Simply increasing Medicare rebates could pour more public money into specialist care without cutting patients’ out-of-pocket costs, a new report warns.
Raising Medicare rebates without conditions risks funneling more taxpayer money into specialist fees without making care more affordable, according to new research showing almost two million Australians delay or skip specialist appointments each year.
The Australia Institute has warned that bigger rebates alone may simply allow specialists to increase their fees, saying patients need “lower and more predictable gaps, not just bigger subsidies”.
In its submission to the federal parliamentary Inquiry into Access to and Affordability of Medical Specialists in Australia, the Institute said Australia had effectively developed a two-tier system, where people with the money, information, and local access to private specialists could often obtain care quickly, while others waited in an under-resourced public system or missed out altogether.
Almost two million Australians delayed or skipped specialist care each year, including close to one million because of cost, with people on lower incomes, those with chronic illness or disability, and people in rural and remote areas particularly affected.
Australia Institute senior postdoctoral research fellow Luke Slawomirski, who conducted the analysis used for the submission, said the system was increasingly dividing patients according to their capacity to pay.
“Seeing a specialist has become a luxury rather than a way for any Australian to receive treatment for a serious health condition,” he said.
“It has become a two-tier system where people who can pay often move quickly, while people who cannot pay are forced to wait or miss out altogether.
“A universal health system should ask people to wait because someone else has greater clinical need, not because they can’t afford the private alternative.”
Around two in five Australians saw a medical specialist each year and one in three did so in the private sector, according to the submission.
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About one in 10 Australian adults delayed or skipped specialist care because of cost, while 30% of people with chronic conditions surveyed last year said they were not confident they could afford the care they would need if seriously ill.
The submission warned that delayed or forgone care could allow conditions to go undiagnosed or deteriorate, increasing treatment costs and pressure on general practice, emergency departments, and hospitals.
But it argued that simply increasing Medicare rebates – frequently proposed as a way of reducing patient gaps – would not necessarily leave patients better off.
It pointed to the Extended Medicare Safety Net as evidence that more generous subsidies could be partly captured through higher provider fees. In a market where specialists could set their own fees and patients had limited alternatives, additional government subsidies could increase what patients were able to pay without necessarily reducing their final out-of-pocket costs.
“Raising Medicare rebates without conditions risks pouring more public money into the same broken market,” Dr Slawomirski said.
“Patients need lower and more predictable gaps, not just bigger subsidies.”
Specialist out-of-pocket costs have risen faster than inflation and faster than out-of-pocket costs for GPs and other Medicare services since 2010.
The average out-of-pocket cost of a non-hospital specialist consultation reached about $78 in 2025, compared with about $11 for a GP consultation.
The report said those increases could not simply be attributed to practice costs, noting private specialist clinics recorded gross operating profit margins of 49%, compared with 36% for general practices. It noted that these were gross operating margins rather than net practice profits or income personally retained by specialists.
The submission stressed that rising fees did not mean individual specialists were acting improperly. Rather, constrained supply, high demand, poor price transparency, and weak constraints on private prices allowed fees to be influenced by market power and local capacity to pay.
The variation in patient costs could be substantial. The lowest and highest 10% of out-of-pocket costs for hip and knee replacements differed by about $5000, a 17-fold difference, while gaps for procedures including grommets and tonsil removal varied about five-fold.
There were also striking jurisdictional differences. The submission cited an average specialist fee of $605 in the ACT, more than four times Tasmania’s $144 average, and said out-of-pocket costs were closely correlated with local incomes.
The Australia Institute wants the Commonwealth to establish a National Specialist Fee and Affordability Framework setting benchmarks for common consultations, procedures and episodes of care, alongside voluntary fair-fee, no-gap and known-gap arrangements.
Enhanced Medicare funding or other public incentives could then be linked to affordable billing. Specialists would remain free to charge outside the voluntary arrangements, but public funding would reward affordable and transparent care rather than automatically subsidising whatever fee a provider chose.
The submission also called for a national specialist workforce and capacity plan to identify shortages by specialty and region and better align training and public outpatient capacity with patient need.
It highlighted dermatology and ophthalmology as specialties where annual trainee intake was barely increasing, while psychiatry, anaesthesia, obstetrics and gynaecology, and surgery were among specialties expected to be undersupplied within five years.
Governments should also make public-sector specialist work more attractive through improved employment conditions, protected teaching and supervision time, joint appointments, regional outreach, and investment in outpatient capacity, it said.
Another recommendation was to fund e-consults, shared-care, virtual specialist, and “advice-and-guidance” models so GPs could obtain specialist expertise without every patient needing a full appointment.
Under such models, GPs could send structured clinical questions to specialists and receive advice about diagnosis, testing, medication, urgency, or management. The submission cited forthcoming modelling suggesting a national advice-and-guidance program could free up more than one million public outpatient appointments annually.
It also called for a national referral information platform giving GPs and patients comparable information on fees and expected gaps, billing arrangements, public and private alternatives, waiting times, telehealth availability, and quality and outcome indicators.
The Institute said the reforms could shift specialist access back towards clinical need rather than ability to pay, while ensuring additional Medicare spending translated into more affordable care rather than simply higher prices.
Read the full report here.
