What is a health insurance gap payment?
A gap payment, also known as an out-of-pocket expense, is the amount outstanding between what a hospital or medical professional charges and what the combination of Medicare and your private health insurance fund covers. You, as the patient, may have to pay this outstanding amount.
Gap payments can be hefty depending on your level of cover and the medical procedure or appointment, and can come as a nasty surprise after a procedure you thought you were covered for.
A gap can arise from:
- Hospital accommodation and incidental costs
- Fees charged by the medical specialists who treat you
Most health insurers have agreements with both hospitals and medical specialists around how much they'll pay towards medical costs. If you use a hospital or doctor that either does not have an agreement with your health fund or charges above the amount that the fund will cover, you could end up paying a significant gap amount for your treatment.
Keep in mind that a gap is different to the health insurance excess you may need to pay when making a hospital-related claim.
What is gap cover?
Gap cover is a feature of some private health insurance policies that helps reduce or eliminate out-of-pocket costs when you’re treated in hospital. It’s an agreement between your health fund and a medical provider—such as a doctor or hospital—that covers some or all of the difference between what your provider charges and what Medicare pays (known as the “gap payment”).
With gap cover, you may have no out-of-pocket costs when seeing a participating doctor, or your gap may be capped at a set amount or percentage of the Medicare Benefits Schedule (MBS) fee.
If your doctor or hospital doesn’t have a gap arrangement with your health fund, gap cover won’t apply and you’ll need to pay the difference yourself. Doctors can also choose, case by case, whether to use an insurer’s gap cover scheme.
How to reduce gap payments and make the most of gap cover
There are ways you can narrow or avoid gap payments and get better value from your private health insurance.
Using the doctors and hospitals that participate in your health insurance provider’s medical gap scheme can help to reduce any out-of-pocket expenses that you may be charged. If possible, consider asking your health fund first which specialists and hospitals they have a preferred provider contract with before you go for medical treatment.
Likewise, it may also be worth asking your medical specialist what their fees will be and how much of that fee will be covered by your private health insurance fund. If your out-of-pocket cost is going to be significant, you may wish to discuss alternative medical specialists with your provider.
In some cases, you could consider switching health insurance providers to find an option with gap cover that your regular medical professionals also work with.
