The 2016/17 budget allocates $2 million to set up a committee to provide advice on the design and implementation of the changes.
There's also a move to revamp the prostheses listing advisory committee to make medical devices more affordable and available to patients faster.
Health Minister Sussan Ley has long been telling voters to be patient, in the face of skyrocketing health premiums and a rise in so-called "junk" policies.
The building blocks to reform the private health insurance system are being put in place beginning with the committee which will look at "reducing the cost and improving the value of private health insurance to consumers", the minister said on Tuesday.
"The Turnbull government will make sure every health dollar lands as close to the patient as possible," she said.
There's also money for the listing of new medicines on the Pharmaceutical Benefits Scheme for Hepatitis C, cancers and asthma.
The budget also includes:
* another $30 million to create the National Cancer Screening Register
* $9 million to curb over-prescription of antibiotics
* better support for GPs and registrars in rural areas
* $10 million to reduce Fetal Alcohol Spectrum Disorders
* new online support for women suffering or at-risk of perinatal depression
* $4.5 million to fight blood-borne viruses and sexually-transmitted diseases in the Torres Strait.
