Medicare at 30

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Medicare at 30

Posted 30/01/2014 by Amanda Biggs

Medicare, Australia's universal health insurance scheme marks its 30th anniversary on 1 February 2014. For 30 years Australians have had free public hospital treatment and subsidised medical services; free if the doctor bulk bills. Medicare is part-funded by a 1.5% levy on income tax (which meets around half its cost) and general taxation. In 2012–13, spending on Medicare totalled $18.5 billion. This makes Medicare the third most expensive government program after the Age Pension and family payments.

Medicare’s precursor was Medibank, originally proposed by economists Richard Scotton and John Deeble in 1968. It was introduced by the Whitlam Government on 1 July 1975, after a bitter battle with doctor’s groups, private insurers, the Coalition and most state governments. Legislation to establish Medibank eventually passed in August 1974, following a double dissolution election and a joint sitting of Federal Parliament. Medibank lasted only a short time before the new Fraser Government introduced a series of modifications which effectively resulted in its dismantling by 1981.

In 1983, the newly elected Hawke Government moved quickly to re-establish a universal health insurance scheme. Legislation to establish Medicare was introduced on 6 September 1983 and passed on 22 September, with the scheme commencing on 1 February 1984. It included the restoration of bulk billing and free public hospital treatment, and was funded by a 1% levy on taxable income.

While a number of policy developments have affected Medicare since, its central principles of providing universal medical benefits regardless of income, and free public hospital treatment have been largely preserved.

In 1991, a patient co-payment of $2.50 and a $3.50 benefit reduction were introduced, but abolished after 3 months. But expanded Medicare Safety Net arrangements, to reimburse patients for high out of pocket costs, were retained. The Safety Net was expanded again in 2004 to cover 80% of any additional out-of-pocket costs (for out-of-hospital services), once an annual threshold of patient spending was reached. Following a review in 2009, which found that expenditure under the Safety Net was surging, safety net benefits were capped in early 2010 for obstetrics, assisted reproductive technology services, pregnancy ultrasounds, cataract surgery and hair transplantation. Since then, caps on safety net benefits have been applied to a wider range of out-of-hospital services.

Means tested dental benefits for teenagers were introduced in 2008 (and from January 2014 expanded to include children).

The Medicare levy has also undergone changes. Originally set at 1% of taxable income (with exemptions for those on low incomes), it was raised to 1.25% in 1986, then 1.4% in 1993, and 1.5% in 1995 to help fund additional health outlays. A temporary surcharge of 0.2% was applied by the Howard Government to fund the gun buy back scheme in 1996. From 1997, a Medicare levy surcharge of 1% was applied to higher income earners who chose not to purchase private hospital cover; this surcharge was recently increased to 1.5% for those on the highest incomes. From July 2014, the Medicare levy will increase to 2% of taxable income, to help fund the National Disability Insurance Scheme.

Since 1984, Medicare has paid around $235 billion in benefits for around 5.4 billion services. These include benefits for General Practice (GP) and specialist visits, allied health services, operations, pathology, radiation therapy, midwifery, mental health services and diagnostic imaging.

The rising cost of Medicare, with growth being driven by increased utilisation and a growing population, has led to claims including from Minister Dutton that Medicare is unsustainable and needs reform. In 2010, Treasury’s Intergenerational Report forecast that total spending on health by Government, as a percentage of GDP, would nearly double by 2050 mainly due to the pressures of ageing, increased utilisation of health services (we go to the doctor more often and order more tests), and the cost of new technologies. The Government’s National Commission of Audit has reportedly received a proposal for a $6 patient co-payment on GP visits which is projected to save up to $750 million over four years. It has been criticised by some who argue it would impact most on the vulnerable and the poor.

But claims that Medicare is not sustainable and needs reform, are not new. A Senate Select Committee on Medicare explored a number of reform options in 2003 and 2004, notably, none advocated increasing patient co-payments. In its 2008 interim report the National Health and Hospitals Reform Commission argued that significantly expanding patient co-payments was not a magic bullet solution, due to the already high level of out-of-pocket payments Australians face. These co-payments may act as a barrier to needed medical care. Some question claims that Medicare is unsustainable; others like the Grattan Institute argue that a number of smaller measures to improve efficiency may be all that is needed to reduce health costs.

On the eve of its anniversary, it is certainly timely to reflect on what has made Medicare an enduring part of our health system, and to consider how well it is placed to meet the challenges of funding future health care needs.


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