Closing the Enforcement Gap: Constitutional Preconditions for Effective Medicare Law

Margaret Faux

Bruce Topperwien

This post is the third in a three-part series of commentaries on out-of-pocket medical costs and the constitutional foundations of Medicare. To view the whole series, click here.

Margaret Faux and Bruce Topperwien

28.5.2026

Introduction

The preceding posts in this series establish two propositions. First, that the Australian Constitution, and in particular s 51(xxiiiA), constrains the Commonwealth’s capacity to impose blunt price controls on medical practitioners by prohibiting ‘civil conscription’. Secondly, that the existing statutory framework governing Medicare already contains the legal architecture necessary to regulate billing conduct, control excessive charging and prevent fraudulent claims.

This third post addresses the question that necessarily follows: if the legal framework already exists, why has unlawful billing conduct, particularly hidden fees and other forms of fraud, persisted?

The answer is not doctrinal but institutional. It lies in a structural enforcement vacuum which, unless addressed, renders both existing law and any proposed reform ineffective.

This institutional deficiency is not merely a policy failure; it is constitutionally significant. Where the Commonwealth is constrained in the direct regulation of prices, the integrity of the system depends on the effective enforcement of the legal conditions upon which public funding is provided. Absent such enforcement, attempts to achieve policy objectives through blunt regulatory intervention risk both constitutional invalidity and perverse market consequences, including the escalation rather than reduction of out-of-pocket costs.

This post argues that Australia now requires a dedicated national enforcement body to address that structural gap; one capable of providing authoritative legal interpretation, coordinated oversight and proportionate enforcement grounded in Medicare’s statutory framework. We propose a hybrid model incorporating operational aspects of the Australian Taxation Office (ATO) and the Office of the Australian Information Commissioner (OAIC).

The enforcement gap

The current enforcement landscape is fragmented across multiple bodies, none of which are structurally equipped to address the full spectrum of unlawful -billing behaviour.

For example, if a patient were to submit a tip-off through the Department of Health, Disability and Ageing’s (Department’s) Medicare fraud portal reporting that they had been required to pay a fee described as an ‘administration fee’ (which is fraudulent), the most likely outcome is that no government action would follow. If the same patient reported the same unlawful fee to another agency, that agency would likely respond that it lacks jurisdiction and refer the patient back to Medicare. This cycle of inter-agency referral is precisely how hidden fees have flourished. They fall through an enforcement gap.

Criminal prosecution remains theoretically available under provisions such as the offence of obtaining a financial advantage by deception under section 134.2 of the Criminal Code Act 1995 (Cth), yet in practice it is rarely invoked against doctors. The evidentiary burden is high, the matters are complex and enforcement agencies must necessarily prioritise only the most serious cases. This creates a threshold effect whereby widespread but individually lower-value conduct, including the systematic imposition of illegal ‘administration’, ‘facility’ or ‘booking’ fees, falls outside practical prosecutorial focus. Put simply, criminal prosecution is poorly suited to high-volume, low-value fraud. It is neither practical nor proportionate to expend significant public resources prosecuting fraudulent $1,000 ‘administration fee’ schemes, yet there can be no serious doubt that consumers require protection from precisely this type of conduct.

The Professional Services Review (PSR) (the Medicare Regulator), while central to Medicare compliance, is similarly constrained. Its jurisdiction is confined to findings of inappropriate practice in connection with Medicare claims and it operates as a peer-review mechanism grounded in the medical profession. It is neither designed nor constitutionally suited to adjudicate fraud, nor should it be. Fraud sits properly within the criminal justice system. Further, in a system where approximately 160,000 health professionals bill Medicare each day - including around 100,000 doctors - the roughly one hundred investigations conducted annually by the PSR barely scratch the surface of the compliance challenge. Indeed, the former Director of the PSR publicly described some of the conduct encountered by the agency as fraudulent and expressed frustration that referrals to the Australian Federal Police and Commonwealth Director of Public Prosecutions frequently generated little appetite for criminal prosecution.

The Australian Health Practitioner Regulation Agency (AHPRA) also does not fill the enforcement gap. AHPRA administers the Health Practitioner Regulation National Law, adopted across each State and Territory, and its statutory mandate is principally directed toward protecting the public from clinical risk. While financial misconduct may, in some circumstances, be addressed through its professional standards regime, and on rare occasions has been, AHPRA is not institutionally configured to investigate or deter complex systemic financial misconduct. Notably, PSR monthly case reports indicate that cross-agency referrals from the PSR to AHPRA occur with some frequency. While it is unknown how many relate specifically to financial misconduct, the relative absence of financial misconduct prosecutions by AHPRA is itself instructive.

The predictable result is that most unlawful conduct falls through the gap between institutional boundaries. Legal prohibitions exist, but enforcement is sporadic, indirect or absent. In such a system, non-compliance becomes normalised.

This enforcement vacuum has particular significance in the context of hidden fees. These practices frequently involve the deliberate characterisation of part of a clinical fee as a separate ‘administration’ or ‘facility’ charge, thereby misrepresenting the true amount charged for a Medicare service. Such conduct breaches section 49 of the Health Insurance Regulations, which expressly requires that the full amount charged and paid for each clinical service is recorded on the invoice or receipt submitted to Medicare. By hiding the true amount charged and paid, the conduct is fraudulent.

However, because these practices are diffuse, normalised and often embedded within private billing arrangements, they have historically escaped meaningful scrutiny. They are too complex for routine detection, too low-value individually to attract criminal prosecution and insufficiently connected to clinical competence to engage professional discipline. The result is a form of systemic illegality which persists not because the law is unclear, but because it is not enforced.

In this context, proposals for constitutional or quasi-constitutional intervention, including the imposition of fee caps or bulk-billing mandates, must be approached with caution. Not only do such measures engage the constitutional prohibition on civil conscription, but they also risk exacerbating the underlying problem. Where enforcement of existing legal obligations is absent, constraining provider pricing behaviour may produce market withdrawal, increased private charging outside the Medicare system and the expansion of a rebate-free sector. The constitutional constraint is therefore not merely a limit on legislative power; it is a signal that the solution must lie elsewhere. Specifically, it must lie in the effective enforcement of the legal conditions attaching to the receipt of public funds.

A new approach

What is required is not additional substantive law, but an institutional mechanism capable of rendering existing law both clinically and legally operational. Such a mechanism must satisfy four criteria:

1.        It must assume responsibility for the drafting of all Medicare laws, including new services approved through the existing Medicare Services Advisory Committee, and provide authoritative legal interpretation, so that the content of Medicare law is clear and consistently applied, with the Office of Parliamentary Counsel retaining formal responsibility for settling and signing off on the final legislative instruments.

2.        It must enable proportionate enforcement, so that conduct can be addressed at the appropriate level without defaulting to serious criminal prosecution.

3.        It must operate at scale, recognising that the relevant conduct is systemic rather than exceptional.

4.        And it must do so within constitutional limits, avoiding any form of compulsion that would amount to civil conscription.

To this end, we propose the establishment of an Attorney-General–led body, the Office of the Medicare Counsel (OMC), designed to meet these requirements and act as the ultimate custodian of Medicare law system-wide.

The core function of the OMC would be the provision of authoritative legal interpretations concerning Medicare law, similar to the written rulings issued by the ATO. This includes the construction of the Health Insurance Act 1973 (Cth) and associated regulations, the interpretation and interaction of Medicare Benefits Schedule (MBS) items, questions of provider eligibility and capacity, documentation requirements, and the delineation of prohibited conduct, including the interaction between Medicare and private health insurance. These interpretations would be binding on the Commonwealth and on private health insurers where Medicare law is engaged, while remaining persuasive but not binding on courts. A public register of authoritative interpretations would promote transparency, consistency and accessibility, replacing the current reliance on informal, inconsistent and often inaccurate sources of guidance that have emerged to fill another systemic failure: the Medicare education gap. That gap has been the subject of targeted academic attention, with research confirming that doctors want clearer education and reliable advice on Medicare billing. Notably, the Department’s current guidance service, AskMBS, has been found by the Federal Court to be incorrect and, in any event, expressly does not constitute legal advice. There is a strong argument that the continued expenditure of public funds on a service that cannot be relied upon, provides no legal protection and has been judicially found to be wrong represents poor use of taxpayer money.

In addition to interpretive authority, the OMC would introduce a model of proportionate criminal enforcement. This would include the power to issue infringement notices for minor, clearly defined statutory breaches and to escalate serious, wilful or systemic conduct to existing bodies such as the PSR or, where appropriate, to criminal prosecution authorities. The procedural model would operate analogously to traffic offences, allowing recipients to either discharge the matter through payment or contest it in a court of competent jurisdiction, with payment not constituting an admission of fraud. This approach fills the current enforcement gap between inaction and prosecution, aligning consequences with conduct.

A further function of the OMC would be the governance of mandatory Medicare law education as a condition of entitlement to claim benefits. This reflects the legal reality that participation in Medicare is voluntary but conditional. Annual certification would be required for all practitioners who bill Medicare, with the absence of certification resulting in the absence of entitlement to payment. To ensure integrity, education would be restricted to approved legal providers, with the offering of unapproved Medicare law education constituting an offence subject to infringement-based enforcement. The OMC would accredit providers, approve curricula, audit assessments and maintain public registers, thereby establishing a coherent and legally grounded educational framework.

To address the evidentiary limitations that currently impede enforcement, the OMC would also operate a Medicare Secret Shopper Program using covert patients to observe real-world billing practices. This program would align with evidence-based methodologies and be loosely modelled on comparable programs operating in other countries, such as the United States, where secret shoppers are embedded in government funded healthcare programs.  

This program would be strictly limited to the passive observation of ordinary billing interactions, without inducement or artificial scenario creation, and would focus on the bills, invoices and receipts generated in the course of care. Information obtained could be used to support infringement notices, inform interpretive guidance or, in serious cases, support referral to existing enforcement bodies. A published protocol would govern the operation of the program and ensure appropriate safeguards.

Finally, the OMC would be empowered to seek declaratory relief from courts in relation to the proper construction of Medicare legislation, MBS items, provider eligibility rules and the interaction between Medicare and private insurance. This function is critical to resolving widespread uncertainty, preventing the continued reliance on incorrect interpretations and displacing informal claims of authority by self-described experts. Court declarations would be published on the OMC’s register, further reinforcing the role of the OMC as a central, authoritative source of legal interpretation.

The proposed OMC would not displace existing institutions but integrate with them. Services Australia would apply the OMC’s interpretations at the point of payment. Policy development within the Department would be informed by settled legal construction. Private health insurers would be bound where Medicare law is engaged. The PSR would retain its role in addressing inappropriate practice, and AHPRA would continue to regulate professional conduct and clinical standards. Courts would retain ultimate authority. The OMC’s role is to fill the gap that currently exists between these bodies, not to replace them.

Implications for consumers

The significance of this institutional reform is not confined to administrative efficiency or legal coherence. It is directly relevant to the position of patients within the Medicare system.

At present, consumers are expected to navigate a complex billing environment in which the legality of charges is often opaque, inconsistently applied and rarely enforced.

Where unlawful fees are imposed, particularly in the form of so-called ‘administration’, ‘facility’ or ‘booking’ charges, the practical burden falls on the patient. They are required to question, challenge or absorb costs in circumstances where the underlying legal position is neither visible nor reliably applied.

The absence of effective enforcement has therefore produced a form of information asymmetry, in which providers possess both the technical knowledge and the practical advantage, while consumers bear the financial risk.

The establishment of the OMC would materially alter this position.

First, authoritative legal interpretations would provide clarity at the point of care, enabling patients, providers and insurers to operate against a shared and publicly accessible understanding of what may and may not be charged.

Secondly, proportionate enforcement mechanisms, including infringement notices, would create real-time consequences for unlawful billing, reducing the prevalence of non-compliant practices that currently go unchallenged.

Thirdly, mandatory education requirements, aligned with these authoritative interpretations, would ensure that all participants in the system possess the legal knowledge necessary to comply, thereby removing the pseudo-defence of ignorance.

Fourthly, the Secret Shopper Program would ensure that enforcement is grounded in actual patient experience, capturing the lived reality of billing practices rather than relying solely on retrospective audit or complaint-driven processes.

Finally, the integration of these functions would reduce the need for consumers to act as de facto regulators of the system. The burden of identifying and contesting unlawful charges would shift back to the institutions responsible for enforcing the law.

In this way, the proposed model does not expand consumer rights in a formal sense. Rather, it gives practical effect to rights that already exist, but which have been undermined by the absence of enforcement.

Conclusion

The persistence of unlawful billing practices within Medicare is not the product of legislative deficiency. It is the product of institutional absence. Where the law is not applied, compliance cannot be expected. Where enforcement is fragmented, inconsistent or effectively unavailable, unlawful conduct becomes normalised.

In this context, constitutional constraint is not the problem to be solved. It is the boundary within which a solution must be designed.

The proposed OMC provides such a solution. It does not expand Commonwealth power beyond constitutional limits, nor does it seek to regulate clinical practice or impose coercive price controls. Instead, it gives operational effect to the legal conditions already attached to the expenditure of public funds. In doing so, it aligns enforcement with constitutional principle.

The model is neither novel nor administratively complex. It may be readily established within the Attorney-General’s portfolio, drawing on existing institutional design. In particular, it could be structured analogously to the OAIC- independent in function, legally authoritative in role and supported through shared corporate services. Such a model would ensure both institutional integrity and administrative efficiency.

Nor is the proposal financially prohibitive. On the contrary, the introduction of proportionate enforcement, including infringement-based penalties, would be expected to offset, and ultimately exceed, the operational costs of the OMC. More importantly, by addressing systemic non-compliance, it would protect the integrity of Commonwealth expenditure at scale.

The question is therefore not whether the Commonwealth has the power to act.

It is whether it will act within the limits of that power.

Without enforcement, the legal framework governing Medicare will continue to operate in form but not in substance. Unlawful billing practices will persist, consumer harm will continue and policy responses will remain misdirected.

Reform debates will continue. But without enforcement, nothing will change.

The establishment of a legally authoritative, proportionate and operationally effective enforcement body is not simply desirable.

It is necessary.

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, ‘Closing the Enforcement Gap: Constitutional Preconditions for Effective Medicare Law’ (28 May 2026) <https://www.auspublaw.org/blog/2026/5/closing-the-enforcement-gap-constitutional-preconditions-for-effective-medicare-law>