Why do I still have out-of-pocket costs if I have private health insurance?

Private health insurance in Australia covers a 'known gap' amount above the Medicare Benefits Schedule fee, but does not cap what surgeons charge. If a surgeon charges above the schedule fee by more than the insurer's known-gap threshold, the remaining amount falls to you as an out-of-pocket cost. Medicare and insurer rebates have not kept pace with what surgical care actually costs to deliver, widening the gap. Asking your surgeon or GP about expected out-of-pocket costs before proceeding is reasonable.

What would MBS rebate reform actually mean for patients?

MBS rebate reform would mean Medicare's contribution towards surgical procedures is updated to better reflect current costs, reducing the gap surgeons need to charge above the schedule fee. RACS is also seeking minimum private insurance coverage standards — floors on what insurers must cover per procedure type. If enacted, the practical effect should be lower out-of-pocket costs for private patients. No reform has been announced; this is an industry submission to an inquiry.

Surgeons want Medicare and insurance overhauled to close the patient gap

What just happened

The Royal Australasian College of Surgeons (RACS) has delivered a submission to a federal House of Representatives inquiry on out-of-pocket medical costs, backed by a profession-wide survey of more than 700 Australian surgeons.

The top finding: 67% of surgeons nominated MBS rebate modernisation as the single most important reform to address patient affordability in surgical care. The submission calls for minimum private health insurance coverage standards, ongoing indexation of Medicare Benefits Schedule rebates, increased public hospital investment, and routine public reporting of specialist waiting times.

This is a submission, not an announcement. No policy has changed. But the scale of profession-wide pressure on a federal inquiry is worth understanding, particularly for patients who have encountered unexpected out-of-pocket costs when accessing surgical care.

Both-and

Why surgical gaps persist

The “gap” in surgical care is the difference between what Medicare and private health insurance together pay for a surgical procedure, and what the surgeon actually charges. In Australia, the Medicare Benefits Schedule sets a rebate — what Medicare contributes — but does not cap what specialists charge. Private health insurers typically cover a known-gap amount above the MBS schedule fee, but that ceiling has not kept pace with surgical fees over time.

The result: patients who believe they are “covered” for surgery find, often at the last moment, that they owe several thousand dollars out of pocket. The $500 threshold for known-gap insurance arrangements — above which insurers must disclose the expected patient cost — has not been meaningfully updated for years.

The 67% of surgeons calling for MBS overhaul are saying what the profession has argued for some time: the scheduled fee has not kept pace with the cost of delivering surgical care, and the system’s design allows surgeons to charge above the schedule. The gap between what Medicare funds and what the procedure costs gets passed to the patient.

This is the profession making a structural argument — not an excuse for individual billing practices, but an account of why the gap exists as a systemic feature, not an anomaly.

The public hospital picture

The finding that 70.3% of surgeons identified inadequate public hospital funding as the primary structural barrier to surgical access sits alongside the private funding argument. For patients who cannot afford private specialist fees, the alternative is the public system — where elective surgery waiting times in many states run to months or years depending on the procedure and the priority assigned.

The two problems are connected. When public hospitals are underfunded and capacity is constrained, waiting times extend, and pressure on patients to use private care — and absorb private costs — increases. RACS is making the case that meaningful reform requires addressing both: Medicare rebates in private practice and funding in public hospitals. A single lever fixes neither.

General practice often sits in the middle of this picture: a GP refers a patient to a surgical specialist, the patient is seen in rooms and told a procedure is recommended, and the out-of-pocket figure emerges either late in the consultation or in the pre-admission paperwork. For many patients, by that stage, the psychological commitment to proceeding is already made.

The obligation to provide informed financial consent — disclosing expected costs before a procedure — exists in professional guidance and in some regulatory frameworks, but enforcement is uneven. The RACS submission addresses structural reform; the consent conversation is a separate and adjacent thread. For GPs, this is a practical point: a patient asking about out-of-pocket costs at the referral stage deserves an honest answer that includes the GP’s knowledge of the specialist’s billing profile, if known, and encouragement to ask the specialist directly before committing to a procedure.

Caveats on the survey

A survey of 700 surgeons is meaningful data, but it represents the profession’s perspective on its own funding environment. Surgeons have a direct interest in how MBS rebates are structured, which does not make the structural argument wrong — there are independent analyses supporting the claim that MBS fees have not tracked cost increases — but it is the lens through which to read profession-led advocacy.

Independent modelling from the inquiry process itself will be the more definitive data source. The inquiry has not yet reported.

My two cents

For patients: if you are facing an elective surgical procedure, asking your GP about expected out-of-pocket costs at the referral stage — before you have met the specialist — is worth doing. Your GP may be able to tell you how a particular specialist bills, and can help you formulate the right questions before the surgical consultation. The gap between what you’re insured for and what you’ll actually pay varies significantly between surgeons, procedures, and states.

The RACS submission represents a profession that is frustrated with a funding structure that hasn’t moved with costs. Whether this inquiry produces reform depends on political will and budget priorities — neither of which are clear at this stage.

Verdict: maybe — well-evidenced structural case from the surgical profession; policy reform is the necessary next step, and that remains ahead.

Sources cited

Surgeons seek Medicare, insurance overhaul to cut patient gaps. Medical Republic, 21 August 2026. https://www.medicalrepublic.com.au/surgeons-seek-medicare-insurance-overhaul-to-cut-patient-gaps/128381