Where a private inpatient’s medical bill gets paid from
The three payers, in the order they pay
Medicare
Pays 75% of the MBS fee. This never changes with how you charge.
Health fund
Pays at least the remaining 25% of the MBS fee, and more under its gap scheme.
Patient
Pays whatever is left. This is the part your charging decision controls.
The three ways to charge: no gap, known gap and beyond the cap
Every fee is measured against the Medicare MBS fee.
Fee reference · MBS fee $1,000, illustrative
Bulk billing
75% of the MBS fee
$750
Basic health cover
Up to 100% of the MBS fee
$1,000
No gap
A further 40%
$1,400
Known gap
Up to $500 more
$1,900
Beyond the cap
The fund drops back to 25%
Over $1,900
MBS fee, $1,000
Your fee lands in one of three zones. Each zone decides how much the fund pays.
Patient pays $0
No gap
You bill at or below the fund's no-gap schedule, which usually sits well above the MBS fee. You accept that amount in full. Medicare and the fund pay everything, and the patient pays $0. Most funds let you choose this per patient or per episode. Some require you to register first.
Patient pays a small, set amount
Known gap
You bill above the no-gap schedule but keep the patient's gap under the fund's cap. The cap is typically $500 per practitioner per episode, but it varies by fund. The fund still pays its enhanced gap benefit, and the patient pays a small, predictable amount.
Patient pays a lot more
Beyond the cap
Once your gap exceeds the known-gap limit, the fund drops back to the legislated minimum of 25% of the MBS fee. The patient pays everything above 100% of the MBS fee. Crossing the cap by $1 can therefore add hundreds of dollars to the patient's bill.
How the patient pays in each zone
No-gap and known-gap charges are easier for patients to negotiate.
No gap
The entire amount is claimed on the patient's behalf.
- Claimed on the patient's behalf
- Patient pays nothing
Known gap
The patient pays the out-of-pocket amount independently. The Medicare and health fund components are claimed on their behalf.
- Claimed on the patient's behalf
- Patient pays the out-of-pocket amount
Beyond the cap
The patient pays the whole amount. A receipt is issued so they can claim back the Medicare and health fund components separately themselves.
- Patient pays the whole amount
- Patient claims back with the receipt
Worked example: MBS fee $1,000
Assume an MBS fee of $1,000 and a fund no-gap schedule of $1,400. Both numbers are illustrative.
Charge $1,000 · the MBS fee
Patient pays $0
Charge $1,400 · no gap
Patient pays $0
Charge $1,700 · known gap
Patient pays $300
Charge $2,200 · beyond the cap
Patient pays $1,200
Dashed line: the MBS fee, $1,000. Medicare’s $750 is the same in every case; the fund’s share is what moves.
Try a charge
Illustrative numbers: no-gap schedule $1,400 (around 1.4× the MBS fee), known-gap cap of $500 out of pocket.
MBS schedule fee
$1,000
Your charge
$750
- Medicare
- Health fund
- Patient pays
- Billing zone
“Basic” products that pay only the MBS fee
A growing number of basic, bronze and budget-brand policies pay only the minimum 25% for medical fees. They have no access to no-gap or known-gap schemes, even for services the policy covers. For these patients, billing at the MBS fee is the only way to reach $0. Every dollar above the MBS fee is out of pocket.
Basic cover · MBS fee $1,000
Charge $1,000
Patient pays $0
Charge $1,400
Patient pays $400
The same $1,400 that is no-gap on a gap-scheme policy costs this patient $400.
Check cover before surgery
If the service falls in an excluded category, the fund pays nothing for either hospital or medical costs, so cover is worth confirming before surgery.
Related guide: A new physician’s guide to inpatient services billing
Frequently asked questions
Can I bill no gap for one patient and known gap for another?
Yes. Most funds let you choose per patient or per episode, so you can bill one patient at the no-gap schedule and another with a known gap. Some funds require you to register with their scheme first.
What happens if my gap exceeds the cap by $1?
The fund stops paying its gap scheme benefit and drops back to 25% of the MBS fee. The patient then pays everything above 100% of the MBS fee. On a $1,000 MBS fee with a $1,400 no-gap schedule and a $500 cap, a charge of $1,900 leaves the patient paying $500. A charge of $1,901 leaves them paying $901.
Is the cap per doctor or per admission?
Per doctor. The surgeon, anaesthetist and assistant each bill separately, and each has their own cap. A patient can pay a known gap to more than one doctor for the same admission.
Do I need to register with each fund's gap scheme?
It depends on the fund. Some apply their scheme to any claim priced within their schedule. Others require you to register or sign an agreement first. Most gap schemes also apply only in hospitals that have an agreement with the fund.
Can I bill a private inpatient who has no insurance?
Yes. Medicare pays 75% of the MBS fee, and the patient pays the rest. Obtain informed financial consent before the procedure, and consider requesting prepayment.
Why did the fund pay only 25% on this claim?
The usual reasons are that the gap exceeded the fund's cap, the patient's policy pays only the MBS fee for medical services, the hospital has no agreement with the fund, or the claim was not lodged under the fund's gap scheme. If the service falls in a category the policy excludes, the fund pays nothing.
Billing with FreshClaim
FreshClaim bills Medicare, the fund and the patient for you.
- 1
Priced to the fund before lodgement
Enter the items and FreshClaim applies the fund’s schedule and your gap arrangement before the claim is lodged.
- 2
Paid directly by Medicare and the fund
Medicare, DVA and health funds pay you directly on no-gap and known-gap claims.
- 3
Known-gap billing, handled before the list
Send your theatre list ahead of time. FreshClaim prepares the informed financial consent, issues the patient invoice and manages prepayment.
- 4
See where every claim stands
Each claim shows its status from capture to payment. Where a claim is rejected, FreshClaim investigates, corrects and re-lodges it.
2.85% + GST on ECLIPSE payments from Medicare and the fund, and 5% + GST on the patient invoice. Charged only on what is paid.