The Turnbull government has doubled down on its support for private health insurers after rejecting a radical health department hospital funding proposal that would have dismantled the $6 billion taxpayer-funded rebate.
Labor accused the Coalition of staging another attack on Medicare after Fairfax Media revelations the government's top health bureaucrats were part of a secretive taskforce developing a plan for a "Commonwealth Hospital Benefit".
But Health Minister Greg Hunt immediately ruled out adopting the policy, declaring his "love" for private health insurance.
"I've rejected it once. If it ever comes forward I'll reject it again," he said.
The private health insurance rebate would be abolished, consumers would be charged more for extras cover and the states would be forced to find more money for public hospitals under the controversial plan. It would pool federal health funding and then provide standard benefit funding to both public and private hospitals.
Department of Health Secretary Martin Bowles and his deputy Mark Cormack are members of the taskforce - funded by taxpayers but run by a private think tank called Global Access Partners (GAP) - which has met three times in the last year.
Under intense questioning in Senate estimates Mr Bowles confirmed he made the decision last year to set up and fund the taskforce after talks with GAP chairman Peter Fritz.
Mr Bowles and Mr Cormack attended meetings of the taskforce and delivered a presentation on the proposal at one of its three gatherings. But they say they made it clear it was not government policy.
Mr Bowles said the proposal was only ever a concept and he had wanted to put more "colour and light" around it.
"I don't apologise for that," he said. "Policy thinking should always happen and we need forums to make that happen.
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"It was in its infancy. It was future gazing."
Officials attended a GAP meeting that explored the proposal just four days after Mr Hunt apparently told them not to pursue the idea in March.
And Mr Cormack met with members of GAP as recently as this month, two months after they say Mr Hunt ruled out the proposal.
Even government members of the estimates committee were clearly displeased with Mr Bowles. Liberal senator Dean Smith suggested the department had been "freelancing" by continuing to work on the policy.
They insisted there was nothing secret about the taskforce even though it was never announced, never released anything publicly and branded its material - leaked to Fairfax Media - as "confidential".
Labor's Catherine King said the taskforce was significant: "We're not just talking about some junior policy officers in the department beavering away. We're talking about the Secretary of the Department of Health and other senior officials meeting with stakeholders in secret and developing up a policy proposal."
But Prime Minister Malcolm Turnbull compared Labor's "desperate" response to last year's "dishonest Mediscare campaign".
"With all your conspiracy theories and plots, all your secrets and scares, they don't make one Australian well," he told Parliament.
While the government struck a three-year hospital funding deal with the states last year it will need to set a path for a post-2020 agreement before the next federal election.
