What is the MBS and Medicare?

Page last updated: 20 July 2016


Medicare is the Commonwealth-funded health insurance scheme that provides free subsidised health care services to the Australia population. It was established in 1984 under the Health Insurance Act 1973 and is a universal system with the goal of providing Australians with affordable, accessible and high-quality health care. Services under Medicare include:
  • Fully or substantially subsidised out-of-hospital (non-admitted) services provided by private practitioners such as general practitioners, specialists, optometrists and, in specific circumstances, dentists and other allied health practitioners;
  • Subsidised private patient hospital services;
  • Fully subsidised hospital treatment for public patients in public hospitals; and
  • Fully or substantially subsided medicines through the Pharmaceutical benefits Scheme (PBS).
Health care in Australia is delivered by a mix of public and private sector entities, and is funded by all levels of government, private health insurers, and out-of-pocket payments by individuals. The Australian Government is not directly involved in health service provision, but funds Medicare benefits, the Pharmaceutical Benefits Scheme (PBS), and subsidises private health insurance premiums. It also jointly funds public hospitals with the States and Territories and provides financial assistance to residential aged care facilities, and home and community care for the aged.

Currently, Medicare Benefits Schedule (MBS) benefits are payable for:
  • Consultations with doctors, including specialists;
  • Tests and examinations by doctors needing to diagnose and treat illnesses, including various imaging services and pathology tests provided by medical specialists;
  • Eye tests performed by optometrists;
  • Most surgical and other therapeutic procedures performed by doctors;
  • Specified dental items under the Cleft Lip and Palate Scheme;
  • Consultations with psychologists; and
  • Allied health services for patients with a chronic or terminal medical condition and complex care needs.
With the establishment of the Medical Services Advisory Committee (MSAC) in 1998, Australia became one of the first country in the world to adopt a national evidence-based approach to the public funding of health services.

The evidence-based approach is designed to achieve a range of outcomes including optimum value for money in the Government’s subsidisation of medicals services, as well as prioritising the uptake of effective new technologies and procedures. MSAC is independent of the Government and, while it provides advice to Government about the funding of medical services, MSAC itself cannot implement funding decisions.

For further information on Medicare, please refer to http://www.humanservices.gov.au.

Medicare Benefits Schedule

The MBS is a key component of the Medicare system. It lists a range of professional services, and allocates a unique item number to each service, along with a description of the service (the ‘descriptor’). In broad terms, the types of services on the MBS include consultation and procedural/therapeutic (including surgical) services, as well as diagnostic services.

Subsidies for services by eligible health professionals take the form of Medicare benefits paid to the patient. The MBS sets out the ‘Schedule fee’ for each service and the rate/s at which the benefit for that service is to be calculated, as well as providing guidance on the clinical and administrative conditions under which benefits can be claimed. The rates of benefits are:
  • 100 per cent of the Schedule fee for general practitioner services;
  • 85 per cent of the Schedule fee for other out-of-hospital services; and
  • 75 per cent of the Schedule fee for in-hospital services for private patients.
The Schedule fee is a fee-for-service set by the Australian Government, and may differ from the provider’s actual fee. Although Medicare is a public scheme, the health professionals providing the services for which benefits are payable are engaged in private businesses – either self-employed, in partnerships or, increasingly, in corporate entities, small and large. Under the Australian Constitution, the right of medical or dental professionals to set fees at their own discretion is guaranteed. The patient is liable for any difference between the MBS benefit for a service and the actual fee charged by the health professional. This difference is known as an ‘out-of-pocket’ cost.

Where the health professional accepts the patient’s assigned Medicare benefit as full payment for the service, there is no out of pocket cost to the patient.

The MBS is an uncapped, demand-driven programme. In general, once a particular service is included on the MBS, its utilisation is largely a matter for health professionals and their clinical decision making in consultation with their patients. While the MSAC may give advice on MBS fees, it does not set them. The fee for an MBS item is proposed and justified in an application to MSAC, and forms the basis of costs included in both the economic evaluation and the budget analysis. If MSAC advises that it supports a proposed service, the application will proceed to the implementation stage, during which the Department consults with stakeholders to finalise the MBS item fee. If the final fee greatly differs to the proposed fee considered and advised by MSAC; the Department reserves the right to redirect this back to MSAC for further consideration.

The MBS can be accessed through MBS Online that contains the latest MBS information and is updated as changes to the MBS occur. To access MBS Online, please refer to http://www.mbsonline.gov.au.