Medicare (Australia)

This article is about the Australian universal healthcare system. For the Australian Government health agency, see Medicare Australia.
The official logo for the Medicare brand

Medicare is a publicly funded universal health care system in Australia. Operated by the government authority Medicare Australia, Medicare is the primary funder of health care in Australia, funding primary health care for Australian citizens and permanent residents including Norfolk Island (From July 1, 2016). Residents are entitled to subsidised treatment from medical practitioners, eligible midwives, nurse practitioners and allied health professionals who have been issued a Medicare provider number, and can also obtain free treatment in public hospitals. The plan was introduced in 1975 by the Whitlam Government as Medibank, and was supplemented in 1976 by a government-owned private health insurance fund, Medibank Private, established by the Fraser Government. Medibank was renamed Medicare in 1984.

Reciprocal Health Care Agreements (RHCA) are in place with the United Kingdom, Sweden, the Netherlands, Belgium, Finland, Norway, Slovenia, Malta, Italy, Republic of Ireland and New Zealand, which entitle visitors from these countries to limited access to Medicare and entitles Australian residents to reciprocal rights while in one of these countries.[1]

Since 1999, the public health plan has been supplemented by a Private Health Insurance Rebate, where the government funds up to 30% of any private health insurance premium covering people eligible for Medicare. Including these rebates, Medicare is the major component of the total Commonwealth health budget, taking up about 43% of the total. The program was estimated to cost $18.3 billion in 2007–08.[2] In 2009 before means testing was introduced, the private health insurance rebate was estimated to cost $4 billion, around 20% of the total budget.[3] The overall figure was projected to rise by almost 4% annually in real terms in 2007.[2] In 2013/4 Medicare expenditure was $19 billion and expected to reach $23.6 billion in 2016/7. [4]


There was an increase in the number of Australians covered by health insurance plans following the end of the Second World War. However, a large proportion of the Australian population continued to lack coverage for health risks in the early 1970s. In 1972, 17% of Australians outside of Queensland (which had a free public health care system[5]) were uninsured, most of whom were on low incomes.


The Whitlam Labor government, elected in 1972, sought to put an end to this two-tier system by extending healthcare coverage to the entire population.[6] Before the Labor Party came to office, Bill Hayden, one of the Labor Party's front bench members of parliament, took the main responsibility for developing the preliminary plans to establish Medibank.

According to the second reading speech of the Health Insurance Bill 1973 delivered by Hayden (who had become Minister for Social Security) on 29 November 1973, the purpose of the new universal health insurance system, called Medibank, was to provide the 'most equitable and efficient means of providing health insurance coverage for all Australians'.[7] There was opposition to the system from the Liberal-Country Party Coalition-controlled Senate. The Health Insurance Bill 1973 and the accompanying bills were rejected by the Senate on three occasions (12 December 1973, 2 April 1974 and 18 July 1974). The Medibank legislation was one of the bills which resulted in a double dissolution of Parliament on 11 April 1974, and was passed at a subsequent joint sitting of Parliament on 7 August 1974. The original Medibank scheme was to be financed by a 1.35% levy (with low income exemptions) but the bills were rejected by the Senate, and so Medibank was originally funded from general revenue.

Medibank started on schedule on 1 July 1975.[7] In nine months, the Health Insurance Commission (HIC) had increased its staff from 22 to 3500, opened 81 offices, installed 31 minicomputers, 633 terminals and 10 medium-sized computers linked by land-lines to the central computer, and issued registered health insurance cards to 90% of the Australian population.

Medibank Mark II

After a change of government at the December 1975 election, the Fraser Coalition government established the Medibank Review Committee in January 1976. The Committee findings were not made public but the new program was announced in a Ministerial Statement to Parliament on 20 May 1976. 'Medibank Mark II' was launched on 1 October 1976 and included a 2.5% levy on taxable incomes, with the option of taking out private health insurance instead of paying the levy. Other changes included reducing rebates to doctors and hospitals.

On 1 October 1976, the Fraser government also passed the Medibank Private bill. This legislation allowed the Health Insurance Commission to enter the private health insurance business. This legislation led to the original Medibank closing in 1981.


On 1 February 1984, the original Medibank model was reinstated by the Hawke Labor government, but renamed Medicare to distinguish it from Medibank Private which continued to exist. The major changes introduced by the Fraser government were largely reversed, although the financing arrangements were changed. Medicare, which came into effect on 1 February 1984, followed the passage in September 1983 of the Health Legislation Amendment Act 1983, including amendments to the Health Insurance Act 1973, the National Health Act 1953 and the Health Insurance Commission Act 1973.

Total health spending per capita, in U.S. dollars PPP-adjusted, of Australia compared amongst various other first world nations since 1985.

Medicare levy

Medicare is presently nominally funded by an income tax surcharge, known as the Medicare levy, which is currently 2% of a person's taxable income.[8] An exemption applies to low income earners, with different thresholds applying to singles, families, seniors and pensioners, with a phasing-in range. Since 2015–16, the exemptions applied to taxable incomes below $21,335, or $33,738 for seniors and pensioners. The phasing-in range is for taxable incomes between $21,335 and $26,668, or $33,738 and $42,172 for seniors and pensioners.

The Medicare levy increased from 1.5% to 2% on 1 July 2014, to fund the National Disability Insurance Scheme.[9]

Medicare levy surcharge

A Medicare levy surcharge (MLS) was introduced in July 1997 by the Howard Coalition government to encourage people on higher incomes to take out and maintain private health insurance. It was part of an effort to reduce demand on the public Medicare system by encouraging people to use the private hospital system.[10]

Initially, the surcharge was 1% for individuals and families above a threshold amount who do not have adequate levels of private hospital coverage. The Rudd Government, with effect from 1 from July 2012, increased the surcharge threshold amount at which the 1% surcharge applies to individuals with "income for MLS purposes" above $90,000, or $180,000 for families.[11] The "income for MLS purposes" includes the individual's or family group's taxable income, fringe benefits, and superannuation contributions less any net investment losses. In 2014, the surcharge increased to 1.25% for individuals without private hospital cover on incomes over $105,000, from $97,000, and 1.5% for those on incomes over $140,000, from $130,000; and the threshold amounts are doubled for families.

Constitutional framework

Section 51 (xxiiiA) of the Commonwealth Constitution was inserted by a referendum of 1946, which gave the federal Parliament power, subject to the Constitution, to make laws with respect to: The provision of maternity allowances, widows’ pensions, child endowment, unemployment, pharmaceutical, sickness and hospital benefits, medical and dental services (but not so as to authorise any form of civil conscription), benefits to students and family allowances.

This empowers the Commonwealth to operate the Medicare scheme, but not the entire Australian health system. The operation of public hospitals remains within the authority of state and territory governments. In practice, state governments, as well as private doctors, act as pseudo-contractors. This is done by a provider number system controlled by the Commonwealth.

Privately run hospitals are also part of the Medicare scheme. Medicare benefits are payable for medical treatment provided to admitted patients of private hospitals as well as public hospitals. However, a patient in a private hospital (by definition, a private patient) would need private insurance coverage to help him or her meet any of the hospital charges such as accommodation costs, as well as some or all of the remainder of the doctor's charges above the 75% Medicare benefit.

Medicare rebates

Standard Medicare rebate

The standard Medicare rebate is 100% for a general practitioner and 85% for a specialist of the Medicare-determined schedule fee, called the Medicare Benefits Schedule (MBS).[12] Patients need to pay the balance of the fees above the 85% of scheduled fee level, until the safety nets cut in. Many medical practitioners charge more than the schedule fees, and the amount in excess of the schedule fee must be borne by the patient and is not counted towards the safety net threshold.

Where practitioners "bulk bill" patients, they agree with Medicare to accept 85% of the schedule fee in full payment for their services. The MBS is not indexed, but is reviewed from time to time.

Medicare safety nets

To provide additional relief to those who incur higher than usual medical costs, Medicare safety nets have been set up. These provide singles and families with an additional rebate when an annual threshold (determined on a calendar year basis) is reached for out-of-hospital Medicare services.[13] There are two safety nets:

  1. the original Medicare safety net, and
  2. the extended Medicare safety net.

The thresholds for both safety nets are indexed on 1 January each year to the Consumer Price Index.

Original Medicare safety net

Under the original Medicare safety net, once an annual threshold in gap costs has been reached, the Medicare rebate for out-of-hospital services is increased to 100% of the schedule fee (up from 85%). Gap costs refer to the difference between the standard Medicare rebate (85% of the schedule fee) and the actual fee paid, but limited to 100% of the schedule fee. The threshold applies for all Medicare cardholders and is $447.40 for calendar year 2016.[14]

Year Threshold Value
1 January 2006 $345.50[15]
1 January 2007 $358.90[15]
1 January 2008 $365.70[16]
1 January 2009 $383.90[17]
1 January 2010 $388.80[18]
1 January 2011 $399.60[19]
1 January 2012 $413.50[20]
1 January 2013 $421.70[21]
1 January 2014 $430.90[22]
1 January 2015 $440.80[23]
1 January 2016 $447.40[24]

Extended Medicare safety net

The extended Medicare safety net (EMSN) was first introduced in March 2004. Once an annual threshold in out-of-pocket costs for out-of-hospital Medicare services is reached, the Medicare rebate will increase to 80% of any future out-of-pocket costs (now subject to the EMSN fee cap) for out-of-hospital Medicare services for the remainder of the calendar year. Out-of-pocket costs are the difference between the fee actually paid to the practitioner (subject to the fee cap) and the standard Medicare rebate.

When introduced, the general threshold for singles and families was $700 and $300 for singles and families that hold a Commonwealth concession card, and families that received Family Tax Benefit Part (A) (FTB(A)) and families that qualify for notional FTB(A). On 1 January 2006 the thresholds were increased to $1,000 and $500 respectively. From then the EMSN was indexed by the Consumer Price Index on 1 January each year.[25]

Since 1 January 2010, some medical fees have been subject to an EMSN fee cap, so that the out-of-pocket costs used in determining whether the threshold has been reached are limited to that cap.[26][27] The EMSN fee cap also applies for any rebate that is paid once the EMSN threshold is reached. The items subject to a cap has expanded since 2010, the latest being in November 2012.[28]

Year Extended Concessional and
FTB Part A Threshold Value
Extended General
Threshold Value
1 January 2007 $519.50 $1039.00[29]
1 January 2008 $529.30 $1058.70[30]
1 January 2009 $555.70 $1111.60[31]
1 January 2010 $562.90 $1126.00[18]
1 January 2011 $578.60 $1157.50[19]
1 January 2012 $598.80 $1198.00[20]
1 January 2013 $610.70 $1,221.90[21]
1 January 2014 $624.10 $1,248.70[22]
1 January 2015 $638.40 $2,000.00[23]
1 January 2016 $647.90 $2,030.00[24]

Medicare and private health insurance

Debates regarding Medicare focus on the two-tier system and the role of private health insurance. Controversial issues include:

There are a number of incentives for people to take up private health insurance. Since 1999, the government has subsidised private health insurance premiums through the Private Health Insurance Rebate. Previously the rebate was 30%, but is now income- and age-tested, ranging between 0% and 35.722%. The rebate cuts out when a member's "income for MLS purposes" exceeds $140,000, and double for a family.[32] Critics argue that the rebate is an unfair subsidy to those who can afford health insurance, claiming the money would be better spent on public hospitals where it would benefit everyone. Supporters argue that people must be encouraged into the private health care system, claiming the public system is not universally sustainable for the future. Similarly, even after the introduction of the rebate, some private health insurance companies have raised their premiums most years,[33] to an extent negating the benefit of the rebate.

As of FY2014 approximately 47.2%[34] of Australians also retain private health insurance with some form of hospital cover, even though they are already entitled to free treatment in public hospitals.

The proportion of Australians with private health insurance was declining, but has increased again with the introduction of Lifetime Health Cover (where people who take out private hospital insurance later in life pay higher premiums than those who have held coverage since they were younger) and tax incentives to take out private cover (such as the Medicare levy surcharge).

Other health care programs

Pharmaceutical Benefits Scheme

The Pharmaceutical Benefits Scheme (PBS) subsidises certain prescribed pharmaceuticals. The PBS pre-dates Medicare, being established in 1948. It is generally considered a separate health policy to 'Medicare'. However, the PBS is now administered by Medicare Australia (formerly the Health Insurance Commission) under the Health Insurance Act 1973, with input from a range of other bodies such as the Pharmaceutical Benefits Pricing Authority.

State/territory programs

State and Territory Governments also sometimes administer peripheral health programmes, such as free dentistry for school students and community sexual health programmes.

Practitioner review programs

This is a basic overview of the practitioner review process in point form:

Dental care services

With some exceptions, such as the Teen Dental Plan, dental care is generally not covered by Medicare for all Australians, although the various States and Territories provide free or subsidised dental services to certain categories of the population, such as Health Care Card and Pensioner Concession Card holders.[37] For example, the state of Victoria provides subsidized dental care to holders of concession cards through a network of community clinics[38] and the Royal Dental Hospital.[39] There is also a voucher system available for general and emergency dental care where these can not be met by the public system. Vouchers allow patients to receive $799 worth of necessary general and/or emergency dental treatment at a time. The patient co-payment in these situations is generally $27 a visit up to a maximum of 4 visits at $108.[40]

See also



  1. "Reciprocal Health Care Agreements". Department of Human Services (Australia). Retrieved 11 August 2013.
  2. 1 2 General Government Expenses, Budget 2007–08.
  3. Metherell, Mark (29 July 2009). "High Cost of Health Reform". The Sydney Morning Herald. Retrieved 2012-01-08.
  4. Britnell, Mark (2015). In Search of the Perfect Health System. London: Palgrave. p. 53. ISBN 978-1-137-49661-4.
  5. Health Reform: Public Success, Private Failure by Daniel Drache and Terry Sullivan
  6. Understanding the Australian Health Care System by Eileen Willis, Louise Reynolds, and Keleher Helen.
  7. 1 2 Biggs, Amanda (29 October 2004). "Medicare – Background Brief". Parliament of Australia: Parliamentary Library. Canberra, ACT: Commonwealth of Australia. Retrieved 16 April 2010.
  8. "Medicare levy". Retrieved 28 February 2015.
  9. "Medicare levy increase to fund DisabilityCare Australia". Retrieved 28 February 2015.
  10. ATO: Medicare levy surcharge
  11. "Medicare Levy Surcharge". Retrieved 28 February 2015.
  12. "What is covered by Medicare?". Private Health Insurance Ombudsman. Retrieved 4 June 2014.
  13. Medicare Benefits Schedule - Note G10.2
  15. 1 2 Medicare Safety Net Thresholds - Effective 1 January 2007. Department of Health. Retrieved 4 June 2014.
  16. 1 January 2008 Medicare Safety Net Thresholds. Department of Health. Retrieved 4 June 2014.
  17. 1 January 2009 Medicare Safety Net Thresholds and Information. Department of Health. Retrieved 4 June 2014.
  18. 1 2 1 January 2010 Medicare Safety Net Thresholds. Department of Health. Retrieved 4 June 2014.
  19. 1 2 Medicare Safety Net. Department of Human Services. Retrieved 4 June 2014.
  20. 1 2 (18 December 2013). 2014 Medicare Safety Net thresholds. Department of Human Services. Retrieved 4 June 2014.
  21. 1 2
  22. 1 2
  23. 1 2
  24. 1 2
  25. Extended Medicare Safety Net Review
  26. Extended Medicare Safety Net 2011 Review of Capping Arrangements
  27. Medicare Safety Net Review and Responses
  28. Summary of the changes to the Extended Medicare Safety Net - 1 November 2012. Department of Health. Retrieved 4 June 2014.
  32. Australian Government Private Health Insurance Rebate
  33. "HCF records strong revenue and membership growth in 2008-09, reaffirms commitment to not-for-profit model". The Hospitals Contribution Fund of Australia. Archived from the original on 4 March 2010.
  35. Medicare Australia's website:
  36. Medicare Australia and the Professional Services Review System, Sara Bird, Australian Family Physician (Volume 37, Number 9), September 2008.


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