Specialist fees are rising far faster than inflation, a Grattan Institute report reveals. These runaway costs and years-long public waiting lists demand immediate action.

Government has the power, it just needs to deploy it.

Medical specialist fees have been out of control for years. Those who cannot pay them join public hospital queues that can run to years.

The bulk-billing rate for GPs is about 84 per cent. For specialists it is about 28 per cent.

Specialists earn about twice as much as GPs. Taxation statistics for 2022/23 show that four of the top five occupations by taxable income in Australia were medical specialists – surgeons, anaesthetists, internal medicine specialists and psychiatrists.

It is a system without guard rails. The average out-of-pocket cost of a non-bulk-billed specialist consultation rose from $46 in 2009/10 to $126 in 2024/25.

Some psychiatrists and surgeons charge up to $1000 upfront, and one in two patients do not know the fee before their first appointment. Knee replacement fees doubled in six years, from $560 to $1080.

The median out-of-pocket cost of a hip replacement was $1240, with one patient in 10 paying more than $5500. I have seen quotes of $2000 and $2500 per eye for cataract surgery.

Private health insurance has made it worse. When insurers introduced gap cover, many specialists dramatically increased their fees. The $13 billion taxpayer subsidy to private health insurance is directly responsible for some of that fee gouging.

A newly published Grattan Institute report of 2025 data found that about 1.9 million Australians delay or skip getting the care they need because of waiting lists.

People living in the poorest parts of Australia receive about one-third fewer specialist services than people in the wealthiest areas.

The specialist system isn’t working particularly for poor and rural Australians. Independent MP Helen Haines has drawn attention to this serious inequality.

What should be done

First, make Medicare eligibility conditional on not exceeding a maximum fee negotiated between government and the profession.

There is precedent in Canada. I understand doctors who do not adhere to the negotiated fee lose access to Medicare reimbursement.

The same logic could apply to private health insurers refusing to pay benefits above the recommended fee. At present the taxpayer, through Medicare, is underwriting fee gouging. This would help patients force lower fees.

Second, governments should set fees. Historically, governments have hesitated to do so because of the Constitution’s prohibition on “civil conscription”. Some suggest, however, that fee-setting is not civil conscription. See High Court decision of 2009

Health Minister Mark Butler has said he is willing to test the Constitution boundaries. He should act promptly.

If specialists took the matter to court, they would have little public support, because most people know about fee gouging. The Commonwealth could also seek state government cooperation to legislate caps, avoiding a constitutional issue.

It may also be able to impose an income tax surcharge on specialists who refuse to comply.

Third, increased government funding of specialist services in public hospitals. Timely access to gap-free consultation would put strong downward pressure on excessive fees as referrals from GPs diminish.

Fixing or capping private fees may encourage more specialists to return to public work.

Where money is needed, it should go first to high-demand areas such as cardiology, dermatology and psychiatry and in geographical areas of highest need.

Professor Graeme Stewart has suggested that the Commonwealth take over full funding of public hospital outpatient services, as the 2009 National Health and Hospital Reform Commission recommended.

He suggests a new authority shared between state and Commonwealth managers and specialists. He warns that simply giving extra funds to state bureaucracies would be a recipe for failure.

Stewart notes that many young specialists would gladly give back to the institutions that trained them. He believes that the culture of commitment to care, research, teaching and training in the teaching hospitals helps to maintain a moral compass apparently lost by many colleagues working full time in the private sector.

A meaningful and sustained increase in public specialist services, enough to genuinely reduce waiting times and provide equitable access, would cost in the range of $1 to $2 billion a year on a recurrent basis, plus a one-off investment of around $3 to $5 billion to clear the existing backlog.

There are other ways in which waiting times could be reduced.

• Approximately 30 per cent of referrals in some specialty areas are assessed as not requiring specialist input. Better GP gatekeeping would reduce inappropriate referrals.
• Increased use, in hospital settings, of nurse practitioners and other advanced practice clinicians could help to triage, manage and discharge patients who do not need specialist attention. Extending the scope of practice for nurses and allied health would also help relieve the specialist outpatient workload.
• In the longer term, it would be necessary to expand the specialist workforce through increased training positions, better conditions and incentives for specialists to work in public hospitals and in rural areas. Infrastructure investment in additional clinic space and operating theatres would be necessary. This would cost money.

We should raise taxation to pay for the above and other reforms that I will later examine.

The government’s recent reforms on negative gearing and capital gains were a good start. The fall in housing prices is good news particularly for young people who have been priced out of the market.

In two recent articles Michael Keating estimated that it would require $115 billion to $120 billion to ensure adequate government services and restore the budget balance to relieve pressure on interest rates.

He suggested that $80 billion to $85 billion could be raised by a Polluter Pays Levy, the Fair Share Levy and tax on wealth, and pointed out that: “According to OECD data, Australia’s net average tax rate in 2025 was 23.5 per cent, the 14th lowest in the OECD, against an OECD average of 25.1 per cent.”

An early decision by the government to cap or fix private specialist fees would be a very useful first step. It would be necessary to follow that with increased funding of specialist services in public hospitals.

The government is allowing vested interests to set the agenda of its reduced spending. Some spending could be substantially reduced, like AUKUS and defence, which is largely about obliging Donald Trump rather than spending in Australia’s interest, where many Australians on low incomes face declining living standards.

To provide improved public services, a significant increase in taxation is necessary, as Keating has suggested.

The Australia Institute also proposed, in August 2025, a 2 per cent annual wealth tax on net assets over $5 million (excluding the family home), and a range of other tax changes.

These would raise $70 billion a year without hurting low or middle-income Australians. Most Australians would support such a tax.

Paul Keating said that “Gough [Whitlam] understood that the ALP was like a bicycle. It only stands up when you pedal. If you stop pedalling, if you run out of ideas, if you run out of push and you run out of drive, it falls over”.

With boldness the government could win back public trust and support. Only the ALP can do it.

John Menadue was secretary of the Department of Prime Minister and Cabinet under Gough Whitlam and Malcolm Fraser, ambassador to Japan, secretary of the Department of Immigration and CEO of Qantas

This article first appeared in Pearls and Irritations. Read the original here