EMMA ALBERICI, PRESENTER: With the carbon tax and mining tax now repealed, the Government will turn its attention to its next big-ticket Budget measure, the Medicare co-payment. So far, Clive Palmer and his PUP senators are not for turning. The Health Minister Peter Dutton remains hopeful. He joined me from Canberra a short time ago to discuss that and the future of Australian pharmacies.

Peter Dutton, thanks for joining us.

PETER DUTTON, HEALTH MINISTER: Pleasure. Thanks, Emma.

EMMA ALBERICI: Clive Palmer says there's no prospect of a GP co-payment in Australia. He says it's as good as a dead duck and that you're engaging in some wishful thinking if you think you're going to get it through. Labor and the Greens are opposed to it as well. So on what basis do you remain optimistic that this will pass the Senate?

PETER DUTTON: Well we've got a July 1 start date next year, so we've got time to negotiate what is a purposeful reform. We're determined to make sure that Medicare is sustainable into the 21st Century. We've got an ageing population, huge costs coming down the line. The fact that we spend $20 billion today on Medicare, but only raise about $10 billion from the Medicare levy and the gap grows and grows each year. It's absolutely necessary that we introduce sensible reforms and I think we can negotiate in good faith, and in private, I'm encouraged by some of the discussions we're having with the independent senators, but as you point out, people publicly have made comments and I'll leave that to them.

EMMA ALBERICI: Are you suggesting that Mr Palmer is being disingenuous about the conversations he's having with you?

PETER DUTTON: Well, Emma, I just haven't commented really on private discussions that we've had with any of the independent starts. The point that I'd make though is that people do accept that there is a problem with the way in which the health care funding in this country is tracking and the two independent reports commissioned by the Rudd and Gillard governments demonstrated that quite ably, and the difference is that we're acting upon that advice. We need to make sure that we can pay for the genomics testing, the medical technology, all of the rare cancer drugs, the fact that 170 people per week today are being diagnosed with dementia, but in a number of years it'll be 7,500 a week. We need to make sure that we've got provision for all of that, and these decisions aren't easy. Every Health minister would want to put more and more into the health system and we're doing that in part. We grow the amount of money that we put into health each and every year in this budget, but we have to be sensible about how it's paid for and we believe a $7 co-payment is a modest amount, but it's a reasonable plan and we've put in place safety mechanisms for those that can't afford the $7.

EMMA ALBERICI: Given the arguments against the co-payment are largely around its inequity, why don't you means test it so only those who have the capacity to pay will have to do so?

PETER DUTTON: Well the difficulty is if you assess it, for argument's sake, by income, in the modern age, people drift in and out of income brackets, so people have superannuation payments, they have windfalls otherwise, they have bonuses at work, they have casual jobs. And the difficulty is that you have a point of reconciliation when people do their taxation and then you would have to claw money back from not only the taxpayer, but also the GP or the pathology provider and I think we create a bureaucratic, administrative nightmare. So, the idea and the challenge always in these public policy changes is to keep it as simple as possible. It's the same principle that Labor applied when they introduced a co-payment in the PBS for people on concession cards. And we believe that we've got the fundamentals of this right because when people understand what it is the Government's proposing, they recognise the fact that we've got a number of safety nets in place for those that can't afford the $7.

EMMA ALBERICI: But with respect and pardon the interruption, but it doesn't seem that too many people are accepting your arguments on this, and if you are looking for simplicity, why not just increase the Medicare levy? I mean, in a progressive tax system, you'd be able to ensure that only those who can afford it pay it.

PETER DUTTON: Well, the trouble is that you don't get that outcome by increasing the Medicare levy because the inflation factor of the $20 billion, which will grow to $34 billion within 10 years' time outstrips the growth in the collection of the Medicare levy. Now the problem is that, yes, it would have to increase dramatically in the first instance, but it still would have to be indexed each and every year to keep up with the growth, bearing in mind that we were spending $8 billion a year 10 years ago on the MBS and we've had a 42 per cent increase over the last five or six years. The growth in the $20 billion just far outstrips the growth in the $10 billion that we collect on the Medicare levy. So, some people have put that to us, but it's just not that easy and we need to recognise that a co-payment in principle is a good policy, providing that we support those that can't afford to pay it and that's what we do in this measure.

EMMA ALBERICI: If you were hoping to be a no-surprises, no-excuses government, why did you never mention the Medicare co-payment before the election?

PETER DUTTON: Well we didn't have a plan for the Medicare co-payment before the election, but when we said that we were keen to get more money back to frontline services and we said that we were keen to have sustainability in the health care system, when we looked at all of the options in government, with the resources of a department - not just my department, but Treasury and Finance as well - it became apparent to us that this was the most efficient way to implement the changes that we needed. I don't think anybody can fool themselves about the costs associated with health care over the next decade or two given the ageing of the population, all of the new medical technologies ...

EMMA ALBERICI: But this all came as a surprise to you - pardon me, but this all came as a surprise to you after you took office?

PETER DUTTON: Not necessarily the growth in the Health expenditure, bearing in mind that we spend about $65 billion a year in my portfolio now. It grows each and every year to about $74 billion by the end of the forward estimates. So I don't think the growth factors came necessarily as a surprise, but the ways in which we could fund that, particularly given the debt and deficit that we were left by Labor, it became apparent to us that the most efficient way to try and provide that sustainability and modernisation of Medicare was through the application of a modest co-payment, bearing in mind that the Commission of Audit recommended $15, and in New Zealand, the co-payment is about $17. So I think we've struck a reasonable balance, and as I say, the universality principle of Medicare is retained and we provide support for those who are most in need.

EMMA ALBERICI: You've cited New Zealand as a model. Will you follow its lead and make doctors visits free for children?

PETER DUTTON: Well we believe that we've got a reasonable balance in the model at the moment, Emma, but we've said that we will conduct our discussions and negotiations in good faith with the independent senators and people have got suggestions to make that we've gone away and had a look at, analysed, costed and we're happy, as I say, to work with them in good faith, but in private. I'm not going to ...

EMMA ALBERICI: But you will consider exempting children, for instance?

PETER DUTTON: Well, I've said that we will listen to sensible suggestions that people have got to make if they think there are ways in which we can approve the Government proposal. But in the end, we have to recognise that the funding for our health system either comes through taxes or from taxpayers directly and we have to have a reasonable balance and I think we've struck that in the deal that we've got on the table.

EMMA ALBERICI: Can you guarantee that $7 is the extent of the burden Australians will need to pay, that the fee won't go up?

PETER DUTTON: Well we don't index the $7 and we've legislated for it to be $7 and in fact the financial incentive that we put in place, which at the moment is paid by way of a bulk billing payment, which is $6.15 or $9.10 within rural communities, we say if the doctors charge that $7, no more, no less, then we will pay that loading, which will become a low gap incentive. So the financial incentives are skewed towards only charging $7, no more than that. In fact if doctors charge more than that, then we remove the $6 subsidy. So, we haven't got an indexation factor. But interestingly enough, if Bob Hawke's co-payment had've been indexed from '91, that co-payment today would be about $6.20 in today's dollars.

EMMA ALBERICI: And can you give the Australian public a guarantee that the Coalition won't raise the $7 co-payment?

PETER DUTTON: Well that's legislated, if ...

EMMA ALBERICI: For how long is it legislated? Pardon me.

PETER DUTTON: Until the Government duly elected can change that legislation. But the fact that we've not put in an indexation of the $7, we've not put a sunset clause in, we've put in place $7 and that'll be reflected in the legislation should we get passage of that through the Senate. So there are protections in place that are legislated for and I think that's completely appropriate.

EMMA ALBERICI: Before we go, I wanted to ask you about the Community Pharmacy Agreement which is going to be negotiated again soon. Can we presume your government, being keen to promote competition, will want to be making some changes?

PETER DUTTON: Well I want to make sure that we've got a community pharmacy network which is supported across the country. There are over 5,000 community pharmacies, particularly those that are in rural communities, where there is very little presence by way of primary health care otherwise, so they provide a very important service. I've said to the Pharmacy Guild that we want to provide support in a transparent way; that is, we want to fund measures that do benefit patients and I think the Pharmacy Guild's of the same mind. So, those negotiations get under way very soon. And again, we conduct those in good faith and I'm hoping that we can find better ways of supporting community pharmacy, and most importantly, the patients who benefit from having a good relationship with the pharmacist, because we believe very strongly in proper medication management and the suite of services that are provided by pharmacy otherwise.

EMMA ALBERICI: At the moment only a registered pharmacist can own a pharmacy. Why shouldn't Coles and Woolworths, for instance, be allowed to operate pharmacies like other supermarkets in the UK and the US do?

PETER DUTTON: Well the Coalition's long held the belief, Emma, that we shouldn't (clearing his throat) - excuse me - that we shouldn't have that corporate ownership model, that we believe very strongly in a pharmacy that is owned at a community level. And I think that is an important policy for us to adopt ongoing. Nobody's convinced us of the need for Coles and Woolies to run pharmacy and we've said very specifically at the last election and since then that we want to make sure that pharmacy - the pharmacy location rules and the pharmacy ownership rules don't change and that's the basis upon which we enter these negotiations.

EMMA ALBERICI: Do you accept that pharmacies are protected in a way that so many other businesses haven't been from the competition from the likes of Woolworths and Coles?

PETER DUTTON: Yes, to a degree. But I would say that given the presence of the banner groups and the discount groups within pharmacy now, this is far from a cottage industry. It's certainly the case that there is a great depth of competition within the pharmacy space and many of these players within pharmacy, the common banner groups that people know that pharmacies to operate under, they have a lot of competition in place. And I'm assured that we are getting good value out of community pharmacy, but again, I think there's an opportunity for us to negotiate better outcomes for patients and for pharmacists and the Government's determined to achieve that outcome.

EMMA ALBERICI: Because it does seem a little incongruous that GPs aren't the only ones who can own doctors' surgeries and yet pharmacists are the only ones who can own a pharmacy.

PETER DUTTON: Well, again, I mean, there are legacy issues associated with that and there's not a desire from the Government to disrupt the way in which pharmacy works. So I believe very strong that pharmacy, particularly in rural locations where we just can't get GPs or allied health professionals otherwise, that they do provide an amazing service. And I would be very surprised if that model was adopted, if we had significant ownership changes. So, we believe strongly in the model that we've got at the moment and I think we can enhance community pharmacy through the six community pharmacy agreements and we are looking forward to those negotiations.

EMMA ALBERICI: Peter Dutton, we have to leave it there. Many thanks.

PETER DUTTON: A pleasure. Thank you.