Summary
- When individuals decide they need hospital admission as private patients, they may experience additional fees known as gap payments or out-of-pocket costs.
- Gaps are costs for patients on top of what Medicare and private health insurers cover. They are the difference between the actual hospital or doctor’s charges and what is covered by the insurance.
- After understanding what gaps are and the types that can occur, one can avoid shock costs, with both doctors’ and the insurer’s assistance.
One would think that all costs are covered after paying thousands of dollars for private health insurance while also holding a free Medicare card. However, that is not true. In several cases, individuals need to make additional payments on top of what their insurance covers.
Apart from paying for excess and co-payments, there could be extra costs paid towards the doctor’s labour or service (if the doctors decide to charge extra for their work). Those expenses are more known as ‘gaps’ or out-of-pocket fees.
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What is gap?
Gaps refer to ‘the difference’ between a hospital or medical costs and the amount that is covered by Medicare and private health insurer. After Medicare and private insurers pay for their share of costs under the MBS scheme, individuals may still (and probably will) face extra burden if admitted to the hospital as private patients.
A gap is also called as a gap payment or an out-of-pocket cost.
Hospital gaps are generally related to accommodation costs, while medical gaps are the expenses going towards a surgeon’s or a doctor’s fees.
These costs will occur only individuals decide to go to private hospitals, or when they want to be treated as private patients in public hospitals, as most services in public hospitals are bulk billed. Some may even say that gaps are rates that come at the cost of being a private patient.
How do gaps work for private patients in hospitals?
Firstly, everything depends on the Medicare Benefits Schedule (MBS). The MBS is the government’s document that transparently describes recommended costs for specific procedures and surgeries. All private insurers’ and Medicare’s claim businesses are based around the MBS rates.
Medicare pays for most of MBS fees, 75 per cent to be exact. Private insurance companies pay for the remaining 25 per cent. Remember – Medicare and private insurers will pay for expenses that are defined in the MBS only.
However, doctors do not need to follow MBS’ suggestions strictly and can decide for themselves if their hard labour is worth the recommended price. This is where the gap payment kicks in – when doctors charge more than the government-recommended fees.
Is there more than one gap scheme?
There are two gap types that one can expect to receive for medical treatments:
- ‘No gap’ – Before committing to the private insurer, it will provide what costs will be covered once the hospital admission starts. However, the insurer cannot guarantee that the doctor will not ask for the gap payment. Even if doctors ask for the higher-than-recommended fee, but under or equal to the insurer’s threshold, patients will not need to pay for out-of-pocket costs.
- ‘Known gap’ – Rare health insurance companies will have a scheme called a known gap. Generally, the known gap means that the company had previously set the amount they are willing to pay, in most cases the same price as the no gap. For example, if the doctor charges an extra fee of A$1 – A$500, patients pay for the difference between what doctors charge extra and the known gap that is within that range. However, the tricky part can come if the doctor charges anything above the known gap because the insurers will refuse to pay the gap. Sometimes, the insurers have agreements with specific doctors that agreed to charge the known gap so one should ask for those doctors’ names in case they want to avoid big gaps.
Why do medical gaps exist?
Sometimes, doctors believe they deserve more money than the MBS has recommended. After they check what Medicare and private insurers may cover, doctors can decide to charge extra money, as they are not obliged to follow the recommended costs.
In most cases, doctors do not charge extra gaps because of greed, but due to specific circumstances that can occur during the surgery or when the patient’s situation gets more complicated.
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Can gaps be avoided?
Patients can avoid gaps if they are privately insured with a private company, and even more if they have agreements with doctors about the known gap. If those arrangements are agreed upon, individuals will less likely need to face high costs, if any.
Most importantly, if individuals know and truly understand the gap schemes (no gap and known gap), significant costs could be dodged.
For example, if the doctor has an arrangement with your insurer, he/she needs to provide an informed financial consent, where all of his/her services are shown, without any surprise costs outside that paper. When that agreement exists, the insurance company will cover for most of the gap fee anyway.
In cases where there is a no-gap, the insurer will pay for any extra expense that is above the Medicare threshold, leaving individuals with a full wallet. As there are many conditions regarding gaps, it would be smart to speak to your desired doctor and the insurance company.
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