The Commonwealth’s Power to Regulate Medical Fees: Constitutional Limits and Contemporary Pressures

Margaret Faux

Bruce Topperwien

This post is part of an upcoming series of commentaries on out-of-pocket medical costs and the constitutional foundations of Medicare

Margaret Faux and Bruce Topperwien

11.3.2026

Introduction

As Australians grapple with escalating out-of-pocket medical expenses, constitutional law has re-entered the policy conversation. The Federal Health Minister has publicly signalled an intention to address egregious specialist charging practices, including foreshadowing potential constitutional reform if necessary.

The political instinct is understandable. But before constitutional levers are pulled, we suggest it is necessary to consider what the Constitution provides, the limits it imposes and the structural consequences of pressing against them.

This post examines the scope and limits of the Commonwealth’s power under s 51(xxiiiA) of the Constitution to regulate medical fees and participation in publicly funded schemes. It does not dispute that regulation is permissible – plainly, it is. Rather, it asks when measures structuring public expenditure cross into unconstitutionality and become compulsion of private professional conduct.

Properly understood, s 51(xxiiiA) entrenches the private and independent character of medical practice in Australia. Attempts to mandate pricing outcomes risk not only unconstitutionality but practical consequences that may intensify, rather than alleviate, out-of-pocket pressures.

The text and purpose of section 51(xxiiiA)

Section 51(xxiiiA) of the Constitution grants the Commonwealth power to make laws with respect to:

the provision of … medical and dental services (but not so as to authorize any form of civil conscription).

Section 51(xxiiiA) is a central constitutional pillar of Medicare. While it authorises federal involvement in funding and regulating medical services, it does so subject to an express limitation: laws must not authorise civil conscription.

Inserted by referendum in 1946 following earlier decisions constraining the federal social services power, the provision has since been considered in numerous High Court cases. Those authorities make clear that ‘civil conscription’ carries substantive constitutional weight. It does not merely prohibit forced labour in a narrow sense. It entrenches medical practice as a private profession operating at arm’s length from the state.

The High Court and the meaning of ‘civil conscription’

The High Court has consistently interpreted the phrase ‘civil conscription’ in s 51(xxiiiA) as being directed at compulsion.

In British Medical Association v Commonwealth [1949] HCA 44, aspects of a pharmaceutical scheme were invalidated because they compelled doctors to perform services in a prescribed manner. In General Practitioners Society v Commonwealth [1980] HCA 30, Medicare survived challenge because practitioners remained free to decline participation and charge privately. In the most recent test of this provision, Wong v Commonwealth [2009] HCA 3, Kirby J articulated the test as whether legislation ‘intrudes impermissibly into the private consensual arrangements between provider and patient.’

Compulsion need not be express. A scheme leaving no realistic alternative may amount to civil conscription. The constitutional line therefore turns on the preservation of meaningful professional autonomy.

These cases are not exhaustive of the High Court’s treatment of s 51(xxiiiA); however, considered in their totality with the broader jurisprudence, they yield three governing principles:

1. Legislation must concern the provision of services, not merely relate to the medical or dental professions.

2. Legislation may regulate the expenditure of Commonwealth funds in respect of medical and dental services by whatever mechanisms the Parliament may design so long as they are reasonably connected to the effective provision of services.

3. Practitioners cannot be compelled, either legally or practically, to provide particular services to particular patients.

Voluntary participation is foundational. Pricing and contractual arrangements remain matters of private dealing unless a practitioner elects to enter the public funding scheme, upon which decision the practitioner must comply with the relevant statutory scheme.

Medicare’s legal architecture: benefits belong to patients

Under Medicare’s enabling legislation, the Health Insurance Act 1973 (Cth) (HI Act), a Medicare benefit is a statutory entitlement conferred upon an eligible person for a professional service. It is payable to the patient. A practitioner may receive that benefit only by assignment, known as bulk billing, which requires the patient’s consent in respect of a particular service.

This patient-centred architecture matters. The Commonwealth does not employ doctors. It subsidises eligible Australians. Doctors engage with Medicare not as state employees, but as private practitioners, and two structural consequences follow.

First, price setting remains a matter of private contract. The rebate influences behaviour but does not determine fees. There is no universal tariff imposed by law.

Secondly, participation is voluntary. Practitioners may bulk bill, charge above the rebate or withdraw from Medicare entirely. That capacity to practise outside the scheme has insulated Medicare from constitutional challenge for decades.

Medicare’s durability rests on incentive alignment within a voluntary framework, not compulsion.

Hidden charging practices and the enforcement gap

Two unlawful billing practices are central to the present debate and demonstrate that a lack of enforcement of the existing statutory scheme – not constitutional incapacity – is the immediate problem.

Bulk billing and the prohibition on gaps

Where a practitioner bulk bills a service under s 20A of the HI Act, they must accept the Medicare rebate ‘in full payment’ for that service. No additional amount may be charged in respect of that Medicare item.

The courts have confirmed that it makes no difference what an additional fee is called or which entity charges it. In criminal prosecutions involving general practitioners, charges described as ‘facility fees’ (Dalima Pty Ltd v Commonwealth of Australia, NSW Supreme Court, unreported, 22 October 1987)  and ‘counselling and theatre fees’ were held to constitute fraud where, in substance, they related to the bulk-billed service.

The offence arises because public money is claimed on the basis that no further charge has been made for the bulk-billed service. If a practitioner bulk bills and charges ‘just the gap’ in respect of that same service, the representation to the Commonwealth is false and the conduct constitutes fraud.

Hospital billing and false statements

The second category concerns materially false statements in connection with Medicare claims, most commonly occurring in hospital settings where patients are privately insured. The involvement of private health insurance does not displace Medicare. A Medicare benefit remains payable and the statutory requirements governing accurate disclosure apply.

Sections 128A, 128B and 129 of the HI Act concern materially false or misleading statements made in relation to Medicare claims, creating criminal offences, whether such statements are made ‘knowingly’ or otherwise. Section 19(6) of the HI Act requires that accounts must record prescribed particulars and s 49 of the Health Insurance Regulations sets out those particulars, which include the amount charged and the amount paid in respect of the clinical service for which a Medicare item number is claimed. Those particulars are material because they are expressly prescribed by regulation.

Therefore, a practitioner cannot lawfully divide their true fee across multiple documents - recording part of it as the Medicare rebated service and the remainder as an ‘administration’, ‘booking’ or ‘facility’ fee - where, in substance, the entire amount relates to the clinical service for which the Medicare benefit is claimed. An account that does not disclose the full amount charged for the Medicare service conveys a materially false or misleading representation to the Commonwealth, thereby constituting fraud.

These provisions are not novel. They have long existed and, from time to time, practitioners have been prosecuted. Yet opaque and unlawful billing persists.

Crucially, these are the practices most likely to intensify if blunt constitutional levers are pulled. Without systematic enforcement, fee caps or bulk-billing mandates may simply displace revenue through the same opaque mechanisms.

In a system constitutionally grounded in private contract and voluntary participation, integrity depends less on compulsion than on consistent enforcement of the statutory conditions that govern access to public funds. Without that foundation, constitutionally imposed mandatory price controls risk aggravating the hidden fee crisis rather than resolving it.

Contemporary proposals and constitutional risk

Recent commentary has included proposals to impose fee caps or mandate bulk billing, both of which must be analysed against the constitutional framework and current enforcement vacuum.

If Parliament were to regulate fees as a condition of lawful practice, such a measure would likely approach, if not cross, the civil conscription boundary in s 51(xxiiiA). Even where framed as conditions of participation, aggressive controls may be viewed by the courts as practical compulsion if participation becomes economically unavoidable.

More practically, such measures risk market exit.

Practitioners are not obliged to participate in Medicare. If participation becomes unattractive, withdrawal is available. A policy intended to reduce out-of-pocket costs could instead expand a private, rebate-free sector.

Market exit risk is not theoretical. For approximately two decades, the previously described opaque and unlawful charging practices have proliferated with a limited enforcement response. As a result, the regulatory baseline has shifted. High-gap practice has become normalised.

Attempting to correct that structural drift through constitutional compulsion, rather than through systematic enforcement of existing law, may destabilise the system and entrench a two-tier market.

Market exit would also affect privately insured patients. Private health insurers may pay medical benefits only where a Medicare benefit is payable. Widespread withdrawal from Medicare could therefore disrupt private insurance flows. While beyond this post’s scope, the systemic consequences would be significant.

A practical illustration of hospital billing

Consider a surgeon quoting $2,000 for a tonsillectomy where the rebate is $300.

If a fee cap were imposed as a condition of Medicare participation, the surgeon faces a choice: reduce the fee and remain within the scheme, withdraw and charge privately, or formally comply while imposing an illegal hidden fee of the kind already described.

In today’s environment, withdrawal is commercially plausible. Patients are accustomed to substantial gaps and to paying fees well beyond the rebate. If the surgeon exits, the patient loses the rebate but may still proceed. If the surgeon remains but restructures the charge using hidden fees, the effective out-of-pocket cost may change little for the patient while the practitioner’s pricing autonomy remains intact. Section 51(xxiiiA) preserves that autonomy. Where exit or hidden charges are viable options, blunt fee controls may not reduce costs; they may do the opposite and shift care beyond Medicare’s reach.

If significant numbers withdraw, patients may face higher private fees while continuing to contribute through taxation, including the Medicare levy. While the levy is not contingent on individual utilisation, sustained erosion of meaningful participation risks straining the perceived legitimacy of the Medicare settlement itself, converging the constitutional and economic risks.

The behavioural reality of forced bulk billing

Forced bulk billing has been attempted. The most recent example of the Commonwealth testing the limits of s 51(xxiiiA) arose during the COVID-19 pandemic, when general practitioners were required to bulk bill certain Medicare-funded services. The measure was short-lived, inadequately monitored and never judicially tested. Its true level of compliance remains unknown.

That episode is instructive because it demonstrates the limits of compulsion in a system built on voluntary participation.

If the Commonwealth were to mandate bulk billing for particular services, three distinct behavioural responses would predictably emerge, mirroring the hospital billing dynamics just described.

Some practitioners would comply by bulk billing and accepting the rebate as full payment; some would comply in form but offset the impact elsewhere, including through hidden fees; and some would withdraw from Medicare for those services altogether and charge privately, leaving patients without a rebate.

The first outcome aligns with policy intention. The latter two do not.

The second reinforces opacity and reallocates costs through structures that have consistently eluded enforcement. The third removes the patient from the protection of the Medicare subsidy entirely. In both scenarios, the patient is worse off - either through hidden charges layered on top of a nominally bulk-billed service, or through the complete loss of public funding support.

These behavioural pathways are not speculative. They reflect observable responses to past funding constraints and enforcement gaps. A mandate for bulk billing would not operate in isolation; it would engage an established market culture in which pricing autonomy has long been preserved and enforcement of existing billing laws concerning hidden fees has been largely absent.

From a constitutional perspective, this reinforces the central point. Section 51(xxiiiA) preserves professional choice. Where participation in Medicare remains voluntary, compulsion directed at outcomes will inevitably produce adaptation rather than uniform compliance. The question is not whether some will bulk bill. The question is how many will respond in ways that shift cost and risk back onto patients.

Conclusion

At its core, the Australian health financing model rests on a private contractual relationship between doctor and patient. Section 51(xxiiiA) preserves that structure. The Commonwealth may influence behaviour through rebates, incentives and conditions attached to public funding. It may not eliminate the underlying autonomy of practitioners to set their fees or to decline participation in the scheme.

That constitutional reality carries risk for blunt reform. If government attempts to mandate bulk billing or impose fee caps in a manner that effectively compels pricing outcomes, practitioners retain a lawful exit. Where exit occurs, patients lose access to the rebate while practitioner fee-setting autonomy remains untouched. The result may not be a reduction in out-of-pocket costs; it may instead produce their escalation.

Moreover, if significant numbers of services move outside Medicare, or hidden fees proliferate further, Australians may reasonably begin to question the social compact underpinning the system. They continue to pay the compulsory Medicare levy. Yet if access to meaningful subsidy diminishes while private price setting remains unconstrained, pressure on the perceived fairness of that arrangement will intensify.

Importantly, enforcement pressures would likely increase, not diminish, under a fee-cap regime. Where pricing controls are introduced into a system in which enforcement of existing billing rules has historically been weak, incentives to restructure, recharacterise or obscure charges become stronger. A regulatory environment that has struggled for decades to address unlawful gap charging and false statements would face heightened complexity. We suggest it would be prudent to address those enforcement deficits before layering additional compulsion onto the scheme.

The constitutional settlement does not prevent reform. But it does limit the available levers. In a system grounded in private contract and voluntary participation, price control is neither easily sustained nor economically predictable.

The safer and more durable path lies in transparency and enforcement - ensuring the statutory rules already governing Medicare billing are rigorously enforced and that patients can see clearly what they are being charged and why. The tools already exist. The question is whether they will be used.

Dr Margaret Faux is a health system lawyer, nurse, author, senior executive, academic and the founder of Synapse Medical, a software and advisory organisation specialising in payment integrity within Australia’s health system.

Bruce Topperwien is a senior public law practitioner with extensive experience in administrative, veterans’, compensation and health law.

Suggested citation: Margaret Faux and Bruce Topperwien, ‘The Commonwealth’s Power to Regulate Medical Fees: Constitutional Limits and Contemporary Pressures’ (11 March 2026) <https://www.auspublaw.org/blog/2026/3/the-commonwealths-power-to-regulate-medical-fees-constitutional-limits-and-contemporary-pressures>