Rebate stuck in the ’80s

Want to know why your health insurance is such poor value for money and why you are paying huge gap fees when you use it? Blame Medicare.

It sounds counterintuitive but the nation’s public health insurer Medicare plays a huge role in funding your care when you are a private patient in the hospital system.

You probably don’t know it but when you elect to be treated as a private patient in a public or private hospital Medicare pays 75 per cent of the Medicare fee for your surgeon. Yes, the public insurer actually pays more of your doctor’s bill than your health fund does.

And the reason your gap fees have been creeping up is the Medicare rebate has not kept pace with inflation since its introduction in 1984.

Medicare rebates were frozen for five years after 2013. The Australian Medical Association has indexed its fees to inflation since 1984 and this highlights the massive inadequacy of Medicare.

For example, the AMA fee for a knee replacement is currently $4675 compared to Medicare’s fee of $1450 and $5675 for a hip replacement compared to the Medicare fee of just $1761.

Under health insurance rules, health funds must top up the Medicare payment for a doctor’s service by at least 25 per cent of the Medicare fee.

Funds can pay the doctor even more on top of this but in an increasing number of cases this top-up is not enough to cover the doctors’ charges and patients are left with huge gap fees.

The government’s Medical Costs Finder website reveals 68 per cent of people who have a knee replacement pay gap fees of up to $3900 to surgeons, anaesthetists and other doctors for this procedure that are not covered by either Medicare or their health fund.

Typically the combined doctors fees for this service are about $4800. Medicare funds $1900 of this fee and the insurer pays $1800.

So, if we want better value from our health insurance, one way to achieve this is to raise the Medicare rebate.