Where Will the Government Find $8 Billion for Medicare ‘Incentives’?

In May 2023, Health Minister Mark Butler announced a historic $8.5 billion investment into Medicare over four years, promising to “strengthen bulk billing” and “support general practice.” At first glance, the announcement was met with applause. But as the dust settles and the details emerge, a new question arises: where will the money actually come from?

The answer, it seems, is from cutting Medicare itself.

Chronic Disease Management Set for Major Cuts

Starting July 2025, the Government is planning significant cuts to Chronic Disease Management (CDM) items — the very items that support long-term care planning for people with diabetes, heart disease, and other serious illnesses.

These Medicare item numbers (such as 721, 723, and 732) allow GPs to create and review care plans and coordinate care with allied health providers. While the Government has said the system is being “streamlined,” the practical effect will likely be fewer patients qualifying for subsidised allied health services and fewer billing options for GPs.

If these changes go ahead, the estimated savings will run into the billions.

Pathology Rebates Also on the Chopping Block

In addition to CDM, changes are also coming to Medicare rebates for routine pathology services.

From August 2025, tests like vitamin B12 levels and urine microalbumin — commonly used to monitor chronic conditions and diagnose deficiencies — will face reduced rebates or stricter eligibility criteria. The pathology sector has pushed back, calling the cuts a danger to preventive care. Health Minister Butler, however, has dismissed concerns as “dishonest.”

According to the Department of Health’s projections, these changes will save hundreds of millions in just a few months.

A Budget Shuffle: Cuts Now, “Incentives” Later

Here’s the crux of the issue: the Government has timed these Medicare cuts to kick in just before it begins distributing the bulk of its promised Medicare incentives.

By November 2025, four months after the CDM cuts and three months into pathology rebate reductions, Treasury is expected to have saved enough to begin funding the “incentives.” It’s a shell game — cut services under the banner of reform, then repackage the savings as a historic reinvestment.

So, What Are We Actually Funding?

The $8.5 billion will go toward:

A tripled bulk billing incentive (mostly funded by the first wave of cuts).
Digital health and MyMedicare expansion.
Modernising practice incentive payments (PIPs).
Grants for clinic infrastructure upgrades.

But none of this changes the fact that the same system being “strengthened” is also being quietly reduced.

In simple terms: less support for chronic disease care, fewer preventive tests, and more conditions placed on GPs. All in exchange for short-term incentives that may or may not sustain real change in the long run.

Conclusion

The Government’s Medicare strategy looks like a budgetary balancing act. Billions in “investment” are being funded not through new revenue or taxation reform, but through cuts to core services. For GPs and patients alike, the next 12 months will reveal whether this approach strengthens Medicare — or simply reshuffles its weaknesses.