The history of Medicare

Forty years ago, the Australian Government established Medicare, a universal health insurance scheme that continues to serve millions of Australians in need of care.

How Medicare began – as Medibank

The first version of Medicare was Medibank. The Australian Government, under Prime Minister Gough Whitlam, introduced Medibank in 1975. 

Public debate on the idea of a health insurance scheme increased from 1967 after Whitlam became opposition leader. He committed to transform health cover if the Australian Labor Party formed government. 

Whitlam became prime minister in 1972 and embraced a model of universal health insurance developed by health policy experts John Deeble and Dick Scotton. It was similar to the Canadian model. 

The Senate repeatedly blocked the legislation to create Medibank, providing a trigger for the 1974 double dissolution election. Whitlam and the Australian Labor Party won the election but not a Senate majority. 

A further rejection of the legislation led to a joint sitting of the two houses of Parliament. The bills were finally passed on 7 August 1974. Parts of the legislation were also subject to a High Court challenge. 

Medibank came into effect in July 1975 but continued to face opposition from peak medical bodies. Following the election of Prime Minister Malcolm Fraser in November 1975, the government made changes to Medicare. A 2.5% income levy was imposed to fund Medibank and there were changes to hospital funding, benefits and bulk billing, and private insurance rebates.  

A 2.5% income levy was put in place to fund Medibank and changes were made to hospital funding, benefits and bulk billing, and private insurance rebates. 

Why we needed Medicare

By the early 1980s, instead of covering all Australians, the Australian Government provided health cover only to pensioners and low-income households.

Before Medicare we had a very ramshackle system. There was private insurance, but it was very inefficient …

– Bill Bowtell, chief of staff for health minister Neal Blewett, 1984. 

Forty years ago, it was hard to get affordable health care in Australia. Many Australians were left without healthcare cover after Medibank was abolished. Three out of 5 families didn’t have private health insurance because they couldn’t afford it. There was no bulk billing, and people had to pay for a visit to the doctor in full at the time. 

Hundreds of thousands of Australians were not covered for medical treatment or hospital care. Hundreds of thousands of others could ill afford the rising cost of private health insurance.

– The Age, 1 February 1984.

… [The] new Medicare program … will mean that nine out of ten Australians will pay less for the health needs of themselves and their families …

– Opposition leader Bob Hawke, February 1983. 

A new plan for universal health care

In 1983, the Australian Government moved quickly to re-establish a universal health insurance scheme. Medicare began on 1 February 1984, and Treasurer Paul Keating opened Australia’s first Medicare office in Bankstown, Sydney.

Medicare is not only a cheaper and simpler system, it's also a fairer system. It's cheaper for Australians and it's cheaper for Australia.

– Excerpt from the government information pack sent to Australians to mark Medicare’s creation. 

By the time Medicare began, more than 14 million Australians – 92% of the population – had signed up for Medicare, and the Australian Government had issued 6.5 million Medicare cards. Medicare restored bulk billing. People could see a doctor free of charge. Public hospital treatment was free. People no longer had to miss out on health care because they couldn’t afford it.

How Medicare was funded

Medicare was funded by a 1% levy on taxable income. It was fair, inclusive, efficient and universal. It was also simple compared with the complex private insurance arrangements that existed before. 

Everyone with a Medicare card could get basic hospital and medical services. Medicare also covered part or all of the cost of treatment by GPs, medical specialists and surgeons. This included tests, scans and screening. 

Medicare has paid over $488 billion in benefits since its introduction in 1984. In its first financial year, Medicare cut the cost of health care so much that inflation fell from 6.5% to 3.9%. The threat of huge medical bills virtually disappeared. 

Hospital and medical expenses were one of the largest reasons for personal and non-business-related bankruptcy before Medicare. After Medicare they actually removed it from the published list of reasons because it fell so low.

– Associate professor Jim Gillespie, University of Sydney.

Not everyone wanted Medicare

Medicare’s introduction wasn’t completely smooth sailing, and some major players had conflicting views.

… [T]he Government should have taken a knife to the expensive, failed Medicare system.  Medicare has added between $3 billion and $4 billion to the Federal Budget. Medicare is one of the great failures of the Hawke Government.

– Opposition leader John Howard, House of Representatives, 14 May 1987.

Public debate about the scheme continued. The Australian Medical Association encouraged doctors not to bulk bill patients, and there were calls for a national strike in public hospitals. 

Despite this, 45% of Medicare services were bulk billed during the first full financial year that Medicare operated. Four years later, the bulk billing rate had increased to 55%. 

Support for Medicare grew over time. In May 1989, 71% of the community supported Medicare and just 12% wanted it abolished. By this time, 65% of Australians had already claimed on Medicare and 92% of those were satisfied with the service.  

Strengthening Medicare

Medicare is now widely considered to be one of Australia’s greatest social achievements. It continues to guarantee everyone with a Medicare card access to health and hospital care. 

Today, the scheme is under great pressure to support changes in health care as chronic and complex health conditions increase. 

The Australian Government is strengthening Medicare to meet these challenges by:

  • increasing bulk billing incentives
  • providing a more connected health and care experience enabled by digital technologies
  • supporting a more team-based, multidisciplinary primary care approach
  • providing more flexible funding models beyond traditional fee-for-service
  • untapping the full potential of the wider health workforce. 

The number of medical services subsidised by the Australian Government through Medicare has grown significantly over the years. When Medicare launched in 1984, there were around 2,300 items on the Medicare Benefits Schedule (MBS).  Today, there are around 6,000. 

… every aspect of Medicare that is delivered by government today will continue to be delivered by government in the future, full stop.

– Prime Minister Malcolm Turnbull, June 2016.

The Australian Government is building a stronger, more sustainable Medicare for a modern Australia. 

We need a Medicare that works for both patients and providers, now and for generations to come.

Find out more about Medicare milestones over last 40 years

Date last updated: