Some doctors have increased their fees by up to 400 per cent, knowing the bill would be footed by taxpayers and not their price sensitive customers.
The federal government has parked its attempts to rein in the Extended Medicare Safety Net, despite a blowout in costs that the Department of Health warned in 2015 was largely the result of medical practitioners increasing their prices.
It will not be included in the May budget.
The safety net is designed to reduce medical expenses for patients by paying for 80 per cent of their out-of-pocket costs for non-hospital procedures once an annual threshold has been met.
Introduced in 2004, many doctors immediately hiked their prices, and costs grew by about $100 million a year until 2010 when the government capped the amount that could be claimed in areas such as obstetrics, assisted reproductive surgery and cataract surgery.
But a Department of Health analysis found doctors in some areas circumvented the changes by shifting charges to other items on the Medicare Benefits Schedule [MBS].
Like squeezing a balloon, each time the government capped prices on one aspect of a medical procedure, prices would billow on other items.
In ophthalmology, when the MBS item for cataract surgery was capped, the item for anaesthesia increased by 400 per cent among the highest charging 10 per cent of medical providers.
The government responded by capping that item in 2012, at which point a routine diagnostic test that most doctors had previously performed for $40 suddenly shot up to $1000 in some practices.
UTS Centre for Health Economics Research and Evaluation economist Kees Van Gool, on whose work the department's analysis was founded, said it was unlikely to be a coincidence that the charge for anaesthesia spiked on the same day the surgical item was capped.
"That to me has always suggested that there's some sort of collusion between the anaesthetists and the ophthalmologists," Professor Van Gool said.
But Royal Australian and New Zealand College of Ophthalmology immediate past president Brad Horsburgh said the number of ophthalmologists charging those amounts "could be counted on one hand" and they had been reported to the government.
"It is the government's job to investigate those patient complaints and we're very happy for the government to do so," Dr Horsburgh said.
The average fee for eye injection has been stable since 2006.
Former Prime Minister Tony Abbott attempted to rein in the costs of the safety net by restricting the amount that doctors could charge for any single item once patients reached the threshold to receive benefits.
But the bill failed to attract the support of the senate crossbench following a concerted campaign by psychiatrists, oncologists and the assisted reproductive technology industry, who argued it would increase costs for patients.
The scheme cost $318 million in 2015, the latest year for which data is available, down from $423 million in 2014, after the government increased the threshold for patients to qualify.
But fee increases have continued apace and by 2019-20 the overall cost of the safety net is expected to reach the levels it did before capping was introduced.
Health Minister Greg Hunt said he would provide an updated on all outstanding cost saving measures after the 2017-18 budget.
The average charge for an anaesthetic item involving the injection of the femoral nerve rose from $83 in 2003 to $408 in 2014, and some practitioners charged up to $4200.
The average charge for brain stem audiometry, a form of hearing test with a scheduled fee of $192, increased to $3995.
The inflationary effect of the safety net was so significant that some patients - including those undergoing radiation oncology - had higher out-of-pocket costs than they would if the safety net did not exist, according to Medicare data.
Grattan Institute health program director Stephen Duckett said an accumulation cap would not affect general practice because most visits were bulk-billed and it would take patients a long time to reach the threshold for private consultations.
But it would affect specialists who were "rorting" the system with very high fees.
"These are very bright people and of course they'll game the system," Professor Duckett said.
The Department of Health said the government had capped 568 items since the inflationary effects of the safety net were identified.
The story How a $40 medical test became a $1000 test overnight first appeared on The Sydney Morning Herald.