funds to introduce no gap or known gap products.

The amended legislation allowed health funds to offer their members the rebate in the form of a reduced premium on the condition that the fund offered at least one no or known gap health insurance product.

As a result, all funds now offer some form of gap cover. Gap cover is usually (but not always) incorporated into a funds hospital cover.

It is important to contact your health fund and doctor before admission to hospital to determine if you may be required to pay any out-of-pocket expenses. You may wish to ask your GP to refer you to a specialist who offers no gap, or a known gap, for the medical services he/she provides in hospital. If you are dissatisfied with the indicative costs you may incur, consider asking your GP to refer you to an alternative specialist.