Why don’t private health insurers cover the entire cost of treatments?

Reviewed and updated 6 December 2024

Why don’t private health insurers cover the cost of appointments with my GP or specialist?

In Australia, Medicare covers some or all of the cost of appointments with your General Practitioner (GP) or specialist.

GPs and specialists have the legal right to run their practices as private businesses. This means they can charge whatever fees they feel are appropriate for their services.

For out-of-hospital medical services on the Medicare Benefits Schedule (MBS), such as appointments with your GP or specialist, Medicare pays:

100% of the MBS fee for GP appointments
85% of the MBS fee for specialist appointments.

If your GP or specialist decides to charge more than the MBS fee, you have to pay the difference, which is known as an out-of-pocket cost.

Under Australian law, private health insurers cannot cover out-of-hospital services that are covered by Medicare, such as:

appointments with your GP
appointments with your specialist
out-of-hospital diagnostic imaging and tests.

Here are some examples of how it works in practice:

Una sees a GP who bulk bills

Una sees a GP who bulk bills. She pays nothing for the consultation because her GP accepts the MBS fee as full payment for their service.

Evan sees his GP who does not bulk bill

Evan sees a GP who does not bulk bill. He has to pay the GP the difference between the MBS fee and what the GP charges for the consultation.

Mason sees his specialist who bulk bills

Mason sees a specialist who bulk bills. Medicare pays 85% of the MBS fee, and Mason pays the remaining 15%.

Nora sees her specialist who does not bulk bill

Nora sees a specialist who does not bulk bill. Medicare pays 85% of the MBS fee, which means Nora has to pay the remaining 15% of the MBS fee plus any extra charge.

Why don’t private health insurers cover the entire cost of treatment by specialists in hospital?

Medicare and private health insurers cover the costs for many in-hospital treatments.

If you receive a treatment on the MBS as a private patient in a public hospital or private hospital, Medicare pays 75% of the MBS schedule fee.

Your insurer must pay at least the remaining 25% of the MBS fee.

However, if your doctor charges more than the MBS fee for the services you receive, there will be a ‘gap’. You may have to pay the gap as out-of-pocket costs unless your doctor has a Gap Cover Agreement with your insurer and charges you under that arrangement.

Many doctors and insurers use Gap Cover Agreements to reduce your Gap payment.

Before agreeing to be treated by a particular doctor, check whether they have a Gap Cover Agreement with your insurer and whether they will honour that agreement for your treatment.

Percy has Gold Hospital Cover with a $750 excess and needs a hip replacement

Percy chooses Dr Bliss as she has an excellent reputation. Dr Bliss says she will charge $2,100 for the surgery. Percy tells her to go ahead, without checking whether she has a Gap Cover Agreement with his insurer.

The MBS fee for this surgery is $1,000. Medicare pays $750 and Percy’s health insurer pays $250. As Dr Bliss does not have a Gap Cover Agreement with Percy’s insurer, this leaves a gap of $1,100. Percy has to pay this as an out-of-pocket cost plus the $750 excess on his policy: $1,850.

Alice has Gold Hospital Cover with a $750 excess and needs a hip replacement

Alice sees 3 surgeons, she likes them all and they are equally skilled.

– Dr Bliss charges $2,100 for the surgery.
– Dr Eden charges $1,800 for the surgery.
– Dr Paradis charges $1,500 for the surgery.

Alice rings her health insurer to check whether any of these doctors have a Gap Cover Agreement. The insurer says:

– Dr Bliss, the assisting surgeons and the anaesthetist do not have Gap Cover Agreements.
– Dr Eden, the assisting surgeons and the anaesthetist have ‘known Gap Cover Agreements’, so Alice will pay $300 in out-of-pocket costs if all of these doctors honour these agreements for her surgery.
– Dr Paradis, the assisting surgeons and the anaesthetist have ‘no Gap Cover Agreements’, so Alice will not pay any out-of-pocket costs if all of these doctors honour these agreements for her surgery.

Alice chooses Dr Paradis to perform the surgery, and requests documentation confirming there will be no out-of-pocket costs for Dr Paradis to perform the surgery with the selected assisting surgeons and anaesthetist. The MBS fee for this surgery is $1,000. Medicare pays $750 and Alice’s health insurer pays $750 (25% of the MBS fee plus the remaining $500). While Alice has no out-of-pocket costs, she must pay the $750 excess on her policy.

Why don’t private health insurers cover the entire cost of being in a private hospital?

Private hospitals are run as private businesses, so they can charge what they decide is appropriate.

Hospital charges you may pay as a private patient include:

accommodation
operating theatre fees
prostheses costs
medicines and dressing
physiotherapy and other therapies in hospital.

If you have Hospital Cover, the amount you pay depends on:

If your policy pays only government-mandated minimum hospital charges for all or some types of treatment, you could pay high out-of-pocket costs.

If your insurer has an agreement with the hospital, you may:

avoid out-of-pocket cost for hospital charges, or
pay an agreed amount based on your policy:
- a total agreed amount or excess, or
- a co-payment: an agreed amount each day you are in hospital up to a cap.

Before agreeing to be treated at a private hospital, always check whether the hospital has a hospital agreement with your health insurer.

Percy has Gold Hospital Cover with a $750 excess and decides to be treated in Private Hospital A.

Dr Bliss tells Percy, if he agrees to have his hip replacement at Private Hospital A, she can perform the surgery next Thursday. Percy agrees to go ahead because he is in pain and keen to have it done as quickly as possible.

However, Percy’s insurer does not have an agreement with Private Hospital A.

Percy has to pay $2,500 in out-of-pocket costs to cover the full cost of being treated at Private Hospital A, including accommodation, operating theatre fees, a prosthesis, medicines, dressings and physiotherapy.

Alice has Gold Hospital Cover with a $750 excess and decides to be treated in Private Hospital B.

Dr Paradis tells Alice she can perform her hip replacement surgery at either Private Hospital A or Private Hospital B.

Alice rings her insurer and finds out it has an agreement with Private Hospital A but not Private Hospital B. Alice asks her insurer for an estimate of the cost of her treatment in Private Hospital A.

As Alice holds Gold Hospital Cover, and Private Hospital A is an Agreement Hospital, she will not have any out-of-pocket costs if she chooses Dr Paradis at Private Hospital A. So Alice chooses Dr Paradis at Private Hospital A and pays no out-of-pocket costs for her stay in hospital.

Why don’t private health insurers cover the entire cost of treatments?

Why don’t private health insurers cover the cost of appointments with my GP or specialist?

Why don’t private health insurers cover the entire cost of treatment by specialists in hospital?

Why don’t private health insurers cover the entire cost of being in a private hospital?

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