You have Medicare. You have private health insurance. So why did you still receive a bill for hundreds — or thousands — of dollars?
How the 75/25 Split Actually Works
When you're treated as a private patient in hospital for a service listed on the Medicare Benefits Schedule (MBS), Medicare pays 75% of the MBS scheduled fee, and your private health insurer covers the remaining 25% — but only up to that combined 100% of the scheduled fee. The gap is what your specialist charges above that scheduled fee. Since doctors aren't required to charge only the MBS rate, and many charge more, that difference becomes your out-of-pocket cost unless a gap arrangement is in place.
A concrete example from the Department of Health: a surgeon charges $1,800 for a service with an MBS fee of $1,000. Medicare pays $750 (75% of the MBS fee), your insurer pays $250 (the remaining 25%), leaving an $800 gap you owe directly — and that's before adding the anaesthetist, assistant surgeon, pathology, and radiology fees, each calculated the same way.
No-Gap and Known-Gap Arrangements Can Eliminate This — But Only If Your Doctor Opts In
Many private health insurers offer no-gap or known-gap schemes: if your doctor agrees to participate for your specific procedure, either your out-of-pocket cost is eliminated (no-gap) or capped at a known amount (known-gap). Critically, this is the doctor's choice on a case-by-case basis, not something automatically applied — you need to ask your specialist directly whether they'll use your insurer's gap scheme for your treatment.
Your Right to Informed Financial Consent
Before any planned (non-emergency) treatment, you have the right to ask every provider involved — surgeon, anaesthetist, assistant, and the hospital itself — for a written estimate of their fees and any expected gap, referencing specific Medicare item numbers. This is called Informed Financial Consent, and it should ideally be provided in writing before you commit to treatment. In a genuine emergency, this isn't always possible beforehand, but you retain the right to ask for a breakdown after treatment.
What This Means Practically
- Before any planned treatment, ask every provider involved — not just the main surgeon — for a written fee estimate referencing Medicare item numbers.
- Ask specifically whether your doctor will use your insurer's no-gap or known-gap scheme for this procedure — it's not automatic.
- Contact your insurer directly to confirm what they'll actually pay and whether you're still in any waiting period that could affect coverage.
- If you receive a bill that doesn't match what you were quoted, compare it directly against your Informed Financial Consent documentation before disputing it.
Related Kibbo Tools
Sources
- Australian Government Department of Health, Disability and Ageing — Out of pocket costs. health.gov.au
- Commonwealth Ombudsman — Informed Financial Consent. ombudsman.gov.au