Mind the Gap: All about out-of-pocket payments

How do out-of-pocket health insurance expenses occur?

Even when you have private health insurance, out-of-pocket expenses can be incurred when:

• you have an Excess or Co-payment arrangement with your health fund
• the procedure you are going into hospital for is not fully covered by your health insurance policy
• your chosen hospital does not have an agreement with your health fund
• your treating doctor/surgeon's fees are higher than the maximum claim your health fund pays up to (which is up to and sometimes above the Government's published Medicare Benefits Schedule). The difference is called a Gap, and unless you have an arrangement with your health fund to cover this sum, it will come out of your pocket.

What is the Gap and how do I avoid it?

In Australia, the Government sets out fees for medical procedures in the Medicare Benefits Schedule (MBS), of which Medicare subsidises 75% and your health fund pays the remaining 25% (providing that your health insurance policy covers the procedure you are due to receive). However, doctors are not legally required to charge within the MBS fee – they may charge their services at a higher rate if they wish. The difference between the fee they charge and the MBS fee is the health insurance Gap.

If your health fund does not cover the cost of the health insurance Gap, you will be liable to pay it from your own pocket.

The good news...

According to the office of the Private Health Insurance Ombudsman, 82% of privately insured services in hospital are gap-free. This reduces your chances of having to pay a health insurance Gap for your medical procedure.

The bad news...

However, it has been documented that one in six people whose procedures did incur a health insurance Gap had not been informed before treatment, and found themselves facing a hefty bill afterwards.

The best news...

The best news is that you can learn how to either avoid the health insurance Gap or minimise it by asking some simple questions. It's in your interest to know the cost of your medical treatment and how much you may need to pay out of pocket. This is called Informed Financial Consent, and it is your right to know.

Questions to ask before agreeing to a medical procedure

Before you agree to undergo a procedure, you should find out some important information that will reveal how much you may need to pay from your own pocket.

Ask your health fund

• Does my private health insurance policy cover me for this procedure?
• Do you have a list of doctors registered with the health fund who will provide the procedure with no health insurance Gap?
• Is the hospital I plan to undergo this procedure at an agreement private hospital covered by my health fund?
• Under my private health insurance policy, do I have to pay an Excess, Co-payment or any other charges? How much will it be?
• Are there any extra expenses for my hospital accommodation or doctors' fees that are not covered by my health fund?
• If I have to pay an out-of-pocket sum, when and to whom do I pay it?

Ask your treating doctor

• How much is your fee?
• Are you registered with my health fund so they pay your entire cost, or is there a Gap that will be payable by me?
• If there is a Gap, how much will it be?
• What if I can't afford to pay the Gap?
• Which other doctors and medical staff (eg. anaesthetist, assistant surgeon, etc) will be involved in my treatment?
• How can I get information about their fees and whether they will be covered by my health fund?
• What is the Medicare Benefits Schedule item number for the procedure I am to have (so you can provide this to your health fund)?

Ask your hospital

• Does this hospital have an agreement with my private health fund?
• Will I have to pay any out-of-pocket expenses for my hospital accommodation?
• What else do I have to pay for out of my own pocket during my time in hospital? (typically this will include the television in your room, as health funds don't often pay for this)

How to reduce or avoid the Gap and other out-of-pocket payments

Here are some ways to reduce other out-of-pocket payments your procedures may incur:

Problem: Your doctor has informed you that there will be a Gap for your medical procedure.

Solution: If you've been told that you will have a Gap payment for the procedure you need to undergo, you can avoid or minimise the Gap by shopping around. Your best option is to find a doctor who has an agreement with your health fund, and agrees to treat you under the terms of that agreement, so there is no Gap payable by you. Remember, you do not have to undergo your procedure at the hospital or with the surgeon that gave you the first quote. While you may have faith in your referring doctor, it is not always the best decision to undergo a procedure in a hospital or with a surgeon whose fees you cannot afford. By looking around, you may be able to find another doctor with an equally good reputation who charges much less. The fees charged are not necessarily an indication of how good the doctor is.

Problem: Your chosen private hospital does not have an agreement with your health fund.

Solution: Ideally you should have found out whether your private hospital has an agreement with your health fund when choosing your health insurance - you can check the moneytime list of agreement private hospitals in your state that have agreements with your health funds to make your decision easier. Most major health funds have agreements with a great number of public and private hospitals all around Australia, so it shouldn't be too difficult to find one in your area that is on your health fund's list. Going with a non-agreement private hospital will incur significant out-of-pocket expenses.

Problem: The procedure you are going into hospital for is not fully covered by your private health insurance policy.

Solution: First of all, find out if it is at least partially covered so you can work out what your out-of-pocket costs will be. You may wish to upgrade your cover to one that does fully cover the procedure, but keep in mind that an upgrade may require a waiting period on that service. If it is not an urgent procedure, you may wish to sit out the waiting period (which could be up to 12 months) so you can choose your hospital and doctor for the procedure, otherwise your other option is to go to a public hospital as a public patient to undergo the procedure. However, you may wish to upgrade your cover at this point so if any of these health issues recur in future, you can choose your own hospital and doctor next time and get private health cover for the next procedure.

By comparing private health insurance policies and being informed, you can avoid or reduce your out-of-pocket payments. Get the cover that suits you today at moneytime.

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