Melbourne, Apr 29 (The Conversation) During a cost-of-living crisis, many Australians may be wondering if their private health insurance policy actually delivers.
Rising premiums, the high costs of specialists’
fees, large out-of-pocket costs and bill shock are some common concerns.
So it might be tempting to look for a “no gap” and “known gap” arrangement. These are in the news this week due to concerns about how health insurer Bupa is negotiating with hospitals to provide this type of care.
But when it comes to hospital care more broadly, what do the terms “no gap” and “known gap” really mean? And how do these options affect your choice of doctor? Out-of-pocket costs are high ================= Australians spent AUD 44 billion out-of-pocket on health in 2023-24. Per person, that’s USD 1,636 a year.
But averages mask the real problem. Costs are concentrated among people who use the private system, where a single hospital admission with multiple specialists can easily generate thousands of dollars in gap payments, many unexpected.
Examples include a bill from: an anaesthetist who charges well above the Medicare schedule fee (patients rarely choose their own anaesthetist so this bill often comes as a surprise) a surgical assistant whose fees the insurer does not cover consulting specialists seen during an admission who charge more than the Medicare rebate and do not participate in your insurer’s “no gap” arrangement.
The underlying problem is specialist fees in Australia are unregulated. This means doctors can charge what they like.
No wonder privately insured Australians are looking at cheaper, or more predictable, options.
What is a ‘no gap’ arrangement? ================== “Known gap” is a middle ground. The doctor charges above the schedule fee, but the insurer caps how much you pay – typically up to USD 500 per service – and you’re told the amount before the procedure.
More doctors participate under “known gap” than “no gap” schemes because they can still charge above the schedule fee. That means more choice for consumers, who also know what they’ll pay upfront.
But when multiple specialists are involved – surgeon, anaesthetist, assistant – those capped gaps add up. Having a “known gap” arrangement reduces the surprise, but it doesn’t eliminate the cost.
What’s in it for insurers? ============ Insurers have a clear financial interest in such arrangements. By negotiating agreed rates with doctors, insurers limit their liability and have predictable costs.
Large insurers – those with millions of members – have real bargaining power. Doctors who want access to their patients have an incentive to join the scheme, even at rates below what they’d otherwise charge.
This shifts pricing power from individual specialists toward large insurers. For patients of participating doctors, that can mean lower costs.
But it also means insurers have growing influence over which doctors patients can see without a financial penalty.
Is it like US health care? ============== The United States has “managed care”, which has been the dominant model of health care for decades. This is where insurers build networks of preferred providers and financially penalise patients for going outside them.
But Australia’s system is different. We have universal health-care coverage through Medicare, and private health insurance sits alongside it.
With Australia’s “no gap” or “known gap” schemes, you can still see any specialist doctor using your private health insurance, but you may pay more for ones outside your insurance company’s network.
What else would work to fix specialists’ fees? ======================= Ultimately “no gap” and “known gap” schemes are a private-sector response to a problem – reducing out-of-pocket health-care costs – that ultimately requires a public policy fix.
A better approach would be for the government to set a fair Medicare schedule fee, updated annually, and tie rebates to specialists who charge at or near that fee. Specialists who charge well above it should not receive the same taxpayer subsidy (Medicare rebate) as those who charge reasonably.
This would address the root cause. “No gap” and “known gap” schemes may be useful. But they are a workaround to reduce out-of-pocket health-care costs – not a solution. (The Conversation) PY PY
