Monday, May 21, 2007

Mind the Gap: Part 5 - GapCover

This is Part 5 of a series outlining the Australian Health Insurance industry from the perspective of a health provider.

5. GapCover

This type of scheme, which goes by many names from insurer to insurer (such as GapCover, No-Gap, EzyClaim, "Just Ask", MediGap, etc. etc), basically involves an agreement between the doctor and the insurer to avoid the patient paying out-of-pocket expenses. In effect it is a bulk-billing system for private health insurance. Insurance companies agree to pay the doctor directly, for an amount above the CMBS rate, with the doctor undertaking to limit or waive any out-of-pocket or gap expenses to the patient. This type of arrangement has long been in place with the Department of Veterans' Affairs (DVA), Victorian Transport Accident Commission (TAC), and WorkCover (previously WorkCare).

The doctor benefits if they did not charge large gap fees to begin with, as they get paid more than CMBS, and they do not have to worry about bad debts (often more than 10% of patients will not pay their bills).

The Government and the Insurance Companies look good because they have "eliminated gap fees". Even better, the insurance companies now have a means to limit future payments to doctors, because they can just make sure that the agreed rates rise at less than CPI, and in 10 years time they are underpaying doctors substantially and there is a community expectation that doctors cannot charge gap fees.

This has worked very effectively for Medicare's Bulk-Billing system for 20 years, and GapCover is merely a similar scheme to cap doctors fees in the longer term while providing a short-term enticement.

The erosion of Medicare benefits is
one reason for increasing Gap Fees

More on this series next week.

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