Gap Payments

Health Insurance Gap Payments Explained

You have private health insurance — so why are you still getting a bill? Gap payments are the single biggest source of confusion in the Australian health system. Here's exactly how they work and how to minimise them.

75%

Medicare pays of the MBS fee (in-hospital)

25%

Your insurer pays of the MBS fee

100%

Doctor's gap above MBS = your responsibility

How Gap Payments Work

When you're admitted to a private hospital, Medicare pays 75% of the Medicare Benefits Schedule (MBS) fee for each medical service. Your insurer pays the remaining 25% of the MBS fee — bringing total insurance coverage to 100% of the MBS rate.

The problem is that doctors can charge above the MBS rate. The difference between what your doctor charges and what Medicare + your insurer covers is your gap — and it comes entirely out of your pocket.

Example: Surgeon charges $3,000, MBS fee is $2,000

Medicare pays (75% of $2,000)$1,500

Your insurer pays (25% of $2,000)$500

Total covered$2,000

Your gap (surgeon's charge above MBS)$1,000 ← your bill

Source: privatehealth.gov.au — Out-of-pocket costs

No-Gap and Known-Gap Arrangements

To reduce your out-of-pocket costs, most health funds have agreements with doctors called no-gap or known-gap schemes.

No-gap

The doctor agrees to charge at or below the MBS rate. Your fund covers 100% of the bill. You pay nothing beyond your hospital excess.

Known-gap (also called gap cover)

The doctor charges above the MBS rate, but your fund pays an additional amount to cap your out-of-pocket cost at a pre-agreed amount — typically $0–$500 per episode.

No agreement (billing outside the scheme)

The doctor charges whatever they choose. Your fund pays 25% of MBS only. The full amount above MBS is your gap — potentially thousands of dollars.

Key rule from privatehealth.gov.au

“There is no requirement for any doctor to participate in an insurer's gap cover agreement.” — privatehealth.gov.au. Always verify before your procedure.

Worried about out-of-pocket costs?

Our agents find funds with strong gap cover networks for the specialists you actually need — so you know your real costs before you commit.

Find low-gap cover →

Where Gap Payments Commonly Surprise People

Anaesthetist

High risk

Your surgeon may be no-gap, but the anaesthetist they work with may not be — and you often don't know until the bill arrives. Always ask about the anaesthetist separately.

Surgical assistant

Medium risk

For complex procedures, a surgical assistant may be present. Their fees can generate a separate gap. Ask whether an assistant will be used.

Obstetrician

High risk

Private obstetric care almost always involves a gap above MBS. Your fund may have known-gap arrangements with some obstetricians — check before booking.

Radiologists / pathologists

Low-Medium risk

Often bulk-billed but not always. If you're having in-hospital diagnostics, ask whether they'll bulk-bill.

5 Steps to Minimise Your Gap

Ask your specialist: "Do you participate in [fund name]'s gap cover scheme?" — before booking.

Use your fund's "find a provider" tool online to search for no-gap or known-gap specialists by suburb and specialty.

Ask your GP to refer you to a gap cover participant where possible.

Request a written cost estimate from your specialist before any procedure — they're legally required to provide one.

Compare funds on gap cover networks — funds with larger networks mean more doctor choice without surprise bills.

Common Questions

What is a hospital excess and how is it different from a gap?+

Your excess is the fixed amount per admission you agreed to when joining the policy — typically $250–$750. It's not related to what doctors charge. A gap is the difference between your doctor's fee and what Medicare + your insurer covers. Both can apply to the same hospital stay.

Can I negotiate a gap with my doctor?+

Yes — you can ask your specialist to charge within the MBS rate or participate in your fund's gap cover scheme. Not all will agree, but it's worth asking, especially for planned procedures.

Why do gap cover networks matter when choosing a fund?+

Different funds have agreements with different doctors. A fund with a larger gap cover network means more specialists in your area will be covered with no or limited gap. This is one of the most important practical differences between funds.