Medical History Important Information.gif - 1587 Bytes
AAMS | Disclaimer

GO TO Publication Status CodesGO TO Review Status Codes

GO TO Parent Article: Health Funding and Medical Professionalism
A short historical survey of the relationship between government and the medical profession in Australia

The Hawke Government, Medicare & The NSW Doctors" Dispute

Labor's shadow Health Minister Neal Blewett outlined the Party's health policy in February in 1983. In March the Hawke Labor government was elected claiming a mandate for a new universal health scheme. It announced Medicare and said it would take effect from February 1984.

Medicare was basically Medibank with the major exception that Medicare was to be the nation's compulsory monopoly insurer. Under Medibank, people could opt out of their Medibank obligation and subscribe to a (registered) private health insurance fund.

Under Medicare, the Commonwealth offered the States untied grants on condition they got doctors to sign contracts that would control costs and private practice in public hospitals.

NSW was to take the lead in implementing Medicare as the Commonwealth lacked the constitutional powers (anti-conscription clause). NSW also had a strong Labor government.

Medicare involved the Commonwealth offering to pay for a wide range of hospital services provided that the patient agreed to receive these services in public hospitals, not private hospitals. This was to have a dramatic effect on the health insurance funds and private hospitals.

Medicare's other features included:

  • Private health insurance was confined to covering hospital treatment as a private patient in either private or public hospitals .
  • Funds were also allowed to cover dental, physiotherapy, chiropractic and other such services.
  • But private health insurers were not allowed to cover the gap.
  • Public hospital accommodation was to be free at the point of service, with a maximum gap payment for medical services of $10 per service or $150 a year.
  • Schedule fees were to be set by a government tripartite tribunal comprising representatives from government, the profession, and the community.
  • The Commonwealth was to meet 85 per cent of schedule fee for doctor's services. Patients were to be reimbursed for payments to GP's.
  • Bulk billing was installed. ie 100 per cent of doctor's charges would by paid by Medicare, if doctors accepted 85 per cent of the schedule fee as total payment.
  • A Medicare levy of one per cent of gross income supplied, except for low income earners (ie those under $120 a week, with further deductions for dependents). This levy did not cover the cost of the scheme but required additional funding from general revenue. Labor later increased the levy to 1.25 per cent. (Fraser had raised the Medibank levy to 2.5 per cent, which was still insufficient to cover the cost of Medibank).
  • Medicare computer monitoring profiles were to be maintained on all doctors to restrain costs and over-servicing.

The majority of doctors agreed to the Schedule of Fees for Medical Services, but the AMA remained opposed in principle to bulk-billing, other than for pensioners and "needy persons".


  • New legislation and Agreements with the States were required to allow Medicare to commence in 1984. The Health Legislation Amendment Act 1983, which comprised amendments to the Health Insurance Act 1973, alarmed the profession. Medicare benefits for medical services were to be paid only if doctors entered into agreements to comply with the Act and all its regulations - but not just existing regulations, but any that might be added in the future unilaterally by the Health Minister. There was to be no appeal open to the medical practitioner and no provision for parliamentary review of these regulations.
  • The anti-conscription clause in the Constitution prevented the federal government from passing legislation conscripting doctors for public service. But this restriction did not apply to States. So the Medicare legislation got around this restriction through its Commonwealth-State Medicare Agreements. The Agreements required States not to confer the right to private practice in public hospitals on any doctor who had not accepted a contract to conform with the Health Legislation Amendment Act.
  • The AMA in September tried to have the new legislation amended. The AMA saw it as an attempt by the Labor government to turn the medical profession into an agency of government. But not all doctors supported the AMA. GP's dominated the AMA at executive and membership levels.


  • January: The Australian College of Radiologists and the Australian College of Orthopaedic Surgeons warned of industrial action if no compromise was reached on the new contracts. Specialists were worried that the AMA was not representing their interests and was not tough enough to negotiate with government politicians.
  • Relations between the federal government and the profession began to deteriorate further when Health Minister Blewett began to make constant public reference to doctor over-servicing. Such references included that "the cancer of medical fraud and over servicing drains the public purse of nearly $10 million a year". His department proved unable to substantiate his claim. The breakdown in doctor-government relations continued.
  • Blewett also resurrected doctors" fears of nationalisation by statements including warnings to ALP meetings of the need to move "gradually and incrementally" in socialising the health system.
  • A NSW inquiry (Richmond Report) into health services for the psychiatrically ill and developmentally disabled was instigated while the paring down of psychiatric hospitals and community care continued.
  • The NSW Minister for Health, Laurie Brereton announced a rapid change from hospital to college-based nurse education. This contributed to a chronic shortage of highly skilled and registered nurses in NSW hospitals. Nurses became more dissatisfied as higher qualifications and responsibility was required but with no improvement in status and conditions. Nurses began voting no strike clauses out of their association's rules, and later went on total strike in NSW to protest hospital closures and changes to their working conditions.
  • The State Labor government secured an amendment to the NSW Public Hospitals Act giving it increasing power over public hospitals and their boards. It also enabled the Health Minister to attach conditions to the payment of hospital subsidies. This was gazetted on 26 March 1983. It included power to:
    • regulate how doctors would work in public hospitals
    • establish regulations determining "the appointment, regulation and government" of doctors performing services in public hospitals
    • make regulations concerning conduct "at work and elsewhere" in regard to excess of the schedule fee for any patient at a public hospital.
  • The Private Health Establishment Act 1982 blocked expansion of private hospitals so that by 1983, 80 per cent of all NSW hospital beds were in public hospitals. This had severe consequences for surgeons wishing to conduct private practice.
  • February: Medicare came into effect on the 1 February. It was embodied in two amendments to the Health Insurance Act (1973) plus agreements with the States and changes to regulations.
  • The relevant law was the Health Legislation Amendment Act No 54, 1983, and the Health insurance Amendment Act No 15, 1984, plus Regulations under s.17 of the Health Insurance Act.
  • The requirement for doctors to sign contracts to work in public hospitals was postponed. The AMA agreed to negotiate further and participate in a Committee of Inquiry into the Rights of Private Practice chaired by Professor Penington Dean of Melbourne University's Faculty of Medicine. The Inquiry's focus was to be on contracts, but also to consider doctors" rights of appeal against the Minister's regulatory decisions.
  • Federal health minister Blewett declared three policies unnegotiable:
    • Specialists in public hospitals were to charge the scheduled fee or below.
    • Fees paid for specialist services were to be paid into a trust fund from which would be deducted charges for doctors' use of hospital facilities.
    • Public hospitals would handle diagnostic specialists accounts to private patients.
  • AMA members met on 22 February and rejected the compromise accepted by their AMA Federal Executive a week earlier.
  • On 24 February, Commonwealth and State Health Ministers decided to introduce legislation to control doctors fees (which only the States had the power to do). Doctors responded with threats of bans on all non-urgent hospital work.
  • On 1 March, the new contracts for diagnostic specialists became mandatory. Threats and counter threats escalated.
  • On 4 March, Prime Minister Hawke held private talks with the medical associations concerned, but without success.
  • On 24 March, the Wran government was elected for a four year term. Regulations regarding VMOs and schedule fees were gazetted.
  • On 31 March, Dr Blewett offered to waive temporarily the requirements for doctors to sign contracts promising to charge no more than the scheduled fee in public hospitals - if the AMA guaranteed doctors" unconditional acceptance of all the Penington Committee's recommendations.
  • On 9 April, doctors attached to NSW public hospitals launched a seven day strike refusing to provide any but emergency services.
  • On 11 April, doctors agreed to halt the strike pending negotiations. Under protest, the AMA agreed to discuss the draft regulations under the NSW Public Hospitals Act with the new Health Minister, Mulock. The AMA said regulations were unacceptable. Mulock said he would not repeal them.
  • Politicians proved to be more adept at negotiation than those representing the doctors. The politicians succeeded in excluding from agenda discussion the key issues alarming the doctors, including that S.42 of the NSW Public Hospitals Act gave the health minister power to regulate the "appointment, regulation, and government" of doctors in public hospitals.
  • Conflict in NSW also continued over workers compensation and third party accident victims being classed as public or "hospital patients" with no fees charged. Specialists wanted them classified as private patients if they were insured.
  • ALL States except NSW agreed to suspend reprisals, awaiting thePenington report. Governments in these states refrained from introducing the relevant Medicare legislation and associated regulation, but not in NSW.
  • On 24 April, the Wran NSW Labor government was re-elected. On 26 April, Wran gazetted regulation 54A under the Public Hospitals Act 1983 Amendments. Section 54A made it a condition of appointment as a VMO that the doctor should not charge more than the scheduled fee for any service.
  • The NSW government was mainly concerned with costs. In NSW, public hospitals provided more than 80 per cent of the State's hospital beds. The expansion of private hospitals in NSW had been blocked by the Private Health Establishment's Act 1982. Specialist medical practice depended on access to public hospitals. The Public Accounts Committee had expressed concern to Parliament and named a number of doctors to Parliament for alleged over-servicing.
  • The NSW Department of Health had replaced the Health Commission and now answered directly to the Minister. Wran had won a solid victory and a four year term of office. Surgeons believed Medicare implementation in NSW was being used to turn VMO's into part-time government employees and to displace private patients from the hospital system. Brereton's amendments of the NSW Public Hospital Act (December 1983) had increased the Minister's power over public hospitals and their boards, and allowed government to attach conditions to the payment of hospital subsidies. The Minister now claimed power to:
    • Regulate how doctors should work in public hospitals.
    • Regulate the "appointment, regulation and government" of doctors performing services in public hospitals.
    • Regulate VMO's conduct at work and "elsewhere".
    • Demand that doctors who wanted to practice in public hospitals agreed not to charge any patient more than the scheduled fee.
    • Transfer any VMO to another hospital.
    • Make it an offence for doctors to "coerce" patients into joining a health fund". (No distinction was made in regard to "advice".)
    • Classify all workers compensation and third party accident victims entering hospital as "public" or "hospital patients". This reduced doctors fees that could be charged to private patients covered by insurance. (This was later changed where the patient was conscious, and could ask to be treated as a private patient. Doctors argued that people who had chosen to insure had already made that choice.).
    • Assign any patient who did not nominate a particular doctor to "hospital patient" status. This further reduced doctors" incomes from private patients. Hospital staff often advised patients not to claim their private insurance status.
    • These regulations, and any future ones the Minister might care to make under the legislation, were not subject to any review by Parliament.
    • The new regulations conferred considerable new powers not only on the Minister, but through him to departmental bureaucrats and public hospital boards.
  • These wide new powers were those desired by the Commonwealth under Medicare but which it was unable to obtain due to the restraint at federal level imposed by the Menzies anti-conscription clause in the Constitution.
  • May: Hospital laundry staff launched industrial action for a 35 hour week and were successful after several weeks. Nurses sought a 38 hour week. It was to take them a further two years to succeed.
  • Nurses continued leaving hospital system in increasing numbers especially as jobs for women with skill were increasing. Government resorted to advertising campaigns, urging them back to nursing.
  • Under its strongly placed Labor government, NSW was being used to test implementation of the Medicare system. NSW surgeons led the counter attack. It was difficult for the doctors to strike, so many resorted to resigning their public hospital service. Orthopaedic surgeons moved first, soon joined by Plastic and Urological surgeons, and then anaesthetists.
  • By 28 May, over 100 orthopaedic surgical posts in public hospitals had been resigned. Dr Bruce Shepherd, Chairman of the Australian Society of Orthopaedic Surgeons (ASOS) called attention to the deteriorating state of public health under the Wran government.
  • Government threatened to import orthopaedic surgeons and have the work of visiting hospital specialists done by general surgeons. Government took out Australia-wide advertisements for surgeons. Not one suitably qualified surgeon broke ranks by responding.
  • Wran next launched a "doctor-bashing" campaign, using such rhetoric as "money hungry doctors". Doctors continued to resign saying they could not strike but they had to leave the system under such conditions.
  • June: The Penington Committee reported that two million Australians had dropped their health insurance cover. Citizens were now paying one per cent of their income to Medicare. Prior to Medicare, 60 per cent of patients in public hospitals had private insurance. Now only 40 per cent did. There was about a 24 per cent drop in private patient bed days in public hospitals since February 1984 when Medicare was launched.
  • This added to the dramatic impact on specialists incomes. Surgeons argued that sessional payments were inadequate, because their practice overheads continued and were not covered by the public work. This was felt most acutely in the inner city and teaching hospitals and also effected traditional professional values and status. Professional resentment against government became increasingly bitter.
  • Small concessions were made to doctors - for example, every patient was required to make a formal written election about their patient status on entering hospital - but such concessions were inadequate.
  • The Sydney Morning Herald backed Wran, even offering him editorial advice on how to subdue the doctors. In April it had editorialised "Now is the time to quit", telling the public that doctors had pushed their luck and were facing defeat and should stop their protest. On 5 June, the SMH editorialised on "How to Knife the Surgeons" . On 12 June, when the doctors had remained undefeated, the SMH advised the Wran government that it might now be time to "use its emergency powers".
  • On 5 June, the Combined Pensioners Association - a pensioner body associated with the Australian Consumers Association - supported Wran using almost identical words used by the Labor Premier. The CPA declared that the dispute was "about a few doctors greedy for power and greedy for money, who want to wreck Medicare".
  • On 8 June, Wran invited ASOS Chairman Dr Bruce Shepherd and Dr Cholm Williams to personal discussion. This was short lived. Within an hour, Wran announced he would recall Parliament and pass legislation banning for seven years all doctors who resigned or could be deemed to have resigned from working in public hospitals. The SMH (12 June) applauded the Premier declaring he had "perceived a fundamental weakness in the surgeon's position". Once again the SMH was proved to be mistaken. The dispute continued. The Hawke Federal Labor government became concerned as there was to be a federal election the following year!
  • On 13 June, the Public Hospitals (Visiting Practitioners) Amendment Bill 1984 was passed by an emergency sitting of the NSW Parliament. It:
    • NuIllfied resignations of VMO's from 26 May 1984.
    • Banned VMO's who had resigned or were deemed to have resigned, from performing as VMO's for up to 7 years.
    • Empowered the publication of the names of doctors so banned.
  • This united the medical profession. An avalanche of new resignations from NSW public hospitals began. Doctors claimed their right to resign from a position without reprisal. Many doctors believed that AMA Federal Executive compromising had allowed their autonomy to be taken away, and for them to be punished for resisting.
  • Public opinion swung to the doctors. Wran's ratings fell. Wran repeated threats to import foreign specialists and stepped up his rhetoric against "the greedy doctors".
  • On 13 June, The Australian Financial Review published assessments of specialists" incomes. It found that specialists who accepted sessional payments for treatment of public patients according to Medicare schedules in NSW would loose 39 per cent of their gross and net income. Those who did not would loose 57 per cent.
  • On 16 June, NSW Health Minister Mulock offered to defer proclamation of the seven year ban if surgeons withdrew resignations. Doctors thought this would leave the ban hanging over their heads. 700 surgeons met in Sydney and decided to resign their public hospital appointments. Anaesthetists met later and decided to follow suit.
  • On 17 June, the AMA recommended that members ban performance of all but emergency services in NSW public hospitals. The Public Medical Officers Association (PMOA) representing staff specialists declared support for the VMOs - even if they took industrial action.
  • On 19 June, Dr Victor Chang, a close friend of Wran resigned "after much soul searching and deepest regret". Chang said he would withdraw only if Wran repealed the new health legislation passed that month and in the previous year. He asked Wran to "act like a statesman". The AMA decided to go ahead with the indefinite strike. The PMOA supported it.
  • On 20 June, surgeons claimed 254 had resigned. The Health Department would acknowledge receipt of only 50. But after four days, the Department had to admit that 854 specialists had resigned. Two days after that, it had to admit that 1029 had resigned.
  • On 21 June, the NSW Labor Council condemned the actions of the AMA and specialist doctors. It supported Wran and threatened "appropriate actions". As a member of the Labor Council, the PMOA dissented, claiming the civil liberty right to resign a job without reprisal. But the Council Chairman refused to accept the PMOA's, motion claiming that the media might misrepresent it. The Council threatened to publish the names of doctors who did not bulk bill and warn union members against those doctors. This never eventuated but bans were imposed on the maintenance of doctors" telephones. In Canberra the Miscellaneous Workers Union banned the cremation and burial of Canberra doctors!
  • The 38,000 strong Health and Research Employees Association won its claims for a 35 hour week after weeks of banning public hospital laundry services.
  • On 25 June, surgeons at Royal Prince Alfred Hospital resigned. Dr Don Sheldon expressed their anger at having to resign from appointments regarded as the finest achievement of a doctor's life's work.
  • Response at all the great teaching hospitals was the same except at the Children's Hospitals where resignations were withheld. Waiting lists for some procedures were now up to 18 months. Hospital surgery was down 50 per cent in most hospitals. The NSW Health Department took out advertisements denying the NSW public hospital system was in trouble, declaring instead that it was 'still in excellent health. (Daily Telegraph, 26.6.84).
  • The NSW Labor Council began a publicity campaign. But one of its members, the PMOA, declared it would strike from 28 July if something was not done about their being called on to perform the duties of the resigned specialists, for which they were not qualified.
  • On 27 June, the NSW government tried further negotiations but the PMOA remained opposed to the legislation. They still threatened industrial action on 28 July, if they were still being asked to replace the specialists and perform their work.
  • On 28 June, the Penington Committee made an interim report. It said:
    • it was finding little evidence of over servicing in public hospitals, *it supported the right of doctors to charge more than the schedule fee for clinical services under certain conditions,
    • it proposed that doctors should have an important say in the administration of public hospitals.
  • The same day Premier Wran said he had advised the Lt Governor of his intention to repeal the seven year ban sections of the legislation, but proclaiming the rest including the declaration that doctors" resignations were null and void. In tune, the SMH began to soften slightly: "Mr Wran admits his mistake", it said. "Its time to start negotiating". It hailed the interim Penington report for making suggestions for "Medicare with fewer tears".
  • Doctors remained distrustful of the NSW government. The AMA rejected as inadequate Wran's promise to repeal the seven year ban legislation when Parliament resumed, and refused further negotiations until its formal repeal.
  • On 30 June, the surgeon's earlier resignations began to take effect. Surgeons continued to abide by these resignations despite Wran's proclamation nuIllfying the resignations. Surgeons set up a "hot line" for VMO's to treat emergency patients in public hospitals. Patient load was increasing as high dependency patients were kept in holding operations or treated by salaried doctors.
  • Federal Health Minister Blewett indicated the federal government's willingness to compromise on changes in hospital administration, and on limitations to doctors' earnings in hospitals. He also offered to upgrade hospital facilities - but only after the final Penington report.
  • On 30 June, the SMH reported that the largest hospital strike in the state's history occurred when 8000 nurses at 44 hospitals walked off the job, and 7000 at 44 more hospitals imposed bans on "non-essential duties" . Nurses wanted a 35 hour week as recently gained by 26,000 members of the HREA.
  • On 3 July, Wran offered to meet a doctors' negotiating committee. By then, hospitals were entering a crisis stage and the medical profession in NSW was fairly firmly united. Their demands were:
    • Repeal of amendments to the Public Hospitals Act which gave the NSW Health Minister sweeping powers to attach conditions to payment of Medicare subsidies to public hospitals.
    • Reduction of Minister's control over hospital boards so that he could not dictate unilaterally the conditions under which doctors practiced in public hospitals.
    • Exclusion of visiting medical practitioners from the controls that were exercised by hospital boards over full-time staff
  • To this ends specifically, they wanted:
    • Repeal of s.42(1)(h) of the Public Hospitals Act which gave the NSW Health Minister power to make regulations on appointment, management and government of visiting practitioners in public hospitals
    • Inclusion in the Act of mutually agreed conditions of appointment, management and government of VMOs
    • Rescission of regulation 54(a) which made appointment of VMOs conditional on their not charging more than the schedule fee for certain items.
    • Inclusion in the Act of an acceptance that doctors could charge above the schedule fee for certain diagnostic services but keeping to a scale of charges set by the AMA and Commonwealth Health Department working party.
    • Deletion of reference to VMOs in sections 28(1) and 29 (ae) of the Public hospitals Act because these would otherwise include VMOs among those employees over whom hospitals boards could exert control.
    • Amendments to section 29(k) so that VMOs could be paid by the session rather than according to hours worked.
    • Empowerment of the industrial arbitrator who could decide conditions of employment to act independently of the Act and therefore free of veto by hospital boards.
    • Repeal of section 13 (4) of the PHA which would empower the Minister to determine the role, function and activities of any hospital without consulting hospital boards.
    • Recision of regulation 54(a)
  • At this stage the NSW public hospital system was generally regarded as deteriorating into a dangerous stage of chaos. Hospital administrators would not cooperate with the crisis service hotline offered by the resigning specialists.
  • In the following months Medicare itself was not made an issue, but its mode of implementation was. Government felt it had to contain the costs of health care which, according to the current wisdom, was growing exponentially. Politicians and bureaucrats did not understand the mindset and modus operandi of the doctors - doctors were frustrated with bureaucracy. Patients were caught in the cross fire.
  • On 21 July, several hundred doctors attended an Australian Association of Surgeons general meeting to hear a progress report. Government had agreed to a Medical Services Committee comprising medical practitioners exclusively. It was to be consulted and provide advice on all changes relevant to medical practice in public hospitals. But the doctors present were dismayed to realise that the changes associated with implementing Medicare had occurred with little or no notice or consultation with any of the medical bodies. Other concession included:
    • increased funds for the 1984-5 health budget,
    • repeal of legislative control of practitioner's fees and practice outside public hospital work (repeal of part of s. 42),
    • revision of hospital admission forms to remove implicit assumption of pubic patient status,
    • re-examination of fee for service and sessional payments in hospitals with the possible mix of the two methods.
  • But meetings of members of all doctor groups except the Doctors" Reform Society expressed wariness about government. So far it had made only promises. Dr Bruce Shepherd expressed the general mood of the doctors: "We have not achieved enough, but we "would lose all standing if we did not go back to work now while "negotiations continue". (ASS meeting 21.7.84). Two days later the doctors were back working.
  • NSW Minister for health would not agree to any diminishment of his powers over regulation for appointment, management and government of visiting medical practitioners - s42 (1)(h)9i). The powers of the Minister were not to be abrogated and he could continue to act without consulting hospitals or their boards.
  • Negotiations were to continue into 1985, with the politicians winning tactically on agenda setting, but with doctors beginning to win significant public support. Health minister Blewett announced a review of the Commonwealth Medical Benefits schedule but as a preliminary to crack down on medical fraud and over servicing. The health department raised the growth in doctor numbers. The ordinary machinery of conflict resolution was proving inadequate to deal with the intensity and complexity of this dispute.
  • August: Members continued dropping out of funds to get free treatment in public hospitals rather than pay the gap as private patients while also paying the Medicare levy and private insurance premiums. Penington noted that Medicare had led two million people to drop their private insurance from February to June 1984.
  • Previously up to 60 per cent of patients in NSW Public hospitals were privately insured. Now they were down to 40 per cent, with a 24 per cent drop in private patient bed days n public hospitals from February to May 1984. This was causing a big drop in surgeon's income, mostly in bigger inner city public hospitals like St Vincents where 90 per cent of occupied beds held public patients.
  • Some surgeons were accepting sessional payments. Orthopaedics had determined to remain honorary as before 1973. Other surgeons resisted arbitration on the grounds that dropping demand their for fee-for-service amounted to accepting the status of government salaried medical service public servants.
  • Government proposed another compromise draft on public hospital admission policies but trust and good had gone. Penington commented that the NSW procedures under Medicare were implemented by public officers whose aim was control and their approach was marked by a failure to understand the 'social culture of Australian hospitals".
  • Public Hospitals (Visiting practitioners) Further Amendment Bill 1984 repealed on 16 August the contentious provisions of the earlier Act. It stipulated that no regulations affecting the conditions of VMOs in public hospitals could be made until advice had been submitted to the Minister by the Medical Services Committee representing the medical profession. The MSC's functions and membership were defined by another Bill - the Health Administration (Medical Services Committee) Amendment Bill 1984
  • But Regulation 54(a) (pursuant to the NSW Public Hospitals Act) remained. It required that fees for hospital-based services complied with the schedule fee. Its removal depended on the Commonwealth Health Department, so there was still no progress on fee-for-service payment in public hospitals.
  • NSW orthopaedic surgeons determined to increase pressure for fee for service. They began to charge hospital patients for treatment and asked for repeal of 54(a) - the requirement not to charge public patients more than the schedule fee. Settlement of this issue depended on the federal health minister Neil Blewett who said he was awaiting Pennington's final report. Orthopaedics were feeling the pressure, having worked for free in hospitals for some weeks. They declared they would continue to give free treatment to low income earners and the otherwise needy, but intended to bill all other patients public and private, and make their accounts a charge on Medicare.
  • Government proposed further compromises in regard to admission procedures but the doctors" trust and good will were virtually exhausted. Penington explained that admission procedures had been "put together by a group of public officers whose aim was control". Their approach showed them to be quite ignorant of the 'social culture of Australian hospitals".
  • The problems of Dr Margaret Sheldon at Wagga Wagga focussed attention on some of the problems bureaucracy was creating for doctor and hospital services. As no radiology was available at the Wagga Wagga public hospital. Dr Sheldon provided them from her private practice. After 1 March 1984, regulation 54(a) applied which provided that patients of or at the hospital could not be charged any more than the schedule fee. Dr Sheldon argued this was based on the assumption that VMOs used hospital staff and facilities to treat the patients. In her case, she had been providing services free for a while but then refused saying this was tantamount to confiscation of equipment and conscription of her services. The result was the cessation of radiology services for Wagga Wagga public patients . The NSW Health Minister said he could not act unless Blewett agreed.
  • September: After much delay Blewett accepted NSW withdrawal of Reg 54(a). NSW reversed its claim that the regulation was necessary "to control the doctors and protect patients".
  • The SMH did not cover the Sheldon story and its consequences at this point. Instead its headline story "Knife-happy Surgeons" was based on sections of a paper by the pro-Labor Doctors Reform Society. The SMH focussed on how varied were the rates of discretionary surgery in different regions of NSW. It was six days later before the Wagga Wagga story penetrated the main Sydney press. It was covered in the Sunday Telegraph (9.9.84)
  • Several bills passed through NSW Parliament in September. Reg 54(a) was rescinded. The newly legislated Medical Services Committee was to comprise four representatives from the AMA, two from the ASS, one from the Australian Society of Anaesthetists, one from the ASOS, and a chairman nominated from the Committee.
  • Remaining grievances were the inadequacy of sessional payments for surgical services to Medicare patients, and that any discussion of fee for service payments was still being ruled out of discussion. Attempts to raise these issues allowed government to once again claim that the doctors" militancy was only about money - rather than civil conscription. Health ministers re-escalated their rhetoric along "greedy doctor", "doctor- bashing" lines, once again inflaming doctor-government relations.
  • October: By 16 October, the SMH had returned to its former anti-doctor, pro-Wran stance with editorials like The surgeons press their luck. Doctors said the SMH editorials were largely based on views provided by academics in public health administration, the health department and government politicians. Such advice failed to appreciate professional values. But the SMH 's preferred sources led it to continue advising Mulock to keep resisting the "greedy doctors" . It encouraged him to draw on the "worldwide oversupply of orthopaedic surgeons" to break doctor resistance. The SMH kept insisting that doctors would soon give in, when "foreign replacements arrive". However, only four applications resulted from the advertising campaign for replacement general surgeons. Not one application was entered for the 79 vacated orthopaedic posts. The Health Minister persisted in teIlling the media that only a minority of orthopaedic surgeons had resigned.
  • Doctors were subjected to a string of such pressures, as negotiations dragged on throughout the latter half of 1984. Blewett hit the media with declarations that he was cracking down on fraud and over-servicing. Health departments hit the growth of doctor numbers, claiming this automatically led to more services and higher costs. Black bans were placed by the NSW Labor Council on doctors" mail. It also attempted to obtain from the health bureaucracy and publish the names of doctors who would not bulk-bill. One union, the Federated Engine Drivers and Fireman's Association (FEDFA) put a ban on cremating or burying orthopaedic surgeons! Bans were placed on John James Hospital, a private orthopaedic unit in Canberra because surgeons withdrew services over classification of private patients as public in out-patient clinics. But still no discretionary surgery was being undertaken in NSW public hospitals and doctors" demands for fee-for-service were still being ignored.
  • The doctors" negotiating committee could still not move government which continued to insist on hourly or sessional payments. At a mass meeting called by the AAS, orthopaedic surgeons decided that they should quit public hospitals unless progress was achieved.
  • Resignations began at the end of October. ASOS chairman Dr Bruce Shepherd decaled that government was not prepared to discuss fee for service and that AMA was failing to represent all doctors. He said the newly formed Council of Procedural Specialists (COPS) needed to represent procedural specialists separately.
  • COPS claimed the rate of sessional payments was inadequate. It was based on inappropriate parameters - ie $30 to $52 an hour. The AMA said average practice costs were $48 an hour. The NSWLC-affiliated Medical Officers Association declared that they would not, and that their younger, inexperienced members could not do work previously performed by VMOs.
  • The Commonwealth Controlled Substances Act tightened control over administration by nurses of drugs in hospitals and put under junior medical staff.
  • November: The SMH headlined: "Doctors dispute turns nasty". The AFR used the term "medical terrorism". Penington endorsed this term in an open letter to all doctors, which angered many doctors.
  • COPS' dissatisfaction with the AMA increased. COPS demanded insurance rebates for private patients in both public and private hospitals and deregulation of the private hospital system. AMA members rejected AMA Federal Executive proposals over sessional payments. The Doctors Negotiating Committee disbanded.
  • December: By now there were 200 doctor resignations with another 250 imminent, worsening the NSW hospital crisis. The dispute by now had become too bitter for a Christmas Moratorium.
  • The federal government declared that it and the NSW government would henceforth only negotiate with the AMA. It refused any discussion with COPS. However, Blewett agreed to an inquiry into fee for service which had been a crucial issue throughout the dispute but excluded from the agenda set by governments for negotiations with doctors.
  • Health bureaucrats had also insisted that fee for service was altogether out of the question. Health department officers insisted that it could be assumed (although no evidence existed) that surgeons paid according to number and type of operations performed would push through as many operations as possible and that any shift in emphasis to quantity and type of work done would increase the already existing, intolerable pressures on cost.(These untested assumptions reflected the new orthodoxy in Treasury departments based on theories about "economically rational man") .


  • January-February: The NSW public hospital system was teetering, with resignations continuing. Most VMOs had left district hospitals - 90 per cent had resigned from Royal Prince Alfred, 80 per cent from Royal North Shore, and 70-80 per cent from St Vincents. Children's hospitals were exempt.
  • The split between the AMA and surgeons was widening. AMA Federal President Lindsay Thompson had met with Federal and State health ministers and worked out a compromise which was accepted by federal and State AMA executives. But specialists rejected the AMA - government deal.
  • Prime Minister Hawke invited selected medical leaders to dinner. This meeting seemed to give government a better understanding of the doctor's case. A five point plan was offered:
    • Assurances would be given about the viability of private practice,
    • The system of designating all patients in public hospitals as "public patients" would be changed,
    • The medical profession would be involved in decision making in respect of hospital beds and the subsidies applicable.
    • Mechanisms would be introduced to allocate extra funds to teaching hospitals
    • Commonwealth and State governments would make an unequivocal public undertaking that the ALP did not intend to abolish private practice or nationalise medicine.
  • COPS refused to accept any return to resigned posts before concrete details of the government undertaking were settled.
  • Health department campaigns against alleged over-servicing and fraud by doctors continued, backed up by public statements by federal health minister Blewett.
  • February: Doctors continued to resign from public hospitals. By February, 328 out of 400 procedural specialists in Sydney's teaching hospitals had tendered resignations. Hospital crisis stories escalated in the media.
  • Pay rises averaging 30 per cent for salaried specialists were announced. Salaried specialists were also given more extensive rights for private practice, plus extra study leave and conference travel. About 617 specialists were salaried employees in NSW at that time. The cost to government of the pay rises was not excessive and was considered to be cost effective politically. Premier Wran confidently predicted on TV that this would induce overseas specialists to come to Australia - previous efforts to attract overseas specialists had failed spectacularly.
  • Wran said he would "change the law" to make the overseas qualifications acceptable in Australia. This activated further alarm and reaction by COPS and the PMOA.
  • The presidents of the Royal Australasian College of Surgeons, the Royal Australian College of Physicians and the Royal Australian College of Obstetricians and Gynaecologists appealed to the NSW surgeons to delay their resignations, and Wran to postpone overseas recruitment. The AMA said it would write to overseas medical associations requesting non-participation, but it too urged specialists to put a moratorium on resignations.
  • COPS responded that the AMA did not represent the whole profession. It said the government must negotiate with COPS on issues directly affecting hospital specialists. COPS said it would negotiate only if the NSW and Commonwealth governments agreed to rescind what they regarded as repugnant sections of the Medicare legislation - eg, S.42 of the Public Hospitals Act which imposed ministerial control over the activities of doctors in public hospitals.
  • AMA President Thompson attacked Dr Bruce Shepherd and COPS. But over 600 COPS members met and decided unanimously to continue with their resignations, to become effective at the end of the week.
  • The dispute began to spread to other States, stimulated by Australian doctors' anger over threats of overseas recruitment including the relaxation of qualification standards.
  • Hawke invited COPS leaders to meet with himself, Premier Wran, and federal and NSW health ministers, Blewett and Mulock. The talks failed when government continued to refuse to repeal sections of the Medicare legislation.
  • AMA President Dr Lindsay Thompson met Prime Minister Hawke and the health ministers the day after the COPS talks. Seeking to retain exclusive AMA leadership of the profession, the AMA President publicly condemned the tactics of the COPS leaders Dr Shepherd and Dr Michael Aroney. He urged NSW specialists to return to their posts, and he asked hospital administrators to continue to reject the hotline the specialists had set up to ensure emergency cases were treated.
  • Government declared it would negotiate only with AMA.
  • March: By now1500 VMO positions had been vacated. Some began returning to their positions, believing the deal made by the AMA with government was acceptable. The AMA held plebiscite and found strong support for a full return to work in public hospitals. But the plebiscite results obscured the fact that a majority of NSW surgeons strongly opposed acceptance. However, the AMA went on to accept the government's offer, after government offered a concession that modified fee-for-service would be extended to all VMOs in all but the great teaching hospitals where hourly sessional payment for teaching posts would still apply.
  • (Many years later the Public Accounts Committee of the NSW Parliament criticised Commonwealth and State governments insistence on sessional payments in as many hospitals as could be classed teaching hospitals. It laid much of the blame for what it saw as the anomalies, inequities and costliness of this policy on the NSW Health Department.)
  • April: Following a widely publicised report by the Complaints Unit of the NSW Health Department, NSW announce stricter new controls over the medical profession. The Complaint Unit declared that stiffer penalties were needed to deal with medical incompetence, negligence, improper professional conduct and unhygienic premises. It called for wider powers to allow entry, search and seizure of documents in premises of registered practitioners and others involved in eh medical profession.
  • Many considered the NSW Complaints Unit to be more concerned with agitating to advance ALP health policy and the interests of the NSW Wran government than objective interest in the betterment of health care. Aggrieved doctors saw the Unit's report and the Labor government's response as another political operation to secure strategic advantage for the advocates of state control over professional autonomy and doctors" patient-first responsibility. By now, any residual ALP government goodwill to doctors was confined to supporters of the Doctors Reform Society, and to those who proved co-operative among the AMA executives and government-salaried doctors.
  • The NSW Branch of the AMA called an Extraordinary General Meeting, which voted in favour of all VMO's resigning their hospital appointments. This brought the State AMA branch closer to the COPS position that to that of the AMA federal body. .
  • The Public Medical Officers Association (PMOA) declared it would not work with any overseas doctors who applied to replace Australian doctors who resigned VMO positions.
  • Labor Prime Minister Hawke was concerned to save Medicare, believing that he had won office in 1983 by promising to implement such a national health system. Cabinet agreed on a "peace proposal" to be put to the AMA. It included:
    • Repeal of S.17 of the Health Insurance Act which limiting the fees of VMOs who treated private patients in public hospitals to the schedule fee.
    • Extension of fee-for-service to VMOs in country hospitals with no resident medical staff, plus a modified fee-for-service agreement covering all public hospitals except teaching hospitals. (This was justified on the grounds that VMOs at teaching hospitals received assistance of staff, gained status, and were therefor able to increase their practice income.)
    • Privately insured patients in public hospitals would be automatically classified as private (i.e. fee paying) patients.
    • Additional Commonwealth funds would be provided for hospital equipment and facilities.
    • Private insurance would be made more attractive.
  • The AMA welcomed these proposals but Drs Shepherd and Aroney declared that although COPS thought this was a better deal it was not good enough to warrant a return to posts. COPS considered it was its resistance that had forced the government to improve its offer.
  • May: Although broad agreement was reached on the government's April "peace proposals", tensions persisted within doctors' ranks. A majority of procedural specialists accepted the April deal, but, with few exceptions, orthopaedic surgeons refused to return to public hospitals. (Many did not do so for many years, until an agreement was reached with the Greiner Coalition government. See 1989 below.) The sources of continuing instability included:
    • Procedural specialists wanted the NSW government to deregulateprivate hospitals but instead Stategovernment regulation of private hospitals increased.
    • The NSW government remained short of funds and kept trying to keep health expenditure down by intervening to affect hospital and doctor activities and charges.
    • Specialists remained wary of that governments were trying to make them de facto government employees. They were determined not to surrender professional autonomy to political and bureaucratic control. Doctors resented government-bureaucratic power over private practice in public hospitals and elsewhere under the powers granted by Medicare legislation.
    • Specialists continued to resist government's unilateral power to alter contracts of VMOs hospital contracts.
    • Specialists resented the requirement that patients be billed by the public hospitals in respect of doctor services, and not directly by the doctors who performed those services. (This was considered a breach of the doctor-patient relationship)
    • Doctors generally resented on-going accusations of fraud and over-servicing, including the associated monitoring of their patient treatment and rigorous new powers of investigation.
    • Doctors remained resentful of the way workers compensation and third party accident victims were classified as public not private patients. (This reduced doctors" income from such services to 85 per cent of the Medicare schedule fee).
  • As delays lengthened in implementing certain features of the April "peace package" (eg. in respect of sessional payments), specialists became increasingly convinced that their fears and reservations were justified.
  • December: Industrial Commission judge. Mr Justice Macken arbitrated on sessional payments. He increased them substantially, on the grounds that Medicare had reduced doctors incomes by shifting people away from private health insurance thereby decreasing the number of private patients in both public and private hospitals. This decreased VMOs gross incomes while still leaving them with the same (rising) practice costs.


  • Even into 1986, the AMA was still warning the NSW government not to renege on Commonwealth-State promises to deregulate controls on private hospitals, and to keep paying bed-day subsidies for private patients in public hospitals.
  • The NSW government introduced further legislation giving the Medical Board wider investigatory powers under the Medical Practitioners Act. These included powers to:
    • enter premises,
    • search medical records,
    • interrogate a doctor about whom a complaint had been laid, without giving him the right of legal representation, and without requiring complainants to make a statutory declaration of their complaint against the doctor,
    • suspend doctors for any such time as the investigations continued.
  • Practitioners not only viewed these new powers as draconian, but saw them as a breach of the "peace package" in that they claimed no prior consultations with the profession had occurred. The Federation of Independent Doctors of Australia (FIDA) called a mass meeting which passed a vote of no confidence in the NSW Health Minister, Barry Unsworth. Attendees voted to refuse to pay registration fees to the NSW Medical Board. Months of negotiations followed. Finally the regulations were revised sufficiently to stop doctors " activism on this issue.
  • Changes to the Area Health Services Act (NSW) created yet another cause for dispute. Legislation regionalised health services, thereby shifting power away from the hospitals to newly constituted area health boards on which hospital staff representation was minimal (one employee from each hospital). Doctors thought this was yet another move to increase Ministerial and departmental power over private practice. VMOs resisted re-negotiating their hospital contracts with the new boards. Government compromised on this issue but refused to extend medical representation on the regional boards.
  • The American Journal of Public Health called for "trade unionism" amongst physicians and emphasised the need for active AMA involvement in social issues.
  • The NSW Wran government was forced to grant nurses the 35 hour week. In Victoria, a 50 day nurses" strike secured all their demands which included not only issues of pay and conditions but also of patient care and professional autonomy.
  • A Medical Manpower and Medical Workforce inquiry chaired by Professor Ralph Doherty was set up. Its brief was to look into medical school intakes, distribution of doctors and medical skills, and the future demand for medical services. Doherty found a shortage rather than over supply of doctors, especially in rural areas and among public hospital medical staff. He noted that the number of registered doctors was not a reliable indicator as many were not practicing.


  • Dr Lindsay Thompson, an AMA past president, urged compulsory unionism for Australian doctors. He argued this was necessary to ensure the profession's authority and influence in matters relevant to the provision of quality health services: He claimed this can only be achieved in our currently divided profession by compulsory unionism and the conversion of the AMA into a body with powers similar to the Law Society." (The Australian, 6.3.87)
  • Government expressed concern over what it described as a blowout in the costs of rural health. In May, the federal government made drastic changes to the Medicare Benefit Schedule but had to delay their implementation after rural doctors threatened to resign from local hospitals. Changes to the schedule included:
    • removal of after-hour loading for GP services, expect those involving home visits for which the loading was increased.
    • reduced subsidies to private patients in public hospitals (from 85 to 75 per cent of the benefits payable).
    • reduced rebates for third and later physician consultations.
    • reduced expenditure of radiology services.
    • reduced fees for CT screening.
    • removal of Medicare rebates for minor procedures (eg removal of warts)
  • Government modifications of their changes operative from October were inadequate according to the Rural Doctors' Association. The RDA said the changes still cut rural doctor practice incomes. By the end of the year, 250 of the 600 country doctors in NSW had resigned their public hospital appointments. (By 1988, the number of resignations had grown to 320). Reports increased of rural community difficult in recruiting and retaining doctors in many country towns.
  • In July, another dispute threatened public hospitals. Salaried hospital specialists, led by the Public Medical officers association (PMOA) introduced selective work bans to secure the inclusion of "on call" money into their superannuation entitlements. Government conceded to their demands.
  • Yet another dispute erupted in NSW in October. A delay of six months had occurred in NSW government response to a resident medical officers' log of claims in regard to working hours, length of shifts and working conditions. These claims were made in the context of on-going, cost-cutting, inadequate hospital and medical funding and serious shortages of resident medical officers, nurses and radiographers. NSW junior hospital doctors threatened to take industrial action, just as NSW obtained a Coalition government with Peter CoIllns as its health minister. CoIllns repeated the Wran government's threats of seeking overseas recruits. Resident medical officers began resigning. By December they began restricting work to emergency services only. But a split among resident doctors loomed. Only 30 per cent of those eligible to join the Resident Medical Officer (RMO) branch of the Public Service Association (PSA) were in fact members. Many were dissatisfied with the PSA's reluctance to take strong industrial action. RMO President Dr Parmegiani was asked by the PSA to tone down his media protests. He refused, reportedly with supporting advice from Dr Shepherd,. Government eventually granted some concessions. It limited resident rostered hours to 130 hours per fortnight and agreed to slightly higher pay ratesÌ
  • Then Opposition Coalition leader John Howard declared Medicare a total disaster and an absolute nightmare. He told Alan Jones 2UE, "What I"m going to do is take a scalpel, without pruning too much, to Medicare. I"m going to say to people. 'If you want to get out of Medicare and make your own private health arrangements, you can do so'. And everybody knows that one of the great disasters of the Hawke government has been Medicare. It has raped the poor in this country. He said a Liberal -National party government would pull Medicare right apart".
  • Professor Cotton, chairman of an AMA committee of review set up in 1986, completed his report. The Committee had been asked to provide guidance on organisational restructuring to correct disunity within the AMA. Many thought the AMA was not succeeding in representing all the various types of doctors across the country. Cotton confirmed that disunity existed within the AMA and that AMA membership had been falling. In 1965 about 90 per cent of doctors were in the AMA but by the mid-1980s the figure had fallen to 50 per cent. Cotton noted substantial differences between the views of autonomous state branches and the federal AMA.
  • Dr Bruce Shepherd led a successful team for the Council of the NSW Branch of the AMA.


  • Rural doctor resignations from NSW public hospitals increased to 320. Nurse staff turnover in NSW hospitals generally reached 30 per cent. Declining hospital services was still a major electoral issue.
  • The Greiner Coalition government won office amid expectations that it would revive failing health services. But shortages due to inadequate funding continued as they had under the previous Labor government.
  • The Greiner government had come to office with a declared policy aim of encouraging the growth of private hospitals, which were in comparative short supply in NSW. In May Young doctors seeking better pay and conditions clashed with NSW health minister CoIllns and began resigning. Only 30 per cent of the States' 2400 doctors eligible for membership were actually members of the Resident Medical Officer (RMO) section of the PSA, headed then by Dr Parmegiani. Fighting continued on into September.
  • Orthopaedic and other VMOs continued to have difficulties with the new NSW Health Minister Peter CoIllns and his department. It was not until the following year that they were offered hospital contracts they were prepared to sign. (This was four years after the April 1985 "peace package" when the dispute began).


  • In an effort to overcome the shortage of public hospital medical staff, the NSW government sought to increase hospital internship to two years. Protests by student doctors forced NSW Health Minister CoIllns to abandon this device.
  • The short supply of nurses continued to worsen due to better jobs becoming available for capable women and the dissatisfaction nurses felt over their pay, conditions and status.
  • The NSW coalition government closed a number of smaller rural and metropolitan hospitals.
  • The Federal Labor government moved to curtail nursing home usage. Its aim was to cut nursing home beds by 50 per cent over the following eight years by increasing hostels and home care.
  • Heath Minister Blewett and his Department founded the Consumers Health Forum (CHF).
  • The PMOA became the Australian Salaried Medical Officers Association (ASMOA) by joining with similar bodies in other states.
  • Private hospitals formed a national association - the Australian Private Hospitals Association (APHA)
  • The NSW Parliamentary Public Accounts Committee reviewed the increase in services of VMOs and payments to them. It directed further inquiry into costs, accountability, financial control and alternatives. It claimed that the rate of increase in sessional payments exceeded what it would have been if a fee-for-service payment system had applied. Labor governments had fought hard to have sessional payments and reject fee-for-service as preferred by the doctors. The Committee criticised the Judge Macken decision (1985) and advised the abandonment of sessional payments to VMOs saying fee-for-service payments would have been less costly. The hearings saw tension rise between the AMA and the PMOA.
  • Conflict between the federal Labor government and the AMA continued. Blewett reminded the AMA that the statutory requirement that government must consult with the AMA before making appointments to government health bodies could be altered to "relevant and appropriate professional associations". The AMA's Bryce Phillips declared: "We are not involved in a campaign to destroy Medicare, although we are certainly committed to identify its deficiencies and to seek to encourage improvement". The AMA also had internal difficulties to face. AMA membership which had been 90 per cent of all the nation's medical practitioners in the mid-1960s was now down to 50 per cent.


  • Federal Health Minister Blewett established the National Health Strategy.
  • The Medicare levy was raised by a quarter of one per cent.
  • Pharmacy outlets were cut.


  • By the end of the year only 45 per cent of Australians were covered by private hospital insurance.
  • Federal Health Department was renamed the Department of Health, Housing and Community Services.
  • The Federal government in its August budget planned to cut the amount GP's would receive from government for treating patients other than pensioners. Its intention was GP's could cover the shortfall in their schedule fee by charging a co-payment when bulk billing. This proved controversial. The Hawke government responded by reducing the proposed co-payment from $3.50 to $2.50, but Keating replaced Hawke as Prime Minister before this was implemented and the co-payment abolished.
  • General Practice Reform Strategy - introduced in the early 1990s because the community health centre strategy had not succeeded in reforming primary health care in the way government had hoped. It was hindered because the Commonwealth retained responsibility for primary health care services via Medicare GP funding, whereas the states retained responsibility for community health care with funding coming via the Medicare block grants. In Victoria, in the early 1990s, there were over 100 community health centres.


  • The Kennett Coalition government elected in Victoria.


  • Victoria introduced a new system of funding public hospitals - Casemix. This comprised a major change in the way hospitals were to be funded. Hospitals no longer received global budgets based on previous levels of expenditure. The system changed so that hospitals were paid according to the number and type of patient services it would be treating - the patients being classified according to the system of diagnoses called DRG's - Diagnostic Related Groups. South Australia followed.

GO TO Please read the "AAMS TERMS OF USE" Carefully Before Using This Website.

Go To Top of Page
GO TO About the Academy - Objectives
GO TO Administrative: Abbreviations, Contacts, Copyright, Search, Site Map etc.
GO TO Library: Book Reviews, Medical History, Testimonials, Other Material
GO TO Links
GO TO Patient Services Directory

GO TO  Hosted with PrecisionInfo

Academy Logo

 Print Friendly Version

    Printing Tip:

  • Documents are best printed out if the text is not constrained in a table.
  • To get a print friendly version of this page click on the printer.