A Longer Explanation about Doctors’ Fees and the Gap
This is a complex area, and the following description is just as much to jog our memory as it is to provide you with an in-depth explanation! We are indebted to Dr. Bill Donnelly of Brisbane Orthopaedic Specialist Services www.boss.net.au for allowing us to use some of his information.
The Schedule is a list of operations which is compiled and updated by the Commonwealth Government. Each operation is allocated an item number and a fee. It is not a recommended fee – it "simply represents the amount that the government, having regard to budgetary and economic considerations, is willing to pay (Auditor General Report No 32 1990-91)."
The Medicare rebate is the amount that you can claim back from Medicare, and is 75% of the government Schedule fee for in-hospital expenses (such as operations) and 85% of the Schedule fee for out-of-hospital expenses (such as consultations). In other words, if the Schedule fee for an operation was $1000, the Medicare rebate would be $750 and the gap would be $250.
The Schedule was established in 1985. Unfortunately, since then, the Schedule of fees has not even increased in line with inflation! Thus if a doctor continued to charge the Schedule fee, he would be effectively be taking a bigger and bigger pay cut year after year. This is what has given rise to the gap, and why most doctors charge more than the Schedule fee. In other words, if the doctor increased his or her fee for the $1000 operation to keep up with inflation, they would now charge about $1700 for the operation, and the gap would now be $950. This gap includes the difference between the Schedule fee and the doctor’s charges ($700), and the difference between the Schedule fee and the Medicare rebate ($250).
The AMA (Australian Medical Association) issues its own Schedule of fees, which is simply the Schedule fee from 1985, increased to keep pace with inflation (the CPI). This would seem to be a fair charge, but we actually charge less than the AMA fee, to try and reduce the cost to patients.
There is often more than one part to an operation and this means there may be multiple item numbers. An example is a laparoscopic cholecystectomy, where there are separate item numbers for taking out the gallbladder and the intra-operative x-ray taken to confirm there are no stones left behind in the bile duct.
If there is more than one item number, the Schedule fee is reduced for each subsequent item number as follows: 100% for the first (most expensive) item number, 50% for the second (next most expensive) item number, and 25% for every subsequent item number. In other words, if there are three item numbers for an operation, and the Schedule fee for them individually is $1000, $800 and $400, the Schedule fee for the procedure would be $1500 ($1000 + $400 + $100).
This is where doctors accept the Medicare rebate directly from the Government as payment of their fee. This means that in 1985, they were accepting 75% of their fee (ie. discounting by 25%) for in-hospital services, and accepting 85% of their fee (ie. discounting by 15%) for out-of-hospital expenses. Because of inflation, the fee that bulk-billing doctors accept is decreasing in real terms each year. This may affect the quality of care that the doctor can provide. For these reasons, most specialists do not bulk-bill.
Most health funds will make up the difference between the Medicare rebate and the Schedule fee for in-hospital expenses. In other words, if the Schedule fee for the operation is $1000, the Medicare rebate for the operation is $750 and the health fund rebate is $250. There will still be a gap, and this will be the difference between the Schedule fee and what the doctor charges.
Until recently, health funds were not permitted to cover the cost of the gap. Now they can. Each fund has its own schedule (list of fees they pay for specific operations) and its own rules. If the doctor chooses, the bill can be sent directly to the health fund and the doctor is paid the amount the health fund has decided for that particular operation. Some funds allow the surgeon to charge more than the health fund gap-cover rebate. You then pay the difference (called co-payment). This is usually a small amount compared to the total gap.
At first glance, gap-cover schemes seem a good idea. Some surgeons have a number of concerns, however. The main ones are:
The setting of fees by the health fund rather than the doctor does not take into account the complexity of the particular operation you require or the doctor’s level of experience.
The publishing of lists of ‘gap-cover’ doctors (which are often inaccurate) interferes with the decision you and your GP make about which is the best specialist for your situation.
If the fund becomes too involved with the treatment, some surgeons are worried that it may lead to the introduction of managed care into Australia as has happened in the United States with unsavoury consequences.
We participate in gap-cover in some cases. It depends on:
Which fund you belong to. Some funds allow us to set an appropriate fee and to send the bill directly to you. Other funds such dictate what we can charge and do not allow a co-payment. You can choose to change your health fund prior to surgery, to one that most adequately suits your needs.
Whether you are eligible for gap-cover with your fund.
Whether your particular operation is appropriate for gap-cover.
Before the operation, you will be provided with informed financial consent. We will give you a quote with an estimate of the surgeon’s fee and your out-of-pocket expenses.
If you are privately insured and we have decided to use gap-cover for your procedure, the bill will be sent directly to your health fund after the operation. If you are not privately insured or gap-cover is not being used, the bill will be sent to you after the operation and you will be responsible for submitting the bill for reimbursement to Medicare and/or your health fund.
The planned operation has a MBS fee of $1000. The surgeon’s fee is $1400. If gap-cover does not apply, you will receive a Medicare rebate of $750. If you are insured, your health fund will reimburse you another $250. The gap is $400, which you will need to pay. If gap-cover does apply and your fund’s set fee for the surgery is $1200, you will have a co-payment to make of $200.
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