Introduction
Few Australian institutions command the public loyalty that Medicare does. Since 1 February 1984, the scheme has guaranteed every Australian resident subsidised access to medical care through the Medicare Benefits Schedule (MBS), affordable medicines through the Pharmaceutical Benefits Scheme (PBS) and free treatment as a public patient in public hospitals. Yet almost every federal budget cycle renews the question of whether universal healthcare can survive the pressures bearing down on it. National health expenditure now exceeds $250 billion a year (AIHW 2024a), the population is ageing, bulk-billing rates have fallen sharply from their pandemic-era peak, and general practice is struggling to attract the next generation of doctors. This essay argues that Medicare is sustainable, but not in its current form. Its fiscal position is considerably stronger than crisis narratives imply; the more serious threat lies in the widening misalignment between a fee-for-service design built for the episodic illnesses of 1984 and the chronic, complex disease profile of the 2020s, compounded by entrenched inequities that corrode the universality on which the scheme’s legitimacy depends. The essay first examines Medicare’s architecture, then assesses the funding pressures arising from demographic change, chronic disease and workforce shortage. It then evaluates equity outcomes for rural communities and for Aboriginal and Torres Strait Islander peoples, before appraising the principal reform proposals, including co-payments, blended funding and MyMedicare. Throughout, sustainability is treated as a threefold concept embracing fiscal capacity, service adequacy and political legitimacy.
The Architecture of Universal Coverage
Medicare’s design reflects a distinctive settlement between public financing and private delivery. Completing the project begun by Medibank in 1975 and resting on the framework of the Health Insurance Act 1973, the scheme pays standardised MBS rebates for services delivered mostly by privately practising doctors who remain free to set their own fees; the PBS caps what patients pay for listed medicines, with safety nets for concession card holders and high users; and public hospital care is funded jointly by the Commonwealth and the states through activity-based funding (Duckett 2022). Financing is strongly progressive. The 2 per cent Medicare levy raises only around a tenth of what Australian governments actually spend on health, with the balance drawn from general taxation, so contributions scale with income while entitlements do not (Duckett 2022).
Bulk billing is the linchpin that converts this architecture into universal access. When a practitioner bulk bills, the rebate is accepted as full payment and the patient pays nothing at the point of care. Crucially, however, bulk billing is voluntary for providers, which makes universality contingent on the adequacy of the rebate. When rebates lag behind practice costs, gap fees reappear and access begins to follow income rather than need. The freeze on MBS rebate indexation between 2013 and 2019 demonstrated precisely this dynamic, eroding the real value of rebates and pushing practices towards mixed billing (Breadon et al. 2022). Out-of-pocket payments now contribute a larger share of health funding in Australia than in most comparable universal systems, at roughly one sixth of total expenditure (Yusuf & Leeder 2020).
The deeper design problem is temporal. Fee-for-service medicine rewards the throughput of discrete consultations and suited the acute, episodic conditions that dominated when Medicare was legislated. It is poorly matched to an era in which almost half of Australians live with at least one chronic condition and chronic illness generates the majority of the burden of disease (Duckett 2022). Managing diabetes, heart failure or depression well requires continuity of care, multidisciplinary teamwork and sustained prevention, none of which a funding logic built around brief, high-turnover consultations rewards (Breadon et al. 2022). Medicare’s architecture, in short, has remained largely static while the epidemiology it serves has been transformed.
Funding Pressures: Ageing, Chronic Disease and Workforce
The fiscal case against Medicare’s sustainability rests on long-run projections. The 2023 Intergenerational Report expects Australian Government health spending to rise from about 4.2 per cent of GDP in 2022-23 to 6.2 per cent by 2062-63, as the number of Australians aged over 65 more than doubles and the number aged over 85 more than triples (Commonwealth of Australia 2023). These pressures are real, and they interact: older Australians consult more often, take more medicines and are far more likely to live with multiple chronic conditions simultaneously.
Two qualifications, however, weaken the crisis reading. First, the Intergenerational Report itself attributes the majority of projected growth not to ageing but to non-demographic drivers, principally new health technologies, rising input costs and rising community expectations (Commonwealth of Australia 2023). These drivers are amenable to policy in a way that demography is not, because governments choose which technologies to subsidise through the MBS and PBS, and at what price. Second, Australia’s aggregate spending is unremarkable by international standards. Total health expenditure of around 10 per cent of GDP sits close to the OECD average and far below the United States, yet Australia records among the highest life expectancies in the world and strong performance on avoidable mortality (AIHW 2024a; Productivity Commission 2024). A system that delivers top-tier outcomes at mid-tier cost is not fiscally broken. Affordability is ultimately a question of political priorities rather than arithmetic inevitability.
Australia also possesses proven instruments for managing the technology-driven component of growth. The PBS subjects new medicines to cost-effectiveness assessment by the Pharmaceutical Benefits Advisory Committee before listing, and uses reference pricing and statutory price reductions to restrain the cost of established drugs, disciplines that have repeatedly kept pharmaceutical spending growing more slowly than the health budget overall (Duckett 2022). The same logic of evaluated and negotiated entry could be applied far more rigorously across the MBS through systematic review and retirement of low-value items (Productivity Commission 2024). The levers required to manage expenditure growth already exist within the system’s own architecture; what sustainability requires is the willingness to pull them.
The binding constraint is therefore less money than workforce. General practice, the foundation on which Medicare’s cost-effectiveness rests, is thinning. Only around 13 per cent of medical graduates now express a preference for general practice as a career, and credible projections indicate a shortfall of more than 10,000 full-time-equivalent GPs by 2031-32, concentrated outside the capital cities (AMA 2022). Where primary care weakens, demand does not disappear; it migrates into emergency departments and inpatient beds, the most expensive settings in the system. Rising rates of potentially preventable hospitalisation already signal this displacement (Productivity Commission 2024). Sustainability analysis that fixates on gross expenditure while ignoring the composition of care misdiagnoses the problem: the risk is not that Australia cannot afford Medicare, but that an under-supported primary care sector quietly converts low-cost care into high-cost care.
Equity and the Unfinished Promise of Universality
Medicare is universal in entitlement but increasingly unequal in effect, and these equity failures are themselves sustainability failures. Access declines steeply with remoteness. People in rural and remote Australia experience worse health and die younger than residents of major cities, yet receive fewer MBS-funded services per person and face the longest waits and the furthest travel (AIHW 2024b). Rates of potentially preventable hospitalisation in very remote areas run at roughly two and a half times those of major cities (AIHW 2024b). The pattern conforms to the inverse care law: the availability of good care varies inversely with the need of the population served, because fee-for-service medicine locates where it can be profitably supplied rather than where need is greatest (Duckett 2022).
The starkest expression of unfinished universality is the health of Aboriginal and Torres Strait Islander peoples. The life expectancy gap remains 8.8 years for males and 8.1 years for females, and the Closing the Gap target of parity within a generation is not on track (AIHW 2023). Aboriginal and Torres Strait Islander Australians continue to access MBS and PBS services at rates well below their level of need, reflecting cost barriers, distance, workforce gaps and care that is not always culturally safe (AIHW 2023). Aboriginal Community Controlled Health Organisations demonstrate that comprehensive, community-governed primary care can close access gaps, yet they operate on fragmented funding streams layered awkwardly over Medicare’s fee-for-service base (Breadon et al. 2022).
Cost barriers are no longer confined to the most disadvantaged. As bulk billing fell from a pandemic-era peak of almost 90 per cent to about 77 per cent of GP attendances in 2022-23, the proportion of Australians who delayed seeing a GP, or did not see one at all, because of cost roughly doubled in a single year (ABS 2023; Productivity Commission 2024). Patients with chronic conditions, who need care most frequently, are precisely those most likely to forgo it when out-of-pocket costs mount (Callander, Corscadden & Levesque 2017). This matters politically as well as clinically. Medicare’s durability has always rested on middle-class buy-in: a universal scheme that visibly delivers for everyone sustains the taxpayer consent that funds it. If gap fees become normalised and higher-income households drift towards parallel private arrangements, the constituency for universality shrinks, and a residual safety-net system, the fate Medicare was explicitly designed to avoid, becomes thinkable. Equity is not an ornament of universal healthcare; it is the load-bearing wall.
Reform Directions: Co-payments, Primary Care and MyMedicare
Reform debates have repeatedly reached for patient charges as the sustainability lever. The 2014-15 Budget’s proposed $7 general practice co-payment, justified as a price signal to moderate demand, was abandoned within a year amid intense public opposition, and the episode remains instructive (Duckett 2022). The Australian and international evidence is consistent: co-payments deter necessary and unnecessary care alike, bear hardest on the poorest and sickest, and generate downstream hospital costs that erode much of the initial saving (Duckett 2022; Callander, Corscadden & Levesque 2017). A co-payment defends the budget by dismantling the very universality that gives Medicare its legitimacy; it purchases fiscal sustainability at the price of service adequacy and political sustainability, and should be rejected on the scheme’s own terms.
The more credible agenda targets the funding model itself. The Strengthening Medicare Taskforce recommended shifting general practice towards blended funding, in which fee-for-service is supplemented by flexible per-patient payments adjusted for age and complexity, supporting multidisciplinary teams, longer consultations and continuous management of chronic disease (Department of Health and Aged Care 2022). Independent analysis reaches the same destination, proposing that a substantial share of primary care funding flow through needs-adjusted patient enrolment so that nurses, pharmacists and allied health professionals can work to their full scope within general practice (Breadon et al. 2022).
Implementation has begun, cautiously. MyMedicare, introduced from October 2023, establishes voluntary patient registration with a usual practice, the administrative foundation for continuity-based and blended payment, and initially carries entitlements such as longer subsidised telehealth consultations (Department of Health and Aged Care 2022). The tripling of bulk-billing incentives for children and concession card holders from November 2023 arrested the slide in bulk billing for those groups (Productivity Commission 2024). These are movements in the right direction, and they matter. The honest assessment, however, is that they remain underpowered relative to the diagnosis. The new incentives ride atop an unchanged fee-for-service chassis; registration is voluntary, lightly funded and does not yet alter how most care is paid for; and the workforce measures needed to make reform real outside the major cities, including rural training pipelines, broader scopes of practice and secure funding for community-controlled services, are advancing slowly (AMA 2022; Breadon et al. 2022). Sustainability will be secured when funding follows enrolled patients and their needs rather than billable events, when distribution mechanisms deliberately direct capacity towards underserved regions, and when savings are harvested from low-value care rather than from patients’ pockets.
Conclusion
Medicare’s sustainability is best understood not as a question of whether Australia can afford universal healthcare, but of whether it will choose to keep the scheme fit for purpose. On the fiscal dimension the evidence is reassuring: Australia buys world-leading outcomes for near-average spending, and the growth pressures identified in the Intergenerational Report are driven substantially by policy-amenable factors rather than by ageing alone. The genuine threats are structural and distributional. A fee-for-service architecture designed for episodic illness is misaligned with a chronic disease era; general practice is losing its workforce; and the erosion of bulk billing, persistent rural under-service and the Aboriginal and Torres Strait Islander health gap are hollowing out universality from within. Co-payments would accelerate that hollowing and represent a false economy. The blended funding direction charted by the Strengthening Medicare Taskforce, and instantiated tentatively in MyMedicare, is the correct one, but its current scale is not commensurate with the problem it is meant to solve. Medicare has been redesigned before and can be redesigned again. Its survival deep into its second half-century will depend less on the size of the health budget than on the willingness of governments to modernise the scheme’s payment architecture and to treat equity not as an aspiration but as the operating condition of universality itself.
References
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