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 A$44 billion out-of-pocket on health in 2023-24. Per person, that’s $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)

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

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”........

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