Worked Examples and Checklists
Gap fees for surgery: a worked example of what you pay with private cover
How Medicare's 75%, your insurer's 25%, gap cover schemes, the excess and hospital charges combine into your out-of-pocket cost for an operation, with the arithmetic shown.
When you have surgery as a private patient, Medicare pays 75% of the Medicare Benefits Schedule (MBS) fee for each doctor's service and your insurer pays at least the remaining 25%. If a doctor charges more than the MBS fee, the difference is a gap fee you pay yourself, unless the doctor bills through your insurer's gap cover scheme, which raises the insurer's benefit so the gap is nil or a known amount. On top of that you pay your policy excess. Hospital accommodation and theatre are paid by the insurer if the treatment is covered, especially at a hospital with an agreement. Asking every doctor for a written estimate, called informed financial consent, is the only reliable way to know the total in advance.
This guide is part of how to compare policies step by step.
Who pays which part
| Bill | Medicare | Insurer | You |
|---|---|---|---|
| Surgeon, anaesthetist, assistant: up to the MBS fee | 75% of the MBS fee | 25% of the MBS fee | Nothing |
| Doctors' fees above the MBS fee | Nothing | Extra benefit if a gap scheme is used | The gap, if not covered by a scheme |
| Hospital accommodation and theatre | Nothing for private patients | Benefit set by the policy and hospital agreement | Excess, and any shortfall at a non-agreement hospital |
| Devices on the Prescribed List (such as an implant) | Nothing | Benefit set by the government list for covered treatment | Gap if the device costs more than the listed benefit |
| Pre-op consults and scans out of hospital | Medicare out-of-hospital benefit | Nothing (insurers cannot cover these) | The rest |
Worked example (all fees illustrative)
Lena has Silver hospital cover with a $500 excess and needs a planned operation in a category her policy covers. She has served her waiting periods.
Surgeon: MBS fee $1,200; surgeon charges $2,400.
- Medicare: 75% × $1,200 = $900
- Insurer: 25% × $1,200 = $300
- Gap without a scheme: $2,400 − $900 − $300 = $1,200
Anaesthetist: MBS fee $480; charges $900.
- Medicare: $360
- Insurer: $120
- Gap: $900 − $360 − $120 = $420
Surgical assistant: MBS fee $240; charges the MBS fee.
- Medicare: $180, insurer $60, gap $0
Hospital: agreement hospital, covered in full apart from the excess: $500
Total out of pocket without gap cover: $1,200 + $420 + $0 + $500 = $2,120
With a gap cover scheme
Insurers negotiate schemes with doctors. Under a no-gap arrangement the insurer pays a higher benefit and the doctor accepts it in full. Under a known-gap arrangement the doctor can charge a capped amount.
Suppose Lena's surgeon agrees to bill under her insurer's known-gap scheme with a $500 gap, and the anaesthetist uses the no-gap scheme:
- Surgeon gap: $500
- Anaesthetist gap: $0
- Assistant: $0
- Excess: $500
- Total: $1,000, a saving of $1,120 compared with the uninsured gaps.
Doctors are not required to use a scheme, and they can decide case by case. Ask before you book.
Out-of-hospital costs before and after
- Specialist consultations: Medicare pays 85% of the MBS fee for out-of-hospital specialist services; the rest is yours. Insurers cannot cover this gap.
- Scans and tests out of hospital work the same way.
- The Medicare Safety Net can raise Medicare's benefit for out-of-hospital costs once you pass an annual threshold; it does not apply to in-hospital services.
Illustrative pre-op costs: two specialist consultations at $300 each with an MBS fee of $160 each: Medicare pays 85% × $160 = $136 per visit, so Lena pays $164 per visit, $328 in total.
How to get an estimate
- Ask the surgeon's rooms for the MBS item numbers and a written quote.
- Ask for the anaesthetist's and assistant's names, item numbers and fees. Anaesthetists often bill separately.
- Give the item numbers to your insurer and ask: Is it covered? What will you pay? Does the doctor use your gap scheme? Is the hospital an agreement hospital?
- Use the Department of Health, Disability and Ageing's Medical Costs Finder to see typical costs for the procedure in your area.
- Ask the hospital whether your excess or any other charges apply.
Public alternative
As a public patient in a public hospital you pay nothing for the operation, but you cannot choose your surgeon and may wait longer for planned surgery. Read public or private patient in hospital before deciding.
When to talk to your doctor
Whether and when you need an operation is a medical decision for you and your doctors. Cost estimates are a separate conversation; you are entitled to ask for one in writing before agreeing to treatment, except in an emergency.
FAQ
Can a doctor charge any amount?
Yes. There is no cap on what doctors in Australia can charge, which is why gap fees vary so much.
What if I was not told about a gap in advance?
Raise it with the doctor's practice first. If you were not given informed financial consent, you can contact the Private Health Insurance Ombudsman for help with health insurance-related billing.
Does Gold cover remove gap fees?
No. The tier decides which treatments are covered, not what doctors charge.
Are gap fees tax-deductible?
Generally no. The net medical expenses tax offset was phased out and could not be claimed after the 2018–19 income year, so out-of-pocket medical costs are not claimable in a current tax return. Check with the ATO if you have unusual circumstances.
Sources
- PrivateHealth.gov.au — out-of-pocket costs, gap cover doctors and agreement hospitals
- Medicare Benefits Schedule — MBS item numbers and schedule fees
- Department of Health, Disability and Ageing — Medical Costs Finder and the Prescribed List
- Services Australia — Medicare Safety Net
