Health Minister Sussan Ley has bowed to pressure to scrap plans to cut a Medicare rebate for short GP visits, and promised to consult on health reform.
The backdown means Australians will not pay more from Monday if they have a short consultation with their doctor.
It comes 24 hours after Prime Minister Tony Abbott defended the proposal to cut $20.10 from the rebate paid to GPs for consultations of less than 10 minutes.
Medicare had to be sustainable, Mr Abbott said, challenging critics to come up with an alternative to the important economic reform.
Ms Ley says there's no new plan yet, but wanted to end confusion surrounding the issue.
"I have heard, I have listened and I have decided to take this action now," she said, in her first act as health minister after breaking her holiday to address the issue.
"I am deeply concerned by the misinformation that is causing confusion for patients and confusion for doctors," she told reporters in Melbourne.
"As a result, I'm announcing today that the changes to level A and B Medicare consultation items will not commence on Monday as planned.
"The government is taking them off the table."
Ms Ley, who was installed as minister just before Christmas, is still committed to introducing price signals into Medicare, including a co-payment for those with the capacity to pay.
She declined to comment on the decisions of her predecessor, Peter Dutton, now immigration minister, saying she stood by her colleagues.
"We are a team, but this is very much my stamp, I believe, on the portfolio, that of consulting, engaging and listening."
AMA president Brian Owler welcomed her decision.
"The changes really had nothing to do with healthcare policy, had nothing to do with sustaining the healthcare system. It was all about saving money," Associate Professor Owler told ABC TV.
Labor has labelled the announcement as an "embarrassing backflip" and a big win for patients.
"But its clear, yet again, that the Abbott government is only acting because it has been forced to by Labor's refusal to bend in our defence of Medicare," a statement from Bill Shorten's office said.
The Greens agreed with Labor, saying the government would not have backed down if the measure had not faced defeat in the Senate.
Labor, the Greens and four crossbenchers were preparing to disallow the measure when the Senate returns on February 9.
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