Insider tips to help you save on medical bills
If you need medical treatment and opt to go private, it’s not always easy to tell how much it will cost.
Thankfully, Australia’s robust private health care system means most of the time you won’t pay the full cost
of your treatment. Between Medicare and your health fund, your costs will generally be partially or fully covered.
However, you can end up paying for some (or a lot) of your treatment out of your own pocket if there’s a difference
between what Medicare and your health fund pay, and your final bill. These are called gaps—and they can end up
costing a lot of coin.
If you know why gaps happen, you can avoid them and make some real savings.
And that all starts with stepping through a typical health journey in the private medical system.
How to access care in the private medical system
Most of the time, if you need medical attention, your first stop will be your GP. If it’s an emergency, you’ll
probably start out in the emergency ward at a hospital—but more on that later.
If you’ve gone to your GP with a medical issue, one of two things will happen: 1) you’ll be diagnosed and treated
on the spot; or 2) you’ll be referred to a specialist.
If you need to see a specialist, you’ll decide whether you want to be a public patient (i.e. access free health care
through Medicare) or a private patient (i.e. use your hospital insurance).
RELATED: Why go private for medical treatment?
If you decide to be a private patient, you’ll get to choose your specialist. Normally your GP will give you a referral
to several specialists so you can pick the one you prefer.
From here, your chosen specialist will either diagnose and treat you on the spot or ask you to come back for additional consultations
until they figure out how to treat your issue. In some situations, you might be referred on for surgery or other hospital
If a trip to the hospital is on the cards, you’ll book a date to go. On your chosen date, you’ll be formally
admitted to hospital and have your surgery or treatment.
After you’ve had your surgery or treatment, you’ll either be discharged straight away, or you might stay at the
hospital for rest and rehabilitation. Either way, eventually you will be discharged—and that’s the end of
your health journey.
Every point before you’re admitted to hospital is considered an ‘outpatient’ service. As soon as you’re admitted to the hospital, you’re considered an ‘inpatient’.
When you’re discharged, you’re an outpatient again.
There are a few confusing situations where you might go to the hospital and still be considered an outpatient. This includes
emergency treatment and outpatient appointments with a specialist, who may have a room in or attached to a hospital.
Generally, if it’s a walk-in-walk-out situation where you won’t need after-treatment care, it’s an outpatient
service. Situations that require more care are generally inpatient services.
Why do you need to know the difference between an outpatient and an inpatient? Simple: whether you’re out or in is
one of the deciding factors in who will pay your bill, and how much will be paid.
How health care in Australia is funded
In Australia, the cost of your health care is funded through three sources:
- Medicare – your tax dollars
- Your health fund – your private hospital insurance
- You – your wallet
Most of the time, Medicare or/and your health fund will help pay your bills. Gaps happen if those two sources don’t
completely cover your costs. And that’s where it starts to get confusing.
Whether Medicare or/and your health fund cover your costs, and how much they cover, depends on a range of factors:
Factor 1: Is your medical procedure or service on the Medicare Benefits Schedule?
The Medicare Benefits Schedule (MBS) is a list of medical procedures and services that Medicare will pay some money towards. Each item on the MBS has a dollar
value assigned to it—this is like a recommended retail price for each procedure and service, determined by the
government. Bulk billing doctors accept the MBS fee as their full payment.
If a procedure or service isn’t listed on the MBS, Medicare won’t cover it. And your health fund generally won’t
cover it either. An example of something not on the MBS is cosmetic surgery.
Basically, if the medical treatment you need isn’t on the MBS, it’s likely you’ll pay the full cost out
of your own pocket.
Factor 2: Are you an outpatient?
Health insurers are legally unable to cover outpatient services, so these costs are generally covered between Medicare and
For a GP visit, Medicare covers 100 percent of costs up to the MBS fee, while for outpatient specialist appointments, Medicare
pays 85 percent of the MBS fee—you’ll pay anything your doctor charges above the MBS fee out of your own
Doctors can charge as little or as much as they like, so it’s not uncommon for outpatient services to involve an out-of-pocket
whether you’re a public patient or a private patient.
While hospital insurance can’t help with outpatient costs, it plays a starring role in covering your inpatient costs.
Factor 3: Are you an inpatient?
Inpatient services are generally covered between Medicare, your health fund and you.
It’s important to know that, for inpatient services, your specialist and hospital will charge separately. It’s
like booking a wedding venue and hiring a band to play there—the hospital charges for the cost of the venue (accommodation,
theatre fees etc.) while specialists charge a fee for their service.
Medicare doesn’t cover private hospital costs1, which is where your hospital insurance kicks in.
The amount your health fund pays towards your hospital stay (and the gaps that happen) depends on the agreement your health
fund has with the hospital as well as the hospital insurance product you have.
Health funds have different agreements with different hospitals to cover either a portion or the full amount of your hospital
costs. For example, if you’re with HBF, you’ll be fully covered for a shared room in a Member Plus hospital—these
are hospitals that HBF has agreements with so that 100 percent of the cost of your shared room accommodation, theatre
fees etc. will be covered by your hospital insurance.
What your health fund covers for your hospital stay also depends on your hospital insurance product. For example, with HBF,
cover for a shared room in a private hospital is a standard inclusion on all hospital insurance products. However, if
you’d like cover for things like a private room, TV and internet you’ll need a higher level of cover.
The other hospital costs to be aware of are any excess or co-payment, as well as any exclusions or restrictions on your hospital
insurance. You must pay these out of your own pocket.
In terms of your specialists’ fees, Medicare pays 75 percent of the MBS fee, while your health insurance pays the remaining
25 percent. Because specialists can charge what they want, specialists’ fees often exceed the MBS fee.
And that’s where more gaps can start to appear.
Luckily, health funds work hard to make agreements with specialists so, if a doctor does charge above the MBS fee, their
members won’t face exorbitant out-of-pocket fees.
1 If you go to a public hospital for emergency treatment, you’re fine—that will be free thanks to Medicare. However, if you go to a private hospital for emergency treatment this is classed as an outpatient service. Medicare doesn’t cover private hospitals, and your health fund can’t cover outpatient services—this means you’ll have to cover the full cost of any emergency treatment you get at a private hospital.
How agreements between health funds and doctors help you save
The type of agreement your doctor has with your health fund can mean the difference between no out-of-pocket and a large
out-of-pocket for inpatient hospital treatment.
While agreements between doctors and health funds can vary, generally they’ll fall into one of these three categories:
No Gap/Fully Covered
If your doctor has a no-gap/fully covered agreement with your health fund, it means 100 percent of their bill will be covered,
and you won’t pay anything out of your own pocket.
Your doctor’s bill will be paid between Medicare (75 percent of the MBS fee) and your health fund (25 percent of the
MBS fee and any amount the doctor charges above that fee).
If your doctor has a ‘known-gap’ agreement with your health fund, it means you will pay a portion of your doctor’s fee out of your own pocket.
Your doctor’s bill will be paid by Medicare (75 percent of the MBS fee), your health fund (25 percent of the MBS fee
plus a portion of the amount the doctor charges above that fee), and you (whatever amount is left over).
Doctors with known-gap agreements can choose to opt in or opt out of the agreement on a patient by patient basis.
If they choose to opt into the agreement, you will have a small gap—with HBF, this will be no more than 10 percent
of the doctor’s full fee.
If they choose to opt out of the agreement, you’ll have the same out-of-pocket that you’d have with a doctor
that has no agreement.
If your doctor doesn’t have an agreement with your health fund, you will probably pay a large out-of-pocket.
Without an agreement, your doctor’s bill will be covered between Medicare (75 percent of the MBS fee), your health
fund (25 percent of the MBS fee), and you - you will pay for any amount the doctor charges above the MBS fee.
Each specialist involved in your treatment will charge you separately, including anaesthetists and assistant surgeons. And
each one of those specialists might have a different agreement with your health fund.
How to reduce your medical costs
To take control of your out-of-pocket, here are three things you can do:
For outpatient services, see if your doctor bulk bills
Some GPs will bulk bill. You won’t pay anything for consultations with them.
You can find bulk billing GPs in your area through Health Engine’s website.
If you’re referred to a specialist for further tests or treatments as an outpatient, you can ask your doctor to request
your specialist bulk bills too—not all of them will agree to it, but it’s worthwhile asking.
For inpatient services, choose your specialist wisely
With hospital insurance, you’re entitled to choose your specialist. This is not the case in the public system, where
you’d have a specialist allocated to you - lack of choice is one of the trade-offs for free health care in the
The ability to choose your specialist in the private system means you can shop around, so you can make sure you’re
comfortable with them and their fees.
To pick a specialist, you have two options:
Option 1 is to get an open referral, meaning you can approach any specialist you like, researching different specialists
until you find one you like.
But shopping around is easier said than done—you might not know any specialists, which is where your second option
Option 2 is to ask your GP for several referrals to specialists they recommend. Then you can call those specialists and get
quotes for their services, settling on one that suits your needs and budget.
RELATED: Preparing for hospital
The top tip when choosing a specialist is to cross-reference your options with your health fund to see what kind of arrangement
they have. If you’re aiming for smaller out-of-pockets, try to pick a no-gap/fully covered specialist.
If you’re an HBF member, you can check our list of no-gap/fully covered specialists here.
Remember: if you’re admitted to hospital for surgery or other treatment, each specialist charges separately. Make sure
to check what kind of agreement your surgeon, anaesthetist, assistant surgeon, radiologist, pathologist and any other
specialist involved in your treatment has with your health fund before committing to them.
Go to a Member Plus Hospital
Choosing a hospital your health fund has an agreement with will also help keep your costs down.
If you’ve already chosen your specialist, it’s likely they’ll tell you which hospital you’re attending—this
will be a hospital the specialist is associated with. Once you know where you’re going, check with your health
fund to see if they have an agreement with that hospital.
HBF has agreements with a range of private hospitals across Australia—Member Plus hospitals—where your costs
will be fully covered. You can see a list of our Member Plus hospitals here.
Just remember, even if you visit a Member Plus hospital, you’ll still need to pay any excess or co-payment out
of your own pocket.
Other health funds have similar arrangements with hospitals—but they won’t be exactly the same, so be sure to
contact your health fund before you settle on a hospital.
Finally, don’t hesitate to get in touch with your health fund once you have quotes from your specialists. Using your
quotes, your health fund can give you an estimate of how much your out-of-pocket will be.
And if you’ve played your cards right, you might not have an out-of-pocket at all.