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Managing Health and Medical Costs

Managing "Gaps" and Medical Costs

The problem with "Gaps"

A 'gap' is the amount you pay either for medical or hospital charges, in excess of what you get back from Medicare or your private health insurer. Some health funds have "gap cover" arrangements to insure against some or all of these additional payments.

Outside of emergencies, you should ask your doctor before you go to hospital for an estimate of their costs and, if there are other doctors involved in your care or procedure (such as an anaesthetist or assisting surgeon), what their charges will be, and the cost of any prostheses. You should also check with your health fund to find out exactly how much is covered by your policy. A formal way that you can request your specialist or surgeon for details in terms of the cost of your procedure is to seek an Informed Financial Consent and to contact your health fund for details of doctors who provide "no gap" services.

A small proportion of Specialists generate most of the Gaps

Gaps are a significant worry for many retirees and one of the major reasons why many retirees continue to maintain liquid funds/assets in excess of what may be absolutely necessary, and actually save in retirement. Many individuals in older age groups feel uncomfortable talking about medical costs and it is something they need to address and manage more actively.

Some doctors, and particularly specialists, have a very commercial mindset and Australia now has costs in some procedures which compare unfavourably with the US. It is clear that a small proportion of medical and dental specialists and surgeons in Australia charge unethically, if not illegally, high fees and members of the public in private health funds need to exercise care to ensure that any charges will be reasonable and fair - at least in non-emergency situations where there is some time to compare treatment costs.

"A handful of ‘greedy’ doctors charge their patients more than twice the official Medicare Benefits Schedule fee.

Only about 7 per cent of all in-hospital medical services are billed at this rate, yet these bills account for almost 90 per cent of all out-of-pocket costs for private hospital patients – and patients are often not told of these costs in advance."

Stephen Duckett, Grattan Institute, November 2019

To provide some background, gaps vary remarkably across Australia, and for no apparent good reason - illustrating that we have a less than perfect market for surgical procedures. What does seem apparent from the information available is that a substantial proportion of surgeons do the "right thing" in terms of charging "no out of pocket expenses" - but others clearly do not and there can be an extraordinary range of fees charged for the same operation. Also, surgeons that perform a significant number of procedures seem to be more cost efficient than those performing relatively few procedures and, most importantly, there seems to be no correlation between the cost and quality of the procedure.

To provide an illustration of just how Gaps vary between specialists, see the illustration below, and bear in mind that many operations will require a combination of specialists, and that although the Anaesthesia gap looks small - its ubiquity means that anaesthesia is responsible for 25% of total gap costs.

Managing Health Costs

Managing your costs in this context includes making your GP aware that cost is a factor prior to their making any referral to a specialist and this approach includes discussions with your dentist if they make a referral. If anything, dental specialists (e.g. endodontists and periodontists) are even less regulated than their medical counterparts and, in some circumstances, their costs can be very significant and, frankly, amount to fee gouging.

Do not accept the argument from GPs they do not have a role in this exercise - there are often different potential health "pathways" to treatment and they should not be providing a referral to a specialist in circumstances where they are not fully conversant with both the specialist's competence and integrity. It's unfortunate that a small coterie of doctors have basically undermined trust in the community, but that is a fact, and if you want any more proof in that regard we would refer you to the Four Corners program of May 28, 2018, entitled, "Mind the Gap".

Additionally, you must ask your GP for an indication of how long it will take to obtain an appointment with the suggested specialist. Too often in Australia referrals are made by GPs as a matter of rote and because of long-standing personal, and sometimes, commercial relationships. That is particularly unsatisfactory if the end result is that you have a three month waiting period, when other equally qualified specialists are more quickly available. When you appreciate that surgeons and specialists in Australia effectively control the number of surgeons and specialists in practice- via their various colleges - the presence of shortages becomes more understandable.

The views of your GP should always be considered carefully, but note that you can request that they provide an Open Referral, one which is not addressed to any particular specialist, and provides you with the option to choose a specialist. The Department of Human Services provides that the, 'referring practitioners don’t need to address a referral to a specific specialist or consultant physician.'

A valid referral only needs to include the following:

  • relevant clinical information about the patient’s condition for investigation, opinion, treatment and/or management;
  • the date of the referral; and
  • the signature of the referring practitioner.
Note that what medical data doesn't cover is the sometimes extraordinary wait that individual's need to endure before even being able to arrange a discussion with a specialist, much less treatment - 3 to 6 months is not unusual. An open referral may provide you with greater flexibility to arrange more timely advice.

A Final Note

Specialists and surgeons effectively have freedom to set their own fees. The following is an extract from the Australian Society of Anesthetists position statement with respect to Financial Informed Consent - we have added the emphasis.

Setting of fees is the determined by the individual, the ASA encourages members to set their fee at what they are worth and ensure they deliver the best quality anaesthesia services. The patient should be informed if the fee will involve out-of-pocket expenses, and that their individual financial circumstances should be taken into account. The AMA fee should be the maximum unless there are extenuating circumstances.

Year on year, anaesthetists rank at or near the top of professional earners in Australia, and they should be adequately rewarded for years of study and application. Whether they should effectively be given carte blanche to set their own fees is very debatable - whilst the great majority of any specialist medical fraternity will act responsibly, evidence suggests a minority will not.

Unfortunately, a concern that specialist/surgical advice may also be driven by financial interests is developing. A recent study published in the BMJ Open investigated why 11 Australian men resisted the advice of their surgeons and did not proceed to having prostate surgery. Most felt pressured by the surgeons to have the surgery, that they were not being presented with a full range of options and were concerned that advice was driven by financial gain. Perhaps they may have been influenced by the media attention given to one Sydney surgeon who quoted an $18,000 gap for prostate cancer surgery - but was never named, unlike other professionals working in financial services, engineering or almost any other activity.

For decades the Australian medical fraternity, represented by the AMA and various colleges, have probably been the most effective professional trade union in the country. This has always been underpinned by the communities view that doctors were focused on what's best for the patient and community - and this level of trust is why the specialist and surgical colleges have been allowed to effectively control education, training and employment numbers within their profession.

The level of trust and confidence now risks being undermined by those in their community whose focus is fundamentally commercial in nature, and the Government should review current structures and make changes accordingly - including the issue of whether private medical services continue to be provide effective and equitable services to Australians. This should include reviewing the control exercised by the various medical colleges on the training of specialists and surgeons - there is a glaring conflict of interest apparent in terms of their controlling the number of available qualified specialists.


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