The federal government is encouraging doctors to pass on a $5 cut to the Medicare rebate onto patients after it ditched plans for a $7 GP co-payment.

Health Minister Peter Dutton says it will be up to doctors to decide whether they will charge patients for a consultation to make up for the planned rebate reduction, which the government is replacing its unpopular co-payment proposal with.

The government has defended the new package as an "optional" co-payment which would be at a doctor's discretion to impose or bear the cost themselves.

Asked if as many doctors as possible should pass on the $5 cut, Mr Dutton told the ABC's 7:30 program: "If they choose to do so then that's something that we would encourage."

Mr Dutton qualified the statement by arguing it was senseless to pretend that every Australian could expect free consultations.

"We believe the people on higher incomes ... that we do ask a $5 co-payment, but that we haven't mandated it."

Only pensioners and other concession card holders, children under 16 and those living in aged-care facilities will be exempt from the rebate reductions.

Mr Dutton defended the government's back-down on the GP co-payment, saying it had listened to the people, its backbenchers and crossbench senators on "sensible" proposals.

Proposal a 'kick in the guts'

The proposal has also been criticised by the Doctors Reform Society, which described it as a "kick in the guts to working Australians".

Spokesman Tim Woodruff said the optional $5 payment would put pressure on doctors to decide who would face charges.

"The $5 co-payment may not seem like much to a rich politician, but [multiples of $5 does] mean a lot to a low income worker," he said.

"... It is not a way to give a fair go to all Australians. It is a way to slowly destroy Medicare as we know it."

The Australian Healthcare and Hospitals Association welcomed the move, with Acting Chief Executive Andrew McAuliffe saying there was "clearly no need" for further financial burden on patients.

“The AHHA welcomes the Government’s decision to abolish the GP co-payment and urges the government to continue work to provide affordable, accessible care to all Australians,” he said.

"A focus on long term sustainable strategies is preferable to poorly considered knee jerk responses such as the co-payment approach.”

Cheers and jeers from crossbench

Yesterday, Opposition Leader Bill Shorten said the announcement was not a back down.

"There is still a tax on going to the doctor," he said.

"Tony Abbott has tried to pretend his GP tax is dead. Sadly for Australians, it is still very much alive."

Australian Greens health spokesperson Richard Di Natale also slammed the announcement, labelling it a "cynical attack on Medicare".

"After spending the best part of a year failing to win parliamentary support for its co-payment the Abbott Government is now trying to slash payments to doctors so that they are forced to do the government’s dirty work," he said.

"The freeze on indexation will impact just as much as the $5 decrease by ripping hundreds of millions out of Medicare over the long term."

Dr Di Natale said the Greens would be moving a disallowance motion at the first available opportunity in the next parliament.

Palmer United Party leader Clive Palmer weighed in on the announcement via Twitter.

A party spokesman said the new proposal was "under consideration but unlikely to be supported".

Senator John Madigan said he was "deeply suspicious" of the announcement.

"The devil is always in the detail," he stated in a Facebook post.

"The first I heard about today's announcement was in the media. If government wants the crossbench support, why didn't they brief us on it first?"

Senator David Leyonhjelm welcomed the announcement, but said the government should have proposed this reform initially.

“The Prime Minister’s announcement is something of a cunning move, but it’s a good one," he said.

"The cut to the Medicare rebate means most people will be paying something for their medical services. This is a good thing, because nothing should be free. We must introduce a price signal for doctor’s visits, otherwise we will no longer be able to afford our health services.

"We are disappointed that the funds will be directed to the Medical Research Future Fund because it will lead to fewer private donations and create unnecessary bureaucracy.”

Family First Senator Bob Day said the announcement was a "step in the right direction", but would not pledge his support before seeing the detail of the proposal.

Senator Nick Xenophon described the government's move as a "passive aggressive back down", which forces doctors to pay or pass on the costs to patients.

"The Government should be working with GPs rather than declaring war on them," he said.

Independent Senator Jacqui Lambie criticised the lack of "in-depth public conversation" over the new proposal, stating that Mr Abbott's change "smacks of policy on the run".

"Any proposal from him must be viewed with suspicion," she said.