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Private health insurance: Covering your out-of-pocket expenses

24 November, 2014
minimise your cost

There are always hidden costs in life, and the same is true for hospital cover or in-patient expenses. You may think that Medicare covers the costs of your hospital admission, or your appointment with a doctor who has treated you in a public or private hospital. And yes, Medicare does cover some of the cost.

However, you may have already experienced that it does not cover all the cost. In fact, if you have ever been an in-patient you may have experienced a bill for out-of-pocket expenses that seemed to add up to an unexpectedly large amount.

So how can you protect yourself in the future from out-of-pocket expenses?


How do out-of-pocket expenses arise?

Before examining ways to reduce out-of-pocket expenses, it can be helpful to know how or why these expenses arise in the first place.

You may have heard the terms ‘out-of-pocket expenses’ or ‘gap payments’ used interchangeably. In essence, these terms refer to the hospital services, treatments, or costs that Medicare does not cover.

Medicare sets a schedule of fees for each type of doctor’s appointment, hospital admission, or treatment. This is called the Medicare Benefits Schedule, and the schedule is set by the Australian Government. For items on the Medicare Benefits schedule, Medicare will reimburse you 75% of the Medicare benefits scheduled fee if you are an inpatient and 85% if you are an outpatient. What this means is that as an inpatient you are left to pay the additional 25%. If you are an inpatient and hold hospital cover, CBHS will pay the 25% (as an outpatient with 85% reimbursement, CBHS does not pay the 15%).However, this proportion only works if the fee you are charged is the same as the fee in the Medicare Benefits Schedule.

What happens more often than not is the fee for your treatment is greater than the fee set out in the Medicare Benefits Schedule. For example, say you were being treated in a hospital for an MRI. The Government sets a fee for the treatment of around $403.20 in the Medicare Benefits Schedule. Therefore Medicare will cover 75% of that fee, which is $302.40. However, perhaps your MRI treatment is in fact $700.

The amount above the Government’s set fee is called the gap cost or the ‘out-of-pocket expense’. This is because this is the extra amount that you will have to pay yourself.

So what can you do to reduce that gap amount or ‘out-of-pocket’ cost?


    Medical gap, AHSA

Reducing the gap cost

Some private insurers will have an arrangement that is designed to minimise or eliminate medical gap costs. For example, CBHS offers an Access Gap Cover arrangement. Under this arrangement, instead of receiving the Medicare benefits scheduled fee, you would receive the ‘Agreed amount’ fee. This Agreed amount fee is co-ordinated by the Australian Health Service Alliance (AHSA) on behalf of private health insurers.

In essence, this arrangement means that if your treating doctor participates in a gap cover arrangement, then CBHS will process your medical claim for you.  As an inpatient Medicare will cover the usual 75% of the fee set out in the Medicare Benefits Schedule, and we - as your private health insurer – will pay the difference between that and the Agreed amount. Anything over the Agreed amount is an out-of-pocket expense.

However, this is contingent on your treating doctor participating in our private health insurance gap arrangement. Therefore it is of crucial importance you ask your doctor some preliminary questions before accepting them as being responsible for treating you.


     Medical provider, scheme

Questions to ask:

  1. Have you chosen to participate in any Gap cover schemes or arrangements (also identified as ‘known gap’) for my treatment?
  2. What, if any, will be my ‘out-of-pocket’ expenses?
  3. If you have chosen to participate in any such schemes, can you send my bill to my private health insurer directly?  

Otherwise, you can also enquire from your private health insurer if your treating doctor has a gap cover arrangement. We also provide a list of medical providers on our website who are part of our scheme, so you could reduce your out-of-pocket expenses by hundreds or even thousands of dollars by choosing a doctor or medical provider who participates in our scheme. Even if they have the arrangement you will still need to check if they are participating in the arrangement.

By taking it upon yourself to see to it that you are being treated by a doctor that participates in one of these schemes, and by being covered by a private health insurer that also covers such arrangements, your out-of-pocket costs or gap payments may be eliminated or significantly minimised.

The last thing you should have to worry about where your health is concerned is whether you can afford to be healthy! By taking these simple steps to protect yourself you can minimise your costs for in-patient services.

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