Changing MBS ruled to allow other health practitioners to sign off on chronic condition management plans in areas with a GP shortage is one of the proposed fixes for the 20-year-old s19(2) exemption initiative.
Tying regional primary care funding to Primary Health Networks rather than leaving rural GP clinics and hospitals to rely on a complex and bureaucratic funding mix is one of several potential initiatives which has been pitched to the Department of Health, Disability and Ageing.
The Nous Group evaluation report, which was dated December 2025 but only published on the DoHDA website last week, examined the Council of Australian Governments (COAG) s19(2) exemptions initiative.
Recommended actions included streamlining the initiative’s billing rules, allowing for greater flexibility in writing a GP chronic condition care plans, tying funding to a “regional primary care funding amount” and expanding the role of PHNs.
This last recommendation would effectively pool funding between the Commonwealth and the states, fitting in with the larger move away from fee-for-service.
“This would involve providing options for service providers including block, fee-for-service or blended funding models, to be considered based on needs,” the report read.
“If the PHN took on this role, then they would be given dedicated funding to address thin market issues which would be based upon funding currently directed through the Initiative.
“Additional funding may be channelled through jurisdictional sources with the aim of having a single organisation with responsibility for primary care provision.
“This arrangement would require strong transparency from jurisdictions and the Commonwealth to ensure ongoing complementary and indexed investment.”
Normally, subsection 19(2) of the Health Insurance Act 1973 banned providers from billing Medicare for a service that was being rendered by or on behalf of a state, local governing body, or the Commonwealth.
This was the clause which stopped, say, a public hospital from billing Medicare for a service that it was already being funded to provide by the state government.
Since 2006, the initiative has allowed the federal health minister’s office to grant an exemption which allowed Medicare benefits to be payable for some state-funded services in rural communities, the terms of which were governed by a series of memorandums of understanding.
“It’s very necessary to have some of these exemptions, because of the inability to have viable viable independent clinic structures,” ACRRM president Dr Rod Martin told The Medical Republic.
In Queensland, the initiative has been key to allowing the state health service to step in and run general practice locations in areas of market failure.
“In Central Queensland, all around Longreach, all of those little towns are all 19(2)s,” Dr Martin said.
“But what they’ve done is very deliberately put in structured primary care. That 19(2) exemption covers for properly worked general practice services the way we would expect to see them. They’re doing all of the preventive health stuff, they’re able to do all of that acute medicine stuff.”
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Other exemptions could be granted under the broader 19(2) banner – i.e., urgent care clinics need an exemption in order to accept federal program funding while also billing Medicare – but these were separate to the COAG s19(2) exemptions initiative.
Sites given an exemption through the COAG s19(2) exemptions initiative – which the new report referred to simply as ‘the initiative’ – must agree to reinvest MBS billing revenue back into improving access to primary care at that same site.
This could include employing additional staff, running a telehealth clinic, or purchasing equipment.
Queensland has traditionally seen the biggest uptake of the initiative, with a total of 58 approved sites as of April 2025. NSW followed at 47 sites, and WA came in third at 20 sites.
Tasmania and the Australian Capital Territory had none.
The Nous report concluded that in its current state the initiative was delivering value in a small number of high-capacity sites with stable workforces, but that most communities were “limited in their ability to gain longer-term benefit”.
It cited high administrative burden and the tendency of the fee-for-service model to reflect billing capability rather than population health need as factors in this failure.
“I’ve certainly been involved with [the 19(2) application process] and it’s doable, but it’s a challenge,” Rural Doctors’ Association of Australia president-elect Dr Gerry Considine told TMR.
“For public health services working rurally, we haven’t got heaps of time and effort to be able to spend on all this.
“For example, in our region in South Australia, we’re just doing one site one at a time.
“It’d be great if it was a process or it was you know cut and paste, and we could sign up all of our sites that are eligible in one go. So yeah, anything that reduces that bureaucratic maze would be fantastic.”
“The Initiative was not created to reform the system,” the report read.
“Instead, it aimed to address the funding gap through location-specific and negotiated ad-hoc arrangements, which were not integrated into the broader health system.”
Nous provided three potential reform avenues: improving the initiative based on its current weaknesses, expanding the role of the initiative or replacing the initiative entirely.
The first consisted of short-term actions like streamlining billing rules to bring down the administrative burden and complementing the exemptions program with a regional investment plan.
Under the second option there were bolder actions, such as doing yearly costing studies to ensure that Medicare loading fees were accurate and developing a broader MBS for eligible regions.
“In thin markets and rural and remote areas that are facing workforce shortages, allowances to utilise a range of health professionals in diverse settings is crucial,” the report said.
“As the current MBS billing items under the Initiative are largely geared towards GP services, a broader review of MBS billing items for nurses, nurse practitioners, allied health practitioners, Aboriginal health workers and paramedics could support greater provision of care.”
The third reform pathway involved medium to long-term recommendations, acknowledging that exemptions were inherently reactive and based on the fee-for-service model.
Potential actions included expanding the role of the PHN and making funding conditional on investment in training and supervision pathways.
While the report did not explicitly back one reform pathway over the other, it appeared to lean toward the final one.
“The findings of the evaluation, feedback from stakeholders and broader evidence indicates that without broader reforms, current shortfalls in access to primary care in rural and remote areas are likely to continue or worsen,” the report read.
“Evidence indicates that reforms that are tailored to local contexts, support multidisciplinary care, and enable flexible funding arrangements that reflect the true cost of service delivery, have the greatest potential to address these shortfalls.”
