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This e-brief provides an introductory background to Medicare, describes the current system and its history and early development as Medibank, and outlines recently proposed changes.
Medicare is the Commonwealth funded health insurance scheme that provides free or subsidised health care services to the Australian population. It provides free hospital services for public patients in public hospitals through the Australian Health Care agreements with the States, subsidises private patients for hospital services (75 per cent of the Schedule fee) and provides benefits for out-of-hospital medical services such as consultations with GPs or specialists (85 per cent of the Schedule fee).
Following mounting dissatisfaction with the existing voluntary health
insurance scheme, major changes to
According to the Second Reading Speech of the Health Insurance Bill 1973 delivered by the Hon. Bill Hayden on 29 November 1973, the purpose of Medibank was to provide the 'most equitable and efficient means of providing health insurance coverage for all Australians'. The objectives of the original Medibank were summarised by R. B. Scotton (1977) as universal in coverage, equitable in distribution of costs, and administratively simple to manage.
The original legislation proposed financing the program through a taxpayer
levy of 1.35 per cent on taxable income, with exemptions for low income
earners. However the Senate rejected the bills dealing with financing
of the program in August 1974 and again in December 1974. Consequently,
the final program was funded entirely from general revenue. The cost of
Medibank in its first year (1975-76) was $1.647 billion, according to
Scotton (1977). The hospital side of Medibank involved free treatment
for public patients in public hospitals, and subsidies to private hospitals
to enable them to reduce their fees. Benefits for public hospitals were
provided through hospital agreements with state governments, under which
the federal government made grants equal to 50 per cent of net operating
public hospital costs.
The Medibank program had only a few months of operation before the dismissal
of the Whitlam Government on
In 1979 Medicare benefits were limited to the difference between $20 and the scheduled fee. And in 1981 access to free hospital and medical care was restricted to pensioners with health care cards, sickness beneficiaries, and those meeting stringent means tests. An income tax rebate of 32 per cent was introduced for those with private health insurance.
The major changes introduced by the Fraser Government were largely rejected by the Hawke Labor Government, which returned to the original Medibank model. Although the financing arrangements were different, and there was a name change from Medibank to Medicare, little else differed from the original. Medicare as we know it came into operation on 1 February 1984, following 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. It differed from the original Medibank program only in matters of detail.
Funding for Medicare was to be 'offset' by
a Medicare levy, originally set at 1 per cent of taxable income, with
a low income cut-off point of $7110 per year for a single person and $11 803
for married couples and sole parents. Below these income levels no levy
was payable. More details are provided in the Second
Reading Speech given by
The Medicare levy is currently set at 1.5 per cent of taxable income.
The latest Department
of Health and Ageing's Annual Report shows Commonwealth expenditure
on Medicare for 2002-03 totalled $19.930 billion.
There have been a number of changes to Medicare and increases to the Medicare levy since 1984. The following table summarises these changes.
| Date |
Change |
| February 1984 |
Medicare introduced |
| November 1986 |
Gap increased to $20 |
| November 1991 |
Introduction of a co-payment of $2.50 for all direct billed consultations, except concession card holders, and reduction of rebate by $3.50 for non-bulk billing GPs Introduction of a Safety Net (indexed annually) to offset impact on low income earners |
| March 1992 |
Co-payment changes abolished after only 3 months |
| July 1993 |
Medicare levy increased to 1.4 per cent |
| July 1995 |
Medicare levy increased to 1.5 per cent |
| July 1996 |
0.2 per cent surcharge on Medicare levy for gun buy back scheme (till June 1997) |
| July 1997 |
Medicare Levy Surcharge of 1 per cent for those with household income over $100,000 who do not have private health insurance Private Health Insurance Incentive Scheme commences providing a capped means test rebate for hospital and ancillary health insurance. |
| |
Uncapped 30 per cent private health
insurance rebate introduced, (replacing PHIIS) to encourage
uptake of private health insurance which reaches a low of 30.5 per
cent in |
| 2000 |
Lifetime health cover commences in July In early 2000, a Medicare levy increase for individuals with a
taxable income above $50 000 for 2000-2001 only, was proposed in
order to provide funding for Australia's
role in |
| 2003 |
In April ‘A Fairer Medicare’ announced, including changes to the Safety Net, incentives for GPs to bulk bill concession card holders, and private health insurance for out-of-pocket out-of-hospital medical costs. Proposed measures examined by Senate Select Committee on Medicare which recommends against the measures. In August following considerable debate the States and Territories begin to sign up to the new Australian Health Care Agreements 2003-2008 which allocate $42 billion to States and Territories to provide free hospital treatment. Medicare Plus announced in November includes proposed changes to the Safety Net and incentives for GPs (not implemented until 2004) |
| 2004 |
From 1 February, each bulk-billed GP service to concession card holders and children to attract an extra $5 incentive payment to the GP. Medicare Plus changes to Safety Net apply from 12 March. The new Safety Net pays 80 per cent of out of hospital Medicare expenses for: families and individuals covered by a Commonwealth concession card or receiving Family Tax Benefit (A) once their out-of-pocket, out of hospital expenses exceed $300 in a calendar year; other individuals and families, once their out of pocket, out of hospital expenses exceed $700 in a calendar year. From 1 May a $7.50 incentive paid to GPs for bulk-billed GP consultations
with concession card holders and children under 16 in non-metropolitan
areas (RRMAs 3-7) and As of 1 September eligibility for the $7.50 incentive payment to GPs extended to eligible urban areas and large regional centres. Under Medicare Plus new MBS items introduced for certain allied health and dental services from 1 July. |
Source : Adapted from Duckett, The Australian Health Care System, 2000, and Grant and Lapsley, The Australian Health Care System 1992, 1993, Department of Health and Ageing Annual Reports (various years), Ministerial press releases (various).
For a comprehensive history of Medibank refer to
The early history and principles of Medibank are summarised in
For a more detailed chronology charting the progress of Medibank to Medicare,
see
For comprehensive details of the Medibank program under the Whitlam Government
see R. B. Scotton, 'Health Services and the Public Sector', in R. B. Scotton
and Helen Ferber (eds), Public Expenditures and Social Policy in Australia,
vol. 1, University of Melbourne, Melbourne, 19781980.
For details of the Fraser Government's changes to Medibank see R. B.
Scotton, 'Health Insurance: Medibank and After', in R. B. Scotton and
Helen Ferber (eds), Public Expenditures and Social Policy in Australia,
vol. 2, University of Melbourne, Melbourne, 1978-1980.
Medicare also provides free in-hospital services in public hospitals
for patients who choose to be treated as public patients. Under the Medicare
arrangements, public patients in public hospitals are not charged for
their medical services or hospital accommodation costs. Funding for services
to these patients is shared between the Australian Federal Government
and State and Territory Governments under Australian
Health Care Agreements. Some dental services including cleft lip
and palate services also attract Medicare benefits.
For private patients in hospital Medicare will cover 75 per cent of the Schedule fee.
Some types of medical services are not covered by Medicare. These include
services to eligible veterans and their dependents (separate arrangements
apply), services covered by compensation arrangements (interim benefits
may be paid, pending settlement of the matter), most Government funded
community health services, as well as services not necessary for patient
care (for example, examinations for employment purposes).
HIC has more details on what Medicare covers.
Benefits for services provided by medical practitioners are based on
a Schedule of Fees listed in the Medicare Benefits Schedule
(MBS). This Schedule of Fees is indexed annually using the Wage Cost
Index (WCI5), which is a compilation of the CPI and a safety net component.
The Schedule is distributed in November each year with a supplement produced
mid year.
The table below shows increases to the Schedule fee for a standard GP consultation, the average patient contribution, and GP bulk billing rates since 1992.
| Year |
Schedule
Fee |
85%
rebate |
Average
patient contribution |
% GP services bulk billed to 30 June |
| 1992 |
24.00 |
20.40 |
7.48 |
70.6 |
| 1993 |
24.15 |
20.55 |
6.90 |
73.2 |
| 1994 |
24.30 |
20.70 |
7.20 |
76.2 |
| 1995 |
24.50 |
20.85 |
7.73 |
77.5 |
| 1996 |
24.50 |
20.85 |
8.32 |
79.3 |
| 1997 |
24.70 |
21.00 |
8.89 |
79.7 |
| 1998 |
25.05 |
21.30 |
9.40 |
78.9 |
| 1999 |
25.85 |
22.00 |
9.88 |
78.6 |
| 2000 |
27.00 |
22.95 |
10.46 |
78.4 |
| 2001 |
28.75 |
24.44 |
11.04 |
77.0 |
| 2002 |
29.45 |
25.05 |
11.68 |
74.1 |
| 2003 |
30.20 |
25.70 |
12.91 |
68.7 |
Source : Medicare Benefits Schedule and Medicare Statistics, various years.
The scheme covers all people normally resident in
Children over 15 can have their own Medicare card.
As of 29 August 2000, holders of Temporary Protection Visas have access
to Medicare. Asylum seekers have access if they have an unfinalised application
for a permanent residence visa (i.e. either for migration or asylum);
and hold a valid visa with work rights in force. Some asylum seekers without
work rights may qualify for Medicare if they are the spouse, child or
parent of an Australian citizen or permanent resident.
Further details on eligibility and enrolment are available from the Health Insurance Commission or from Medicare Offices.
There are currently three ways of billing under Medicare. Where medical
practitioners decide to bulk bill
Medicare, the service is free of charge to the patient and the practitioner
accepts the Medicare rebate as full payment for the services. Services
to non-inpatient services (e.g. GP consultations) attract a benefit of
85 per cent of the Schedule fee.
Or the patient can pay the doctor's account and then claim the benefit
from Medicare, or claim from Medicare for the unpaid account and receive
a cheque made out in the practitioner's name - to whom the cheque is then
given, plus any balance still owing.
The patient may have to pay the difference (or gap) between the benefit
and the total fee charged at the time of service. If the medical practitioner
charges less than 85 per cent of the Schedule fee, Medicare will only
pay the amount equal to the charge.
Medicare benefit payments are made through a network of 226 Medicare offices (101 in rural areas), administered by the Health Insurance Commission (HIC). More details on how to claim from Medicare are available from HIC.
Under Medicare, Safety Net Arrangements
apply which protect patients from significant out-of-pocket costs for
non-inpatient services.
Under the new Medicare Plus Safety Net arrangements Medicare pays 80 per cent of out-of-hospital Medicare expenses for: families and individuals covered by a Commonwealth concession card or receiving Family Tax Benefit (A) once their out-of-pocket, out-of-hospital expenses exceed $300 in a calendar year, and; other individuals and families, once their out-of-pocket, out-of-hospital expenses exceed $700 in a calendar year. In addition the arrangements under the old Medicare Benefits Safety Net continue to apply in conjunction with the new Medicare Plus safety net. These arrangements are for ‘gap payments’ (i.e. the difference between the Schedule fee and the Medicare rebate). Once gap payments exceed $328 Medicare benefits will increase to 100 per cent of the Schedule fee for the rest of the calendar year (this applies to all individuals and families).
Although individuals do not need to register for the Safety Net, couples and families do. More details, including how to register for the Safety Net are available on the HIC website.
| Threshold |
Who it is for |
How it is calculated |
Benefit to you |
| $300* |
Commonwealth concession card
holders |
Out-of-pocket costs |
80% of out-of-pocket costs |
| $700* |
All Medicare card holders |
Out-of-pocket costs |
80% of out-of-pocket costs |
| $328* |
All Medicare card holders |
Based on gap amount |
100% of Schedule fee |
* This figure is adjusted in line with the Consumer Price Index (CPI) on 1 January each year. Source HIC.
Partial funding of Medicare medical benefits expenditure is from a levy
on taxable income. The balance of funding for Medicare medical benefits
is from consolidated revenue. The Medicare Levy was originally set at
1 per cent of taxable income when first introduced in 1984; however it
has gradually increased since then. It is currently set at 1.5 per cent
of taxable income.
The Medicare levy only funds a portion of total Commonwealth expenditure on health. In 2002-03 health expenditure by the Commonwealth totalled $33.377 billion, while receipts from the Medicare levy totalled $5 billion, or 14.9 per cent of health expenditure.
The Medicare Levy Surcharge is an additional 1 per cent surcharge of taxable income imposed on high-income earners who are eligible for Medicare but who do not have an appropriate level of hospital insurance with a registered health fund. The Medicare Levy Surcharge is in addition to the normal 1.5 per cent Medicare levy. More information on the surcharge is available by clicking on the link above.
Medicare is a very popular government program and public support has
been high. In April 1984 just after its introduction, 52 per cent of respondents
to an opinion poll commissioned by the Health Insurance Commission (HIC)
were in favour of Medicare, and this had risen to 85 per cent in 1993,
according to a 1994 Background
Paper prepared by the Parliamentary Library. Community satisfaction
with Medicare remains high at 93 per cent according to the latest HIC
Annual Report.
In 2002-03, the HIC processed 221.4 million services, representing $8.116 billion in Medicare benefits, and covering 20.6 million people enrolled in Medicare. Other key statistics on Medicare are contained in the HIC's Annual Report.
Quarterly Medicare
Statistics released by the Department of Health and Ageing
provide details of current and past levels of bulk billing (including
by electorate), number of Medicare services accessed, average patient
contributions and other relevant data. The latest statistics are available
online. A useful
introductory table is the Analysis of Major Aggregates
by Broad Type of Service which includes summary data on number
of services, benefits paid, patient contributions and bulk billing levels.
Table
A7 shows the percentage of all services bulk billed, while
Table C3
shows bulk billing rates for unreferred GP attendances.
Levels of bulk billing for unreferred GP attendances have been declining in recent years after reaching a high of 79.7 per cent in1996-97. By the December quarter 2002 bulk billing for unreferred GP attendances had declined to 68.8 per cent, but by June 2004 this had improved to 70.2 percent.
Bulk billing rates by Federal electorate are now released as part of the Medicare Statistics (year end figures only). Table E1 shows the percentage of non-referred (GP) attendances by Federal electorate. The most recent data (year ending December 2003) shows the electorate of Indi has the lowest level of bulk billing (29.8 per cent) while Chifley has the highest (98.3 per cent).
For an exploration of the reasons for the decline in bulk billing, see
the Department of the Parliamentary Library's Current Issues Brief Decline in
Bulk Billing: Explanations and Implications, (also available as
an audio brief) by
Proposals for changes to Medicare were announced by the Coalition during the 2004 election campaign. These include from 1 January 2005 increasing the Medicare rebate for all GP services to 100 per cent of the Schedule fee, plus increasing fees paid by the Department of Veteran’s Affairs for GP services provided to eligible veterans and war widows from 100 to 115 percent of the Medicare fee. Details are available in this election policy statement.
These changes will require amendments to the Health Insurance Act and related legislation.
For copyright reasons some linked items are only available to Members of Parliament.