What percentage of the bill will the patient have to pay if the insurance policy has an 80/20 split?

Health insurance is a necessity for anyone looking to control his out-of-pocket medical expenses and safeguard against unexpected health costs. The hallmark of the health insurance system is cost sharing between the insured and the insurer. A traditional way this is done is through an 80/20 split.

An 80/20 insurance policy is a form of coinsurance in which you satisfy your deductible first, and then you pay 20 percent of additional medical costs and your insurer pays the 80 percent balance.

Coinsurance Percentage Breakdown

The "80/20" part of the health plan refers to coinsurance. Coinsurance is the amount of money you are going to pay for covered services assuming you have no deductible. When you go in for a medical procedure, you pay 20 percent of the total cost of the bill, and your health insurance pays 80 percent of the total cost of the bill.

Most coinsurance plans do cap the total amount you pay with out-of-pocket limits. You would pay 20 percent of your total healthcare costs until you reach your out-of-pocket limit. Then the insurance pays 100 percent of your medical expenses.

Out-of-Pocket Deductible Obligation

A deductible is the amount of money you pay out of pocket before any insurance kicks in. With an 80/20 plan with a deductible, you pay the deductible first. Once you pay the deductible amount, insurance begins to pay, and you pay the 20 percent of the bill up to your out-of-pocket maximum. Choosing a higher deductible plan often lowers your personal monthly premium or the amount of money you pay out of pocket for your health plan.

80/20 Monthly Premium Costs

Your healthcare options are varied depending on your specific situation. The cost or premium for your health insurance plan depends on the coverage you select during enrollment. High-deductible plans with high coinsurance are often cheaper than low-deductible, low-coinsurance plans.

The 80/20 plan is a common healthcare plan, but you may save money on premiums by changing the numbers to 70/30 or even 50/50. Just remember, you'll pay more in the case of an accident or unexpected medical necessity.

Coinsurance Covered Services

The 80/20 coinsurance coverage only works on covered services. Make sure the healthcare service you are going to need is covered by your health plan. When it is not covered, you pay the entire cost of the procedure or medical bill.

When you sign up for your health insurance, the company sends you a packet listing the details of your health plan. Keep this document for reference on which medical services are covered by your insurance. When in doubt, call your health insurance company to verify a procedure is covered before opting for it.

If you have treatment as a public patient at a public hospital you do not pay anything for your medical treatments.

Costs for many private treatments are also fully covered by Medicare and private health insurers. However, you may have to pay out of pocket costs if you have medical treatment as a private patient in a private or public hospital. This can include costs for:

• doctors or other health care providers
• hospital charges like accommodation and theatre fees

You might also have to pay out of pocket costs for medical services:

• outside a hospital, for example for appointments or diagnostic tests
• at a private hospital accident and emergency department

Bulk billed services

If you are bulk billed for a medical service you will pay no out of pocket costs. The health professional bills Medicare and accepts the Medicare benefit as full payment for the service.

Learn more about bulk billing.

What out of pocket costs you might pay

Any out of pocket costs you pay will vary depending on:

• how much you are charged
• whether you have treatment in hospital or outside hospital
• whether your treatment is covered by Medicare and how much Medicare pays
• if you are treated at a hospital, whether you are a public or private patient
• whether you have private cover for the treatment and if so, your level of cover

Doctor’s fees can only be covered by private health insurance for treatment in hospital. Different insurers might pay a different amount for the same service. Talk to your doctor, hospital and health insurer about:

• what your costs might be
• when you must pay them

See our practical tips for exploring the costs of medical treatment options.

To see typical costs paid for medical services, use our Medical Costs Finder.

Transparency and informed financial consent

For medical costs, transparency means being able to understand the typical costs of a treatment or service.

It’s your right to get an estimate of costs from your doctor or hospital before you agree to have treatment. This helps you understand what you might have to pay. This is called informed financial consent.

Our Medical Costs Finder makes the costs of common medical specialist hospital procedures more transparent. This can help you make a more informed choice.

Your referring doctor is your most important source of information when you choose a specialist. Learn more about how to decide if doctor’s fees offer you good value.

You can also read the Australian Medical Association’s guide on informed financial consent for doctors and patients.

The Commonwealth Ombudsman also offers guidance about informed financial consent for medical treatment, including what to do if your costs are higher than expected or you want to make a complaint.

It might not be possible to get your informed financial consent if you need emergency treatment.

Costs for services outside hospital

Out-of-hospital medical services might include:

• GP or specialist appointments
• diagnostic imaging
• pathology
• radiation or chemotherapy
• dialysis
• rehabilitation

If an out-of-hospital service is on the Medicare Benefits Schedule (MBS), Medicare will pay:

• 85% of the MBS fee
• for GP appointments, 100% of the MBS fee

Medicare does not generally pay a benefit for out-of-hospital services that are not on the MBS, like physiotherapy and podiatry.

Your out of pocket costs for services outside hospital that are on the MBS will be the difference between what your doctor charges and any Medicare benefit paid by the government. 

Most doctors bill Medicare directly for the Medicare benefit. If the service is not bulk billed, you pay the difference between the Medicare benefit and the total fee (usually by paying the whole fee up front and then claiming the Medicare benefit back).

Private health insurers can’t cover out-of-hospital Medicare services. However, they might cover some of the services Medicare doesn’t, like physiotherapy and other allied health services not on the MBS.

Learn more about what private health insurance covers.

Medicine and pharmaceutical costs

The Pharmaceutical Benefits Scheme (PBS) subsidises the cost of medicines for Australians. Learn more about the Government subsidy and what you pay for medicines.

Private health insurance can cover some medicines, for example medicines not on the PBS. Ask your insurer whether they cover medicines that are not on the PBS.

Costs for in-hospital services

You pay no out of pocket costs for treatment as a public patient in a public hospital if you have a Medicare card.

You may have to pay out of pocket costs if you are a private patient in a public or private hospital.

Doctor and other fees for private patients

As a private patient in a public or private hospital, you might have to pay for doctors and other health providers such as:

• surgeons
• assistant surgeons
• anaesthetists
• other specialists
• medical imaging, pathology or other diagnostic test services

If you have private hospital insurance cover for the medical service, your insurer must pay at least the remaining 25% of the MBS fee.

Doctors and other health providers often charge more than the MBS fee for medical services you receive as a private patient in a hospital. This is called the gap. You may have to pay the gap out of your own pocket unless the doctor has a gap arrangement with your insurer and charges you under that arrangement. Many doctors and insurers use gap arrangements to remove or reduce your gap payment.

Hospital charges for private patients

Hospital charges you might have to pay as a private patient include:

• accommodation
• operating theatre fees
• prostheses costs, for example plates, screws, artificial joints
• medicines and dressings
• costs for physiotherapy and other therapies in hospital

If you have private hospital insurance the amount your insurer will pay for these depends on:

• your policy
• whether your insurer has an agreement with the hospital

Some policies pay only the Government mandated minimum amount for hospital charges for all or some types of treatment. This could mean you pay high out of pocket costs.

If your insurer has an agreement with the hospital you may either:

• pay no out of pocket cost for hospital charges
• pay an agreed amount according to your policy

This might include:

• a total agreed amount, or excess
• an agreed amount every day you are in hospital up to a cap, or co-payment

If you are admitted as a private patient to a hospital that doesn’t have an agreement with your insurer you might have to pay high out of pocket costs.

Talk to your doctor and insurer about whether you can have your treatment at an agreement hospital.

Check which hospitals have hospital agreements with your health insurer.

Second-tier default benefits for private hospital patients

If you are treated in a hospital that does not have an agreement with your insurer but which we have assessed as second-tier default benefits eligible, you will still receive a benefit from your insurer.

These are called second-tier default benefits.

We assign eligible hospitals a second-tier default benefits category according to Schedule 5 — Second-tier default benefits of the Private Health Insurance (Benefit Requirements) Rules 2011.

Insurers use this category to work out what second-tier benefits they must pay. Your benefit must be no less than 85% of the average charge for similar treatment in another hospital of the same category.

We publish a list of all Commonwealth-declared hospitals (Excel, 292 KB).

You can use this list to check:

• whether a hospital is second-tier default benefits eligible
• its second-tier default benefits eligibility category

Work out your hospital admission costs

As a private patient your total out of pocket costs will be the sum of all hospital charges, doctors’ fees and fees from other providers, minus any Medicare or private health insurance payments.

Example:

You have private hospital insurance for an operation in a private hospital. Your policy has a $750 excess and no co-payment.

Your surgeon charges $1,800. They do not have a gap cover arrangement with your insurer.

The MBS fee for the surgeon’s services is $1,000. Medicare pays $750. Your health insurer pays $250. This leaves an $800 gap you have to pay.

You also needed an anaesthetist, assistant surgeon, radiology and pathology tests. You can work out your out of pocket costs for them the same way you worked out the surgeon’s. For this example, assume their total fees were $3,500 and you must pay $600 out of pocket.

Your hospital charges are $8,500. Your insurer pays most of this cost but there is no Medicare benefit. You must pay an excess of $750.

The total costs of your treatment is $13,800. You pay $2,450, which is made up of:

• $800 for your surgeon and $600 for other providers
• your hospital charge excess of $750

Gap arrangements for hospital treatment

Doctors set their own fees for private medical services. They can charge more than the MBS fee set by the Australian Government.

When a doctor’s fee for hospital treatment is higher than the MBS fee, the difference is called the gap. You pay the gap, or your private health insurer might where there is a gap cover arrangement. It’s normal for there to be out of pocket costs in many situations. However, many doctors and insurers use gap arrangements to remove or reduce your gap payment.

Fees for the same type and quality of care might vary depending on:

• who you see
• where they are located

You might find you are paying high gap costs when another doctor could provide you the same quality of care for less. Read more about how to decide if your doctor’s fees offer you good value.

Many private health insurers make gap cover agreements with particular doctors. This might reduce your gap payment or mean you have no gap to pay at all.

If your doctor doesn’t have a gap cover agreement, or they don’t agree to charge you under the agreement, you must pay the gap yourself.

There are 2 types of gap cover your insurer might provide by agreement with a doctor:

No gap cover means your insurer will pay a certain amount more than the MBS fee for a service. If your doctor charges more than the MBS fee but less than or up to the no gap limit set by the insurer, you will have no out of pocket costs.

Known gap cover applies if your doctor charges more than the no gap limit, but not more than an additional limit set by your insurer. This is the known gap limit.

If your doctor charges less than or up to the known gap limit, you must pay the difference between the doctor’s fee and what your insurer agrees to pay.

If your treatment costs more than the known gap limit your insurer won’t pay more than 25% of the MBS fee. You must pay the entire gap out of pocket.

Learn more about insurer no gap arrangements with doctors.

Ask your doctor and insurer whether gap arrangements apply to you.

Specialist booking or administration fees and split bills

A booking or administration fee is an out of pocket cost you pay to get an appointment or treatment with a specialist.

If your specialist charges you a booking or administration fee as well as charging you for the medical service they provided, you can’t claim the booking or administration fee from Medicare or your insurer.

Your doctor should not charge you fees that aren’t related to your treatment. But they can ask you to pay an upfront amount before they provide you treatment.

Bill splitting is when a doctor issues 2 different bills for the same treatment. Your doctor might:

• send one bill to Medicare and your private health insurer for the benefits they will pay
• send another bill to you for out of pocket costs

Doctors sometimes split bills to work around gap cover agreements where they have agreed with an insurer not to charge you more than a certain amount. Split bills also mean the Government and insurers don’t find out full details of the fees being charged for services they subsidise.

Ask your specialist for a written estimate of your costs in advance. You should expect a final invoice that reflects all the costs.

What to do if you have unexpected medical costs

Learn more about what to do if your medical costs are higher than you expect and how to make a complaint to the Commonwealth Ombudsman.

Learn more about your costs with the Medical Costs Finder

The Medical Costs Finder is an online tool that lets you find out more about the costs of specialist medical services.

You can use the tool to:

• compare costs you are quoted by your specialists with the typical cost of the medical service in your area
• see how much people have paid out of pocket for the same medical service