Every Australian citizen or permanent resident can seek free treatment in public hospitals anywhere in Australia courtesy of Medicare but public hospitals have long (sometimes ridiculousy long) waiting lists for many elective surgeries and you generally won’t get a say in who does your surgery. The alternative is to “go private” and choose your surgeon and the time and place of your surgery.
Other than finding a surgeon who they can trust, how much they will be paying out-of-pocket for their surgery is an important consideration for most people who are contemplating having any surgery done in the private health system. Those who have no private health insurance or third party insurance would expect to face a large bill for the surgery but this would naturally depend on the nature of the surgery. However, even those who have comprehensive private health insurance may be surprised to learn that they will usually still have to shoulder some of the cost of the surgery. These days, it is entirely possible for someone with comprehensive private health insurance to be asked pay a four or even five figure sum to the surgeon for an operation in a private hospital. How can this occur?
Every surgeon is free to set their own fees for service. If you have comprehensive private health insurance and have a standard operation done in the private health system, both Medicare and your private health fund will contribute towards the doctor’s charges for any in-hospital/inpatient consultations and treatment but the amount of the contribution is capped. The Australian government sets the fee for what Medicare will contribute towards specific medical services and this is published in the form of the Medicare Benefits Schedule, which you can look up online. If you have a standard operation and are privately insured, then the Australian government will typically provide a rebate for your surgeon’s fee that is equivalent to 75% of the published Medicare schedule fee for that operation while your private health fund will provide a top-up, at least to the amount of the remaining 25%. So if your surgeon only charges the Medicare schedule fee, you won’t be out of pocket at all. If the surgeon charges more than the Medicare schedule fee, then you will have to foot the difference, or what is known as “the gap”, out of your own pocket. Now the fact is that the fees in the Medicare Benefits Schedule do not reflect the real life costs of medical care as the government is trying to keep its costs down. One good example is the current freeze on Medicare rebates that was introduced in 2013 as a temporary measure but which has been extended every year since, with no end in sight. One result is that there is a growing gap between what surgeons charge and what health insurance funds will contribute to surgeon’s fees.
Many Australian private health funds try to bridge that gap by offering so-called “gap cover “schemes. These are an arrangement where the private health fund will contribute more than the amount of 25% of the Medicare schedule fee towards the cost of their member’s surgery, provided the surgeon agrees to cap their bill to an agreed level. You can think of it as the health fund trying to offer a sweetener to the surgeon to keep the patient’s costs down. Most gap cover schemes allow the surgeon to charge an extra $500 in fees but if the surgeon decides to charge the patient more than that, then the health fund dramatically reduces the amount that they will reimburse the patient, which will often lead to aa big increase in the patient’s “gap” or out-of-pocket expenses. Let’s look at an example:
John has comprehensive hospital insurance with private health fund Acme Health. John has been suffering from a lumbar disc herniation for six months and he cannot put up with the pain any longer. The waiting list for a lumbar discectomy in the public hospital system is too long for him so he decides that he wants to have a discectomy in the private system. John goes to see surgeon Dr X. Dr X tells John that his fee for a lumbar discectomy will be $10000. Let’s say the Medicare Benefit fee for a lumbar discectomy is $1500. So ordinarily, Medicare and John’s health fund would together pay a total of $1500 towards the cost of the surgery, leaving him $8500 out of pocket. In other words, the $8500 should be his gap. However Acme Health tells Dr X that they will top up their payment for the surgery by an extra $300 if he does not charge more than $2300. So Dr X can charge anything between $1500 to $2300 and John will be guaranteed to pay no more than $500 out of his pocket. However if Dr X charges even $1 over $2300, then the health fund will reduce their contribution so that John will get back only $1500 and John’s gap therefore increases. If Dr X’s final charge in $2350, then John will be out of pocket for $850. However John has been quoted $10000, and that is why his gap will end up being $8500 if he sticks with Dr X. John can choose Dr X or find a surgeon who will charge him no more than $2300. If John wants to shop around, he can ask his health care fund as health care funds usually have a list of “gap cover” surgeon.
You could consider that John is “buying” an operation. It is (very superficially) like buying a kettle or a dishwasher, except that it’s a much more important decision because an operation can transform your life for good or bad. However just like there are websites where people have posted their opinions or reviews of certain brands and models of electrical goods, there are websites where people have posted their reviews of doctors. Also, just like John could go to an electrical retailer and haggle for a discount, John could try to negotiate the surgical fee for his operation. Value is in the eye of the beholder and some people believe that paying more gets them a better product/service. John might be happy to pay $8500. I know a lot of people wouldn’t be. I recently received an enquiry that went like this: “I have been quoted in Hobart a total of $89062.65 to conduct a cervical artificial intervertebral disc replacement and spinal rhizolysis. This means an out of pocket expense of $7502. This seems excessive. Can you assist at a cheaper rate?”
The hypothetical case above raises the question of what is a reasonable fee for an operation? Of course there is never going to be unanimous agreement on that as every doctor has a different idea of what the dollar value of their care is. Doctors agree that the fees in the Medicare Benefits Schedule are inadequate and do not reflect the real cost of providing medical care. Therefore Australian Medical Association (AMA) publishes its own schedule of what it considers reasonable fees for medical services, and these fees are much higher than what is in the Medicare Benefits Schedule and exceed what is permitted under most private health fund gap cover schemes. Many specialists use the AMA schedule to calculate their charges. Insured patients who are treated by surgeons who charge AMA rates will usually be out of pocket by a few thousand dollars. Incredibly, there are even a small number of surgeons who are charging much more than AMA rates for their surgeries, so that their privately insured patients always end up with gaps of $10000 or more.
Does the surgical fee reflect the quality of the surgery? According to the Royal Australasian College of Surgeons, the answer is most definitely a no! The Royal Australasian College of Surgeons has recently been outspoken on this issue as you can read in this news article… http://www.news.com.au/lifestyle/health/the-surgeons-charging-ten-times-the-medicare-fee/news-story/cab846d96f31648da0cf998c2df768de You can also read the College’s position on surgical fees here https://www.surgeons.org/media/21660272/2015-04-29_surgeons_fees.pdf. Even worse than surgeons who charge exorbitant surgical fees are those who scare uninsured patients into dipping into their savings in order to pay to have private surgery for conditions like prostate or brain cancer, which are actually treated extremely well in the public hospital system. The current president of the Australian Medical Association has recently made public comments such as in this 2UE interview https://ama.com.au/sites/default/files/documents/210616%20-%20Transcript%20Dr%20Gannon,%202UE%20Sydney%20-%20out-of-pocket%20surgery%20costs.pdf.
We are lucky in Australia to have a good public health system that can provide free care for many medical conditions. From what I have seen, especially in Melbourne, anybody with cancer gets excellent free care in public hospitals. However the reality is that the public health system is straining to cope with treating absolutely everything well. The newspapers regularly highlight the chronic problem of long waiting times for spinal and orthopaedic surgery in public hospitals. The trouble is that pain in itself is not classified as an emergency in the public hospital system unless it is related to cancer or major trauma. If you have pain from a badly worn out hip or back, you can easily find that you face 3 month to 2 year waiting times just to get an appointment to see a specialist in a public hospital and once that specailist has offered you an operation in the public hospital system you then go on a surgery waiting list and could easily wait 6 months to 2 year before you get the operation.
To me, medicine has always been more than just a job. Of course I have to cover overheads in my private practice just like any other doctor but I believe in accessible healthcare and my philosophy is to do my best to keep healthcare affordable. If you have diligently paid for private health insurance for years, then I think it is unfair to lump you with a gap of thousands to tens of thousands of dollars. If you don’t have any private health insurance, then I will do everything I can to bring the costs down. So I do use gap cover schemes as much as possible for those who have private health insurance, and if you do not have private health insurance I will certainly do my best to control the costs and come up with an affordable quotation for you. I am pleased to say that I have helped many uninsured patients to afford an operation in my private hospital without compromising on the quality of care.