Finance Minister Mathias Cormann says a special Medicare fund is about "public confidence", as Labor sought to show it would make no practical difference.
The Turnbull government promised in the budget to set up a Medicare Guarantee Fund (MGF) from July 1 this year as a special account to cover the $34 billion a year cost of the Medicare Benefit Schedule and the Pharmaceutical Benefits Scheme.
Labor frontbencher Katy Gallagher asked Treasury officials and Senator Cormann on Monday whether there would be any practical difference between last year and this year in terms of funding health.
Senior Treasury official Joanne Evans said the process of "special appropriations" - used for about 80 per cent of government spending - would continue, but the difference would be the special account would be debited.
Senator Cormann said there was a "practical difference".
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"There is clear visibility of the full cost and clear visibility of the full funding allocation," Senator Cormann told a Senate committee.
"What we are doing here is improving the transparency of what it costs and how it is funded to give public confidence that funding is secured in the budget."
"We accept you've got a public confidence problem," replied Senator Gallagher.
Labor campaigned heavily on health funding at the 2016 federal election, which contributed to the government deciding in the budget to ease the freeze on Medicare rebates and set up the fund.
Funding for the MGF will come from the Medicare levy - minus amounts to fund the national disability insurance scheme - and a portion of personal income tax receipts.
