Australian taxpayers are bearing the brunt of escalating specialist medical fees as government expenditure on the Medicare safety net has experienced what experts describe as "explosive" growth, more than doubling over the past fifteen years.
The staggering cost increase
Exclusive data obtained from the federal health department reveals that total Medicare safety net benefits have surged from $339 million in 2010 to $871.4 million in 2024 - representing an increase of over $522 million. The most significant contributor to this dramatic rise has been the extended Medicare safety net introduced during Tony Abbott's tenure as health minister in 2004.
While spending on the original safety net increased modestly from $14.1 million to $20.9 million, expenditure on the extended safety net has nearly tripled, jumping from $324.9 million in 2010 to $850.4 million in 2024.
How the safety nets operate
Australia's healthcare system features two distinct safety nets designed to support individuals facing substantial out-of-pocket medical expenses. The original Medicare safety net covers the gap between the government-determined schedule fee and the Medicare rebate. Once patients reach the annual threshold of $576 in gap costs, Medicare covers 100% of the schedule fee for additional services within that year.
The extended safety net, however, addresses the difference between the Medicare rebate and what healthcare providers actually charge patients. When out-of-pocket expenses reach $2,615.50 annually, Medicare contributes up to 80% of subsequent out-of-pocket costs.
Systemic flaws and specialist fee inflation
Peter Breadon, Health Program Director at the Grattan Institute, characterised this expenditure growth as "explosive" during a period when specialist fees have increased dramatically, far outpacing both inflation and the actual cost of providing care.
Breadon identified two fundamental problems with the current system. "First, costs are surging because it's a badly designed subsidy with money going to fee-charging specialists and the wealthiest patients who can afford to repeatedly see them," he explained. "Additionally, specialist fees are soaring, pushing more patients over the threshold each year."
Academic research supports these concerns, with a 2009 article in the Australian Economic Review concluding that the extended Medicare safety net "has possibly created greater inequities in Australia's healthcare financing arrangements."
Government response and expert commentary
The Albanese government has initiated a review of the Medicare safety nets, expanding caps on extended safety net benefits originally introduced in 2010 to control fee inflation. A spokesperson for the Department of Health, Disability and Ageing confirmed the establishment of a working group to examine the safety nets' operation, with a consultation paper already circulated and reform options under consideration.
Former Chief Medical Officer Professor Brendan Murphy commented that while safety nets have provided patient relief, the extended safety net had proven "inflationary and required additional caps to limit further fee escalation."
Murphy highlighted how high fees have rendered specialist consultations unaffordable for many patients, forcing them into the "overcrowded public hospital system." He described this development as "a failure of one of the original aims of Medicare, that even uninsured people could access private outpatient care with an affordable copayment."
The former medical leader also addressed the income disparity between GP specialists and other specialists, noting the gap has become "unjustifiable" and suggesting that "specialists would do well to reflect on the impact of their fees on patients and potentially consider a minor trade-off in income."
Breadon emphasised that addressing the root causes requires comprehensive solutions including tackling workforce shortages, improving public healthcare access, and regulating excessive fees. Meanwhile, the government continues to explore reforms to a system that increasingly strains both taxpayer resources and healthcare equity.
