Funding the Medical Profession Australia 1949-1968

Dec 12, 2000Health Funding, Paper

The Menzies Era.
1949 – 1968
The Senate Select Committee on Medical and Hospital Costs

Health strategy under Menzies-style governments moved sharply back from war time Labor’s nationalised British-style health model. But Commonwealth welfare and re-distributive intervention continued. Menzies-style governments had an overriding commitment to voluntary health insurance – but in conjunction with targeted Commonwealth assistance to the needy.

The multiplicity of targeted groups led to a complexity of measures and increased bureaucracy, while still leaving 15-17 per cent of Australians uncovered by insurance and unentitled to free health care.

Labor continued to advocate a universal, compulsory, national health insurance scheme but it also began to distance itself from the British nationalised health model favoured by the war time Chiefly Labor government.


  • The Menzies government was elected in December 1949, Menzies later stated:
  • “We began the labour of evolving an effective National Health Scheme which would have a wide cover, but at the same time preserve the uncontrolled doctor-patient relationship”.
  • Menzies took advantage of the wide regulatory powers added to the Constitution under Chifley to introduce the Menzies-Page Health Plan.
  • College of Nursing Australia founded.
  • Commonwealth Institute of Child Health founded.


  • Menzies announced plans for a national health scheme based on voluntary insurance to cover medical and hospital costs, a limited “free medicine” scheme, a national health education program, a free milk for school children program, and a medical services to the disadvantaged program.
  • Menzies” Minister for Health was Dr Earle Page. Overall, the aims of the Page plan were fourfold:
    – improve nutrition,
    – prevent disease,
    – contribute to hospital costs,
    – relieve the high cost of medical treatment.
    – (i.e. 90% of cost to be covered by combined government subsidy and voluntary insurance, and the rest a gap payment by patients to control usage).
  • Special provision for the needy was to be delivered via age, invalid, widows, and unemployed pensions and maternity allowances.
  • Doctors cooperated in the new Menzies Pharmaceutical Benefits Scheme which made 139 “costly, lifesaving and disease preventing drugs available on doctors” prescriptions without recourse to the official form that Labor had tried to enforce.
  • Page spelled out the voluntary insurance principle. He explained that there were in existence five million life assurance policies. Accident and sickness insurance covering hundreds of thousands more. Over 600,000 more were covered by friendly society family policies against sickness and medical treatment. Over half a million more were covered by hospital insurance funds and trade union schemes. Page declared that “voluntary insurance is therefore a well established principle”.
  • The Liberal government’s policy was to bolster private voluntary health insurance to make “continuous membership more attractive and easy”. The declared aim was to encourage individual responsibility, avoid government bureaucracy and associated costs, and not to interfere in the doctor-patient relationship.
  • It was thought that the plan could be implemented quickly by existing organisations, with no means-testing required if a variety of premiums/ coverages were offered by the private health insurance funds to suit various economic groups.
  • Page outlined the principles of the Menzies-Page Medical Benefits Scheme, promising that the combined Commonwealth and fund benefits would cover up to 90 per cent of the cost of medical treatment. However, in the first year of operation of the scheme, insured persons ended up paying 37 per cent of the total cost of medical services out of their own pockets, over and above what the Commonwealth and the funds contributed. (See also 1953) Until 1970 this figure never fell below 30 per cent. That is, for fifteen years under Coalition Commonwealth governments, patients paid 30 per cent or more of their doctors’ bills, after having already paid their taxes and their private insurance premiums. Public discontent mounted and led to committees of inquiry beginning in 1968. Their findings influenced the ALP health policy that the Whitlam government implemented.


  • The Pensioner Medical Service was commenced. The BMA agreed to “consessional fees” for GP surgery consultations and home visits covered by the various Services for the treatment of pensioners, the aged, invalids, widows, TB sufferers and their dependents.


  • The Commonwealth Hospital Benefits Scheme was started. It comprised a small basic benefit to all hospital patients, with an additional benefit for those contributing to a voluntary hospital insurance fund, plus a benefit to those with Pensioner Medical Service entitlements. Public hospitals were allowed to reintroduce public bed charges and to means test patients for eligibility for public bed treatment.


  • The Commonwealth Medical Benefits scheme started paying benefits only to contributors to voluntary medical insurance funds.
  • The Menzies-Page Health Plan took advantage of the wide regulatory powers written into the law under Chifley who had lost office before taking any action under the National Health Service Act, 1948-49.
  • The National Health Act of 1953 was passed. It repealed the National Health Service Act 1948-49 and consolidated the legislation relating to hospital, medical and pharmaceutical benefits and the Pensioner Medical Service. From then on it was the principal Act governing the national health benefits scheme.
  • The Medical Benefits Scheme was introduced, involving voluntary, contribution to a registered medical insurance fund. Patients made their own choice of doctor and fund. The fund acted as the government’s agent, and paid the appropriate Commonwealth benefit.


  • Eligibility for Pensioner Medical Service and Pensioner Pharmaceutical Benefits was restricted.
  • A report on mental health facilities and the needs of Australia revealed serious shortcomings. The Stoller Report for the Commonwealth government prompted it to patch the gap left by the termination in 1954 of the Commonwealth/States agreements under the Mental Institutions Benefits Act. States were offered subsidies on a one for two basis for building and equipping mental health facilities.


  • By now all states except Queensland had charges for public ward accommodation.
  • The Commonwealth Home Nursing subsidy scheme helped non-profit home nursing services expand.
  • The Commonwealth Serum Laboratories produced Salk vaccine.


  • The National Biological Standards Laboratory was set up to test drugs and set standards for therapeutic goods.


  • The Commonwealth introduced the Special Account System to improve the provisions which health insurance schemes made available for contributors with chronic illness and pre-existing conditions. This was a gap not covered in previous rules.


  • Commonwealth introduced a five shilling charge for PBS prescriptions. It blamed rising costs caused by more new expensive drugs, especially antibiotics.
  • The National Heart Foundation was established – a private national organisation promoting research, public health information and rehabilitation.


  • The Australian Medical Association was registered as a corporate body. It succeeded the British Medical Association in Australia completely by 1965.
  • Dr William McBride wrote to the Lancet regarding thalidomide.


  • The Commonwealth Health Department established (post thalidomide) a Registry of Adverse Drug Reactions.


  • The Public Medical Officers Association (PMOA) was registered as a trade union.