Medicare gets it own quarantine fund

Billions of taxpayer dollars for Medicare will be quarantined in a new fund while the indexation freeze on rebates for doctors and other health professionals is coming to an end under new Turnbull government measures.

As well an extra $2.4 billion will be poured into Medicare and $2.8 billion into hospitals.

The budget measures are seen as a move by the government to counter Labor's Mediscare campaign that almost cost the coalition the 2016 election.

The freeze on Medicare rebates - a huge sticking point for doctors - will be lifted in stages over the next four years, at a cost of $1 billion to federal coffers.

Bulk-billing incentives for GPs will be indexed again from July 1, as will rebates for doctor appointments and specialist consultations from mid-2018.

Payments for diagnostic imaging services, such as mammograms and CT scans, will be indexed from July 2020 for the first time in 16 years.

Health Minister Greg Hunt sais the end to freezes holds up the government's end of partnerships struck with GPs, specialists, pharmacists and the medicines sector.

The government will legislate a special fund to cover the cost of Medicare services and the taxpayer-subsidised Pharmaceutical Benefits Scheme into the future.

Money collected from the Medicare levy - less the cost of the National Disability Insurance Scheme - plus a portion of income taxes will be put into the guarantee und every year.

It's expected to have $33.8 billion added in 2017/18 and more than $143 billion over the next four years.

"Tonight, we put to rest any doubts about Medicare and the Pharmaceutical Benefits Scheme," Treasurer Scott Morrison told parliament on Tuesday.

"The (fund) will provide transparency about what it really costs to run Medicare and the PBS and a clear guarantee about how we pay for it."

The Medicare levy will be increased by half a point to 2.5 per cent, largely to cover NDIS costs.

The government intends to save $1.8 billion over five years and cut the cost of medicines for Australians through reducing the prices it pays for drugs listed on the PBS.

It will reinvest the bulk of this money - $1.2 billion - in adding new drugs to the scheme starting with treatments for heart failure, schizophrenia and idiopathic pulmonary fibrosis.

There is also money for mental health support, treatment and research; more after-hours services; community pharmacy services including home visits; and cancer research.