Prime Minister Tony Abbott has announced the government will ditch plans for the $7 Medicare co-payment.

Instead an optional co-payment will be introduced at the same time the Medicare rebate to GPs is reduced by $5.

It will be up to doctors to decide whether their patients make up the difference or bulk bill them.

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Incentives to bulk bill concession card holders and children under 16 remain in place.

The new measures apply from July 2015.

The changes at a glance

– The co-payment will be optional, at the discretion of the doctor.
– The co-payment has been reduced from $7 to $5.
– It will not be applicable for concession card holders, children under 16, veterans and those in aged care facilities.
– Doctors will be under no obligation to charge the co-payment.
– Doctors will still be encouraged to bulk bill concession card holders and children under 16.

Mr Abbott said the new package had significantly improved the government’s co-payment measures, while at the same time maintaining the desired price signal.

“Bulk billing stays for young people and for pensioners. The co-payment is at the option of the doctor,” Mr Abbott said at a press conference to announce the move.

“We’ll save, as I am advised, some $3.5 million over the forward estimates.”

“It’s been pretty obvious for some time that we were going to have to improve the position that we took to the budget.

“I am absolutely convinced that the package we brought forward today is a better package than the one that we brought forward on budget day.”

But Labor leader Bill Shorten is not so sure, saying that Mr Abbott dumped the co-payment in favour of a back-door tax.

“It is still a tax on Australians going to the doctor,” Mr Shorten told reporters in Melbourne.

“It is still a GP tax, it is still a broken promise, and we know that when he gets chance he’ll reintroduce it again.”

The $7 fee on visits to the doctor, pathology and diagnostic imaging services was announced in the budget and had been regarded as a “barnacle” stuck to the government.

Mr Abbott told Coalition MPs late last month that he would be removing some “barnacles” from the government before Christmas.

The patient contributions were touted at budget time as saving $3.5 billion over five years – savings that were to be invested into a Medicare Research Future Fund.

Mr Abbott said the new plan would result in the same amount of savings and the research fund will still be established.

Under the original proposal concession card holders and children under 16 would have been charged the co-payment for their first 10 visits each year.

Mr Abbott said the Government’s Expenditure Review Committee had been “chewing over” this change for some weeks and it had been approved by Cabinet today.

The first version of the co-payment had failed to win over the required support in the Senate and had not yet reached parliament as legislation.

– with ABC