Medicare is Australia's publicly funded universal health care system, which covers all citizens and permanent residents for medically necessary doctor’s services and hospitalization. The program is funded partly by a 1.5% income tax levy and partly out of general revenue.
The amount Medicare pays for procedures is determined by the Medicare Benefits Schedule (MBS). For outpatient (out-of-hospital) care, it covers 100% of the MBS fee for General Practitioners and 85% of the MBS fee for specialists. Many physicians charge more than the MBS fee and the patient pays the difference, the "gap". Some physicians accept just the amount paid by Medicare and bill Medicare directly. This is called bulk billing. The patient pays nothing.
Medicare covers 100% of public hospital expenses for public patients. If a patient is using private insurance in the hospital, Medicare pays 75% of the MBS fees for physician costs. Patients can choose whether to be a public or a private patient.
Once a patient has exceeded certain thresholds of out-of-pocket expenditures,the Medicare Safety Net covers a larger percentage of physician fees.
The gap is the amount a patient ends up paying out-of-pocket for medical services. Sometimes it means specifically the difference between the Medicare Benefits Schedule (MBS) fee and the amount that Medicare actually pays.
Medicare Benefits Schedule (MBS)
The Medicare Benefits Schedule (MBS) is the schedule of fees set by the Australian federal government for medical services. Although health care practitioners are free to charge more, Medicare only pays their percentage based on MBS fees. The Australian Medical Association has their own set of suggested fees, which are higher. Many doctors adhere to the AMA suggested fees rather than the MBS.
Medicare Safety Net
The Medicare Safety Net protects Australians from high out-of-pocket expenditures on medical expenses incurred out of the hospital. Once a person has spent $399.60 on medical expenses in a year, Medicare starts reimbursing for medical services at the rate of 100% of the amount designated by the Medicare Benefits Schedule (MBS). (Prior to reaching the $399.60 threshold, Medicare only reimburses for specialists, for example, at a rate of 85% of the MBS.) After a person has spent $1157.50, Medicare reimburses for 100% of the amount designated by the MBS plus 80% of any amount over the MBS rate a physician or laboratory may charge.
For example: A specialist charges $200 for a service to a patient who has not met any Medicare Safety Net threshold. Let's say the MBS rate for that service is only $100. Medicare only covers 85% of the MBS rate so the patient ends up paying $115 for that service and Medicare covers $85. If the patient has met the $399.60 threshold, Medicare would pay $100 and the patient would have to pay $100. If the patient has already met the $1157.50 threshold, Medicare would pay the $100 plus 80% of the additional $100 that doctor charges. In total, the patient would only have to pay $20 for that service.
Low-income Australians get the highest level of Medicare reimbursement once they meet a threshold of $578.60.
Some Australian doctors are willing to accept the amount Medicare pays them as their full payment. This is called bulk billing. The doctor bills Medicare directly and the patient doesn’t pay anything. Some doctors bulk bill for all their patients and others just bulk bill for certain patients, e.g. pensioners.
Pharmaceutical Benefits Scheme
General patients can get most generic prescription medications for $35 or less. When patients qualify for a concession because they: make less than $25,000 per year, are a student, are seeking work, are a pensioner – they can get generic prescriptions for $5.80. Brand name medications cost more. There is a Pharmaceutical Benefits Schedule, which lists all the medications that are government subsidized. Some medications are excluded including some very new drugs, drugs that are not found to be effective, and drugs prescribed for cosmetic reasons.
Pharmaceutical Benefits Safety Net
The Pharmaceutical Benefits Safety Net protects Australians from high prescription drug expenses. All Australians are eligible for Safety Net benefits after they have spent a certain amount on prescription medications in a given year. Once a general patient has spent $1363 out-of-pocket on medications in a year, the Pharmaceutical Benefits Safety Net kicks in and the rest of their medications cost $5.80. If a patient is a Concession Card holder, their medications are free after they spend $348 out-of-pocket.
Concession cards are available to Australians in a variety of circumstances. They are generally intended to help people afford some type of service, e.g. medical care, prescription drugs, public transportation. Pensioners, students, unemployed job seekers, low-income individuals and families, and disabled veterans are all eligible for various types of concession cards.