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Medical expenses up 8.3% – how can you avoid being stung?


Private hospital patients are hit with the biggest increase in out-of-pocket costs in recent years.

Australians are paying an average of $351 out of pocket every time they go to the hospital as a private patient, according to new figures from Australian Prudential Regulation Authority (APRA). That's an 8.3% increase compared to the same quarter in 2020 (January to March).

It marks the biggest hike in out-of-pocket payments for at least 6 years, eclipsing a 4.3% jump between March 2016 and March 2017. The most recent increase sees private hospital patients pay $26.88 more on average in out-of-pocket expenses than the same time last year.

Out-of-pocket costs are on an upward trend

Treatments with the biggest out-of-pocket expenses

The amount you'll pay varies depending on the treatment you get. For example, figures show that plastic/reconstructive surgery had the largest average gap of $478. On average, policyholders will only be covered for 59% of reconstructive treatment costs – they have to fork out for the rest.

It's a similar story with ear, nose and throat, urology and orthopaedic services. In the last quarter to the end of March 2021, private hospital insurance holders paid on average 28%, 26% and 24% of the total hospital bill for these treatments respectively.

Despite the rising out-of-pocket costs, the number of people taking out private hospital insurance is going up. At 31 March 2021, 11,396,181 people – or 44.2% of the population – were covered by hospital insurance. This was 172,818 more than March 2020.

The top 5 gap percentages

    Type of treatmentAverage gap you'll pay
    Plastic/reconstructive surgery41%
    Ear, nose, and throat (ENT)28%
    Urology – urinary tract issues26%
    Orthopaedic – bones, joints, ligaments, etc24%
    Anaesthesia – pain relief19%

How can I limit these expenses?

Out-of-pocket costs have been a problem for the health insurance industry for a number of years. A recent Grattan Institute report said exorbitant surgeon fees are one of the biggest issues facing private health, calling on the federal government and industry leaders to rein in costs.

"About 6% of specialists' services in hospitals are billed at more than twice the Medicare fee, and these services account for 89% of patients' out-of-pocket costs," the report said.

Aside from both the industry and government stepping up, there are a few ways that private health insurance patients can avoid nasty surprises when it comes to out-of-pocket expenses.

Informed Financial Consent

If you're going to hospital to receive treatment, your doctor has an obligation to inform you about the costs. Ask your doctor to outline the costs of your treatment, ideally in writing, before the procedure, so you know exactly what you're paying for. This is known as your Informed Financial Consent. It should include information about your procedure, including:

  • The Medicare Benefits Schedule (MBS) item number and the fee for each item
  • Accommodation and operating theatre costs
  • Doctor fees, including the anaesthetist
  • Prostheses costs (where applicable)

Gap cover

Look for health insurance funds that have arrangements with specialists. This is often known as gap cover and can help reduce or in some cases completely eliminate out-of-pocket expenses. It could be one of the best ways to ensure you're not hit with a big bill when you need to go to hospital.

Finder reached out to HCF, Medibank and HBF and each confirmed that gap cover is included as standard on their hospital policies. But the insurers were keen to stress that it's up to the doctors to decide whether they're willing to participate or not. So, do check with your doctor before you book your treatment.

While it's often impossible to eliminate out-of-pocket medical expenses, you can help yourself by planning ahead. Make sure you have a health insurance policy that covers you for the treatment you need; shop around for a doctor that won't charge exorbitant fees and always get them to send you the MBS item number to give to your health fund.

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