Key Takeaways
- The ‘gap’ is your doctor’s fee above the Medicare Schedule and your fund’s benefit.
- No-gap and known-gap only apply when your doctor chooses to work with your fund’s gap scheme for that procedure.
- Always ask for Informed Financial Consent (item numbers and fees) from every provider – surgeon, anaesthetist, assistant – before booking in treatment.
Introduction to Gap Cover
Gap cover is the difference between what your doctor charges and what Medicare plus your health fund will pay.
Being able to wrap your head around how no-gap and known-gap arrangements work – and when doctors choose to use them – can be the difference between a good hospital experience and unexpected bill shock.
To help get you across everything you need to know, let’s break down the essentials so you can lock in price certainty.
What ‘gap cover’ really means
When you’re treated as a private patient in a hospital, Medicare pays 75% of the Medicare Benefits Schedule (MBS) fee for each service and your private health insurer pays the remaining 25% – so long as your policy covers that service in full. If your doctor charges more than the MBS fee, the difference it creates is a ‘medical gap’ that someone has to pay. That could be your fund (through a gap scheme), just you or a mix of both.
Bear in mind that the gap is separate from other costs like your excess or co-payment, hospital accommodation, theatre fees, prostheses, etc. For in-hospital medical services, your fund can insure the ‘patient gap’ above 75% (and sometimes above 100% of the MBS fee), but only if there’s a prior arrangement in place with the doctor.
Definitions you’ll see on policies and your bills
- No-gap: You pay $0 for the medical provider’s bill because your doctor has used your fund’s gap arrangement and charged within the fund’s “no-gap” threshold.
- Known-gap: You pay a capped, pre-quoted out-of-pocket because your doctor used the fund’s scheme but charged above the no-gap threshold (you must be told about the amount upfront).
- Out-of-gap (no scheme): The doctor doesn’t use your fund’s scheme so you pay any amount above the MBS and fund benefits.
Remember that doctors can choose whether or not to use a fund’s gap cover on a case-by-case basis. It’s not automatic, and your doctor might use the scheme for one patient and not for you.
How a private bill comes together
Let’s say you need surgery and the MBS item has a schedule fee of $2,000:
- Medicare pays $1,500 (75%).
- Your fund pays $500 (the remaining 25%).
- If your doctor charges $2,500, there’s a $500 gap above the MBS.
What happens to that $500 depends on the arrangement that’s made. Here are a few potential scenarios:
- No-gap: Your doctor participates in your fund’s scheme and writes off the $500 – so you pay nothing.
- Known-gap: Your doctor participates but charges a permitted known-gap, say $100 – so you pay $100.
- No scheme: Your doctor doesn’t participate at all – so you’re stuck with the full $500 payment.
Top tip: Your excess or co-payment, if your policy has one, is separate and still payable to the hospital.
Why ‘% no-gap’ matters when comparing funds
The most recent State of the Health Funds report is packed with useful metrics like “percentage of services with no gap” and “Percentage of services with no gap or where known gap payment made” for each insurer. A higher percentage means the fund’s gap scheme is being used more often by providers in that state (but local provider behaviour also plays a role).
Just be sure to use these tables as a guide – not a guarantee – for any potential out-of-pocket situations you might run into. Also note that the number reflects doctor participation and fund agreements in your state. Cities will show higher participation than more rural areas of the country. Finally, remember that the metric is showing data from the last full year, and it won’t predict your doctor’s decision for your surgery – so always check with your provider first.
Informed Financial Consent (IFC) is your best defence against bill shock
Before you book surgery, make sure you get Informed Financial Consent (IFC) from every provider involved – your surgeon, your anaesthetist, your surgical assistant and others. It’s something you might not have considered, but an IFC is becoming increasingly necessary.
It should list things like MBS item numbers, your providers’ fees, any anticipated gap, as well as whether they’ll use your fund’s no-gap/known-gap scheme. Hospitals should also give you a written estimate for accommodation, theatre, prostheses and any excess/co-payment.
The Australian Medical Association’s latest IFC guide even includes questions to ask your doctor and a template form you can use – handy when you’re comparing quotes from multiple providers.
Top misconceptions about gap cover
“I have Gold hospital – so I’ll never pay a gap.”
Hospital tiering (Basic/Bronze/Silver/Gold) tells you which clinical categories your policy covers or restricts. What it does not do is control what your doctor charges you. You still need IFC and to check whether they will use your fund’s gap scheme.
“My extras cover will pay the surgeon’s gap.”
Extras cover helps with out-of-hospital allied health (e.g. physio, dental, optical, etc.). It doesn’t pay your surgeon’s in-hospital medical gap. That’s handled by Medicare and hospital cover and (maybe) a gap scheme.
“Once I find a no-gap doctor, it’s no gap for everything.”
Gap cover decisions are per-treatment and per-provider. Your surgeon might use the scheme, but the anaesthetist might not, so ask everyone for IFC.
“Known-gap is bad value.”
Not at all. A transparent, pre-quoted known-gap can be excellent value – especially if the doctor is your preferred specialist and the known-gap is fairly modest.
Portability
Don’t re-serve waiting periods when you switch to a new health fund or policy
“John was immediately covered for a hip replacement in private hospital because he had already served his waiting periods for joint replacements on his old policy”
What actually determines whether you’ll pay a gap?
- Doctor participation: They must be in your fund’s scheme and the fund’s no-gap threshold for the MBS item. Doctors are free to use – or not use – the scheme for any of their patients.
- MBS or provider fee: The larger the difference, the greater chance of there being a gap unless the doctor caps their charge within the scheme.
- Policy coverage and restrictions: If a clinical category is restricted or excluded on your policy, you could be hit with higher costs – regardless of any gap arrangements.
- Multiple providers: Anaesthetists and assistants bill for their services separately. That means just one party opting out of the gap scheme can create a gap, even when the surgeon doesn’t.
Tick these boxes before you say “yes” to surgery
- Is the procedure fully covered on your tier (e.g. joint replacement on Gold or some Silver Plus)? If restricted, think about upgrading or switching your policy.
- Get MBS item numbers from the surgeon and hospital. You need these for the most accurate quotes and fund enquiries.
- Ask each provider whether they’ll use your fund’s gap scheme and issue IFC with fees and gaps in writing.
- Talk to your fund to check on things like excess, any hospital agreements, whether the providers are participating, etc.
- Check waiting periods (12 months for pre-existing conditions, for example) before upgrading purely to chase lower gaps.
- Get everything in writing, including IFC from each individual provider plus the hospital estimate. It’s your sole reference in case something changes on the day.
How the Medical Costs Finder fits in
The government’s Medical Costs Finder shows you standard fee ranges for different MBS items so you can sense-check quotes. It’s a super handy guide, but not a contract. Instead, individual doctors set their own fees and decide whether they are joining in on gap schemes.
What to do if you still get a surprise bill
- Go back to the provider with your IFC and ask them to explain any differences.
- Speak to your fund to see what was paid and whether the doctor billed within the gap rules.
- If you can’t resolve it, you can always get free help from the Commonwealth Ombudsman (they oversee private health insurance complaints). They also have reports and fact sheets to help explain gap schemes and how you can dispute charges.
Why a fund’s ‘% no-gap’ isn’t the whole story
Those headline percentages are helpful, but they don’t capture your preferred surgeon’s habits. A fund with high state-wide no-gap use might still see gaps in a specialty with few providers who all charge well above the scheme threshold.
Regional, public and out-of-hospital nuances
- Regional areas: In medical specialties with fewer providers, market dynamics can mean only a handful of doctors actually use gap schemes. Ask your fund whether they have contracted hospitals or preferred provider arrangements nearby to you.
- Public or private: If you’re going public, you won’t pay a medical gap for in-hospital treatment, but you also can’t choose your doctor and might have to see out some long waiting times. Private gives choice and speed, but you have to manage gaps on your own.
- Out-of-hospital: These consults are covered by Medicare at 85% of MBS for specialists (or 100% for GP items). Health funds generally don’t pay medical benefits outside hospital, while extras cover applies to allied health only.
How Fair Health Care Alliance can help
Our experts look beyond just premiums to the factors that actually influence out-of-pocket costs. We look at each fund’s performance in your state on no-gap/known-gap use. We also look into hospital agreements and whether your local hospital is contracted for your policy. And we inspect how specialists operate in your area – including their use of gap schemes for your specific procedure or treatment.
Finally, we sit down to look at tier restrictions and waiting periods, so you’re covered before you book surgery. Armed with all of that information, we’ll help you compare policies and prepare the right questions for your providers, so you always get certainty on price – before you say yes.
FAQ's
It’s the difference between a doctor’s total fee and the combined Medicare (75% MBS) plus fund benefit (25% MBS). If a doctor charges above the MBS fee and doesn’t use your fund’s gap scheme, you pay the difference.
No-gap means you pay $0 for the provider’s in-hospital medical bill. Known-gap means a capped, pre-agreed out-of-pocket disclosed with Informed Financial Consent. Both rely on the doctor using your fund’s scheme for that treatment.
Ask your fund for participating providers for your MBS item numbers, and ask each provider whether they’ll opt in for your surgery. Also get IFC from every provider in writing.
No. It’s a useful indicator, but it’s not a promise. A single non-participating provider (you’re your anaesthetist) can still create a gap.
Upgrading helps make sure the clinical category is covered (avoiding any restricted or excluded surprises), but it doesn’t control your providers’ fees. You still need providers to use the gap scheme. And remember that waiting periods might apply when you upgrade.
Not usually. Out-of-hospital specialist consults are paid by Medicare at 85% MBS (or 100% for GPs). Funds usually don’t pay medical benefits outside hospital.
