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Social Policy Section
is Australia’s national health insurance scheme which subsidises the cost of many
medical and allied health services. Medicare commenced on 1 February 1984,
following the passage of the Health Legislation
Amendment Act 1983 and related legislation in September 1983. At the
for Health Dr Neal Blewett described Medicare as ‘a major social reform’ which
aimed ‘to produce a simple, fair, affordable insurance system that provides
basic health cover to all Australians’. Medicare is largely based on the
short-lived Medibank scheme, introduced by the Whitlam Labor Government in 1975
but which was later dismantled by the Fraser Coalition Government. Since being
introduced, Medicare has undergone some major changes including subsidising expensive
new technologies (such as PET scans), adding preventive health checks and
funding new ways of delivering health care (such as team care for chronic
This Quick Guide updates the archived 2004 Parliamentary
Library publication Medicare—a
Background Brief with a focus on developments over the last decade. It describes
the range of services and benefits now covered by Medicare, as well as eligibility
requirements, billing practices, financing arrangements, safety nets, statistics
on bulk billing and expenditure, significant issues and challenges.
Medical Benefits Schedule
Medicare operates by paying a specified benefit (in the
form of a rebate) for a health or medical service for which a claim is
submitted. Only services provided by private practitioners (the majority of
Australian doctors work in private practice) are covered by Medicare. Services
provided in a public hospital only attract a Medicare benefit if the patient elects
to be treated as a private patient.
Services covered by Medicare benefits are mandated in
specified tables, published as the Medical
Benefits Schedule (MBS). Only clinically relevant services are eligible for
benefits. A clinically
relevant service is one which is generally accepted by the relevant
profession as necessary for the appropriate treatment of the patient. Certain
services are specifically
excluded including medical examinations for insurance purposes, mass
immunisations and services for which a state health service or third party
insurer is responsible. Regulations
can also specify that other services be excluded.
Each service listed in the MBS has an item number, a
descriptor which outlines the type and scope of the service and relevant
clinical requirements, the Medicare schedule fee, the applicable Medicare
benefit, and any additional safety net benefits.
Most items listed in the MBS are remunerated on a fee for
service basis. However, in recent years other types of practitioner payment
methods (such as incentive
payments for managing certain chronic conditions or for bulk billing certain
categories of patients) have been introduced.
The level of Medicare benefit is calculated as a
percentage of a mandated schedule fee for the service, and varies on the
setting. A service provided in hospital attracts a benefit equal to 75% of the
schedule fee; a service provided out of hospital generally attracts a benefit
of 85%. In the case of non-referred attendances (those provided by a general
practitioner (GP)) the benefit is set at 100% of the schedule fee. If the
health practitioner chooses to bulk bill, they receive the Medicare benefit as
full payment for the service and the patient pays nothing (bulk billing is discussed
in further detail below).
Medicare claims and payments are administered by the Department of
Human Services. The operation of Medicare itself is governed by provisions
in the Health
Insurance Act 1973 and related regulations. The Minister for Health has
overall responsibility for Medicare.
Updates to the Medical Benefits
The MBS is updated regularly to reflect changes to the scope
of services due to changes in clinical practice, the addition of new services
or the deletion of obsolete services, as well as to allow for the regular adjustment
of fees. Such changes do not require amending legislation but are specified in
which is classified as a legislative instrument and may be subject to disallowance
New services and treatments are assessed by the Medical Services Advisory Committee, an
independent expert committee which advises the Minister for Health on the
comparative safety, clinical effectiveness and cost-effectiveness of any
proposed medical service or technology, and recommends the circumstances under
which MBS listing should be supported.
The MBS currently contains around 5,754
items and covers a much wider range of services from when it first
commenced. Originally limited to professional medical services, pathology,
radiology, acupuncture, dental services for palate deformities and optometry,
the MBS now includes technologies such as PET and MRI scans, as well as new
types of care arrangements such as team care and chronic disease management.
Allied health services were added in 2004, nursing and midwifery in 2010 and
telehealth consultations in 2011. The Department of Health lists some of these
key developments on this webpage.
In the 2014–15
budget, a two year pause in the indexation of the scheduled fee for most
MBS services was announced—GP services, pathology and diagnostic imaging were originally
exempt. This pause was expanded at the 2014–15
Mid-Year Economic and Fiscal Outlook (MYEFO) to include GP services, and
the duration was extended to 2018. Because the MBS benefit is calculated as a
percentage of the schedule fee, the pause has the effect of freezing both the
patient rebate and the rebate paid to the doctor if they bulk bill.
In April 2015, the Health Minister Sussan Ley announced the
establishment of a Medicare
Benefits Schedule Review Taskforce to undertake a major review of all Medicare
items to ensure ‘services can be aligned with contemporary clinical evidence
and improve health outcomes for patients’. Many of the items on the MBS have
never been assessed or changed since their introduction. An interim
report provided to the Minister in December 2015, recommended the removal
of 23 services which were regarded as obsolete. A second report is due
at the end of 2016.
Bulk billing is where the practitioner directly bills the
Department of Human Services for the service and accepts the Medicare benefit
as full payment. Bulk billing is not mandatory; practitioners are free to
decide whether to bulk bill or privately bill the patient. If a patient is bulk
billed they cannot be charged a co-payment or an additional fee, making the
service free to the patient. In 2004 the Coalition Government introduced
bulk billing incentives, an additional payment to encourage GPs to bulk bill children
patients. This included a higher incentive to bulk bill these groups in rural
and regional areas. Bulk billing incentives for pathology and diagnostic
imaging were introduced
by the Labor Government in 2009.
A patient who is not bulk billed will be issued an account
by their health provider. This usually means the patient must pay up-front and
the rebate from the Department of Human Services. Many practices now offer
electronic claiming, making payment of the rebate to the patient virtually
Nationally, as at September 2015, across all Medicare
services, the bulk
billing rate was around 77.4% (Medicare Statistics, Table 1.1).
However, for GP services the rate is higher at around 84.0%. The highest level
of bulk billing is for Practice Nurse items (99.5%). For specialists, the bulk
billing rate is considerably lower, around 30.0% with Anaesthetics recording
the lowest rate (10.1%).
Bulk billing rates vary
across regions. Generally, higher rates are seen in regions with a higher
density of health practitioners, such as metropolitan areas and where
competitive pressures apply. But bulk billing rates can be relatively high in
areas with significant levels of socio-economic disadvantage. For example,
regions of Western Sydney regularly record the highest GP bulk billing rates,
while the more affluent suburbs of North Sydney have lower rates, likely
reflecting the differing incomes and capacity to pay of residents in each
community. The type of practice can also influence bulk billing levels. A
number of so-called ‘corporate practices,’ (GP clinics owned by a single
company usually employing GPs under contract) often market themselves as
exclusively offering bulk billing.
While a $7 patient co-payment was proposed in the 2014–15
budget, it was subsequently ruled
out by the new Health Minister Sussan Ley in early 2015, following criticism
from medical, health and consumer groups.
Eligibility for Medicare
Australian residents are eligible
for Medicare provided they:
- hold Australian citizenship or
- hold documented New Zealand citizenship and are lawfully living
in Australia or
have been issued with a permanent visa or
- have either applied for a permanent visa, excluding an
application for a parent visa, or have permission to work in Australia or can
prove a relationship to an Australian citizen or permanent resident.
Norfolk Island residents, previously excluded from Medicare,
will be eligible from July 2016.
In addition, if a reciprocal
health care agreement with another country has been signed, residents of
these countries who are visiting Australia have restricted access to Medicare.
Medicare benefits are not available for prisoners
or those covered by third party insurance arrangements (such as life
To be eligible
to provide a Medicare service a medical practitioner must meet certain
criteria. They must either be:
- a recognised specialist, consultant physician or general
- in an approved training placement under section 3GA of the Health Insurance
Act 1973 or
- a temporary resident doctor with an exemption under section 19AB
of the Health
Insurance Act 1973, and working in accord with that exemption.
Non-medical health professionals such as allied health
providers, dentists, nurses and midwives must be registered according to State
or Territory law or be members of a professional association with uniform
national registration requirements, and registered with the Department of Human
All professionals wanting to bill Medicare must also obtain
provider number from the Department of Human Services.
Overseas trained doctors
19AB of the Health
Insurance Act 1973 specifies restrictions that limit overseas trained
doctors (including New Zealand trained doctors) and former overseas medical
students trained in Australia, from claiming Medicare benefits for 10 years. However,
an exemption can be obtained by working in a designated district of workforce
shortage for a minimum period. In addition, working in designated remote areas
the period of time they would normally have to wait to offer services covered
How is Medicare funded?
Medicare is primarily financed through taxation, which
includes the imposition of a Medicare levy on taxable income.
The Medicare levy is currently set at 2% of personal taxable
income (with certain exemptions).
Exemptions from paying the levy are specified in the Part
VIIB of the Income
Tax Assessment Act 1936 and include: foreign
residents and residents of Norfolk Island (the latter will become liable
for the levy from July 2016), certain persons not
entitled to Medicare benefits, members of the Australian Defence Force,
Veterans entitled to free medical treatment due to disability, age pensioners
and those on Disability Support Pensions, and those who meet certain medical
requirements. There are also exemptions and phase-in limits for low
income earners and pensioners which are adjusted annually.
New Zealand citizens lawfully residing in Australia are
liable for the levy.
The rate of the Medicare levy has been adjusted
several times, usually to help fund increased Medicare costs. When first introduced
it was set at 1% of taxable income. A temporary addition to the levy of 0.2% was
imposed in 1996 to help fund the Commonwealth’s gun buy back scheme after the
Port Arthur massacre. In July 2014, the levy was raised
from 1.5% to 2% of taxable income to help fund the new National Disability
Insurance Scheme (NDIS). As a consequence of this latter change, the levy has
been renamed the Medicare and DisabilityCare Levy.
Most of the revenue raised by the Medicare levy is not
hypothecated and goes into consolidated revenue. A proportion is being directed
to the newly established Disability
Care Australia Fund which helps fund the NDIS.
Medicare levy surcharge
In July 1997, a Medicare
Levy Surcharge (MLS) was introduced. This made high income earners who do
not hold appropriate private hospital cover liable for an additional surcharge
of 1% on their taxable income. The MLS was one of a suite of measures (the
others being the Lifetime Health Cover loading and the private health insurance
rebate) the Howard Government introduced to try to reverse declining private health
In July 2012, the MLS was raised so that those on the
highest incomes (individuals on incomes over $140,000 and families with incomes
over $280,000) are now liable for a 1.5% surcharge if they don’t purchase
Consumers who purchase appropriate private hospital cover from
a registered insurer may also be eligible for the means-tested private
health insurance rebate, which provides a
discount on their premium. Appropriate cover must have an excess of $500 or
less for individuals or $1,000 or less for couples and families.
Does the Medicare levy cover the full
cost of Medicare?
Revenue from the Medicare levy and MLS only partially covers
the annual cost of Medicare. The remaining cost of Medicare is met through
general taxation revenue. In 2013–14, the Medicare levy and the MLS together raised
around $10.2 billion according to Australian Taxation Office statistics.
In that year, Medicare benefits totalled $19.1 billion, according to the annual
Medicare statistics. Together, the levy and MLS met 53.4% of the cost of
Medicare. In 1984–85, the first year of Medicare, expenditure totalled $2.27
billion while the levy raised $1.03 billion—around 45% of Medicare’s cost.
In 2014–15, Medicare funded over 373.4
million services and paid benefits totalling around $20.5
Budget Office (PBO) has forecast that government expenditure on Medicare
will grow to $36.6 billion by 2025–26, up from $20.2 billion in 2014–15. While
the PBO notes that past growth in spending is attributable to policy changes
that broadened Medicare’s scope or increased benefits, future growth is
forecast to slow, in part due to the indexation pause that was introduced in
Medicare helps fund many services, but patients may still be
liable for out of pocket costs when the doctor or practitioner chooses not to bulk
bill. Medicare sets a minimum fee for services (the schedule fee) and the
rebate amount (see above), but practitioners are still free to set their own
fees. Some doctors may set their fees well above the schedule fee particularly where
competitive pressures are weaker and bulk billing rates are low. This means
that their patients may face high out of pocket costs even after receiving a Medicare
Patients may be eligible for one or more of the Medicare
safety nets. Current Medicare safety net arrangements comprise three
components: the Original
Medicare Safety Net (OMSN) introduced in 1984, the Extended
Medicare Safety Net (EMSN) introduced in 2004 and the Greatest
Permissible Gap (GPG) which has been present since Medicare’s inception.
The OMSN reimburses patients when they incur ‘gap expenses’
for out of hospital services above a set threshold.
‘Gap expenses’ are defined as the difference between the Medicare rebate (85%
of the schedule fee) and the Medicare schedule fee. Once gap expenses exceed the
threshold, patients receive 100% reimbursement of the schedule fee for the
remainder of the calendar year. In addition to this, the GPG ensures the gap
between the MBS fee and the 85% rebate for out of hospital services cannot
exceed the GPG amount (which is indexed annually to CPI).
The EMSN was introduced to provide an additional benefit to
families and individuals experiencing high out of pocket costs due to the
growing gap between the Medicare schedule fee and fees charged by doctors,
particularly specialists. The EMSN benefit (which is in addition to the
Medicare benefit) applies when a patient’s out of pocket expenditure on out of
hospital services exceeds an annual
threshold. Once this threshold is reached, patients are reimbursed 80 per
cent of any further out of pocket costs they incur on out of hospital services
for the rest of the calendar year.
In 2009, a review
found that EMSN expenditure was growing at a faster rate than Medicare spending
and was contributing to a significant increase in average provider fees,
particularly for some specialities. It found that the majority of EMSN benefits
were being distributed to the more socio-economically advantaged and had little
impact on the most disadvantaged. Some 55% of EMSN benefits went to the top
income quintile, while the lowest income quintile received less than 3.5%. Consequently,
the Government introduced caps
on EMSN benefits for selected out of hospital MBS items identified as having
excessive average fees (initially obstetrics, pregnancy related ultrasounds,
cataract surgery, hair transplantation, and a varicose vein procedure). Capping
now applies to most out of hospital services, with the cap amounts specified in
the MBS. For capped EMSN services, reimbursement is the lower of the specified benefit
cap or 80% of any subsequent out of pocket costs for the remainder of the
calendar year once the EMSN threshold is reached.
In the 2014-15
budget, it was announced that from January 2016 the existing Medicare
safety net arrangements comprising the OMSN, the EMSN and the GPG would be
replaced by a new simplified safety net. The new Medicare Safety Net would have
lower out of pocket expenditure thresholds—$400 for concessional
singles and concessional
families, $700 for non-concessional Family Tax Benefit-A families and
non-concessional singles, and $1000 for non-concessional families who do not
qualify for FTB-A. The total benefit payable (rebate plus safety net) would be
capped at 150% of the MBS fee. Legislation
to enact this measure was introduced to Parliament, but lapsed with the prorogation
A range of statistics on Medicare is available.
of Health produces quarterly and annual statistics on bulk billing rates,
including by broad type of service (for example, GPs, specialists and pathology).
The release also includes data on the number of Medicare services claimed,
total benefits paid and the average patient contribution for these services (or
average out of pocket cost). Data is broken down by state and geographic
classification (that is, remoteness), but not by electorate.
In addition, data on individual Medicare item numbers
(services claimed and benefits paid) is also available from the Department
of Human Services. Data can be disaggregated by patient demographics (age
and gender), by state and by time period (monthly, quarterly, annually) and as
a per capita figure. Also available is data on number of services and benefits
by broad category of service. The website also hosts historical Medicare data on
bulk billing by electorate and safety net benefits (although not current
Other agencies also report Medicare data. The Productivity
Commission’s annual Report
on Government Services reports a range of Medicare statistics, for example,
details of MBS funded primary care and mental health services, and use of
Medicare by Aboriginal and Torres Strait Islanders.
Data on the My Healthy
Communities website uses Medicare data for many of its reports, including reports
on the average
number of GP and specialist attendances and average
Medicare benefit paid per person, broken down by Primary Health Network.
Occasionally, Medicare data is provided in response to
Parliamentary questions on notice. This is usually provided through the Senate
Estimates process, with the answers appearing on the relevant Committee’s webpage.
While all Australians are eligible for Medicare and most pay
a Medicare levy, ensuring that all can access Medicare benefits when they need
to remains a challenge. For example, people in some rural, regional and outer
metropolitan areas face barriers due to a lack of Medicare funded services resulting
from the distribution
of the medical workforce. This has a particular impact on Aboriginal
and Torres Strait Islander people, who may also face cultural and language
Another issue is rising patient out of pocket costs in the
form of co-payments. Nearly ten percent of adults living in some parts of
delaying or avoiding seeing a GP due to cost. Accessing affordable specialist
care where co-payments are more common, remains problematic particularly
for those on low incomes. Some specialists’ fees are set well above the
Medicare Schedule fee, while bulk billing rates are low. As the indexation
pause introduced in the 2014-15 budget continues, stakeholders such as the AMA
have warned that GPs may have to abandon bulk billing and pass costs on to
patients as co-payments.
Other challenges include managing the cost implications associated
with the rise
of chronic diseases and the ageing of the population, funding innovative but
sometimes expensive new
therapies, improving integration
of services across multiple settings (eg primary care and acute care) and maintaining health care
quality. Emerging issues include ‘diagnosis
medicine and the role of private
health insurance in primary care.
Amanda Biggs, ‘Medicare
at 30’, Flagpost, (2014).
Anne-marie Boxall and James A Gillespie, Making Medicare:
the politics of universal health care in Australia (UNSW Press, 2013).
Available from the Parliamentary Library.
Gwen Gray, The politics of Medicare: who gets what , when
and how (UNSW, 2004). Available from the Parliamentary Library.
Stephen Duckett, ‘Medicare
at middle age: adapting a fundamentally good system’, Australian
Economic Review, vol. 48 (3), September 2015.
Department of Health, ‘History
of key MBS primary care initiatives 1999-2013’.
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