Outsourcing the Medicare payments system could be a good idea if the government imposes strict penalties for any privacy breaches, a former federal health department boss believes.
Stephen Duckett, now health program director at the Grattan Institute, says the threat of big penalties would ensure companies take privacy seriously if the government does decide to outsource the payment of benefits.
"There's nothing wrong with what they're proposing but that is with one caveat," he said on Thursday.
"The tender has to be really, really clear on what happens when there's a breach of privacy."
Health Minister Sussan Ley this week revealed the government was considering the move, insisting it was about bringing the payments system into the 21st century and had nothing to do with privatising Medicare.
A number of private companies, including Telstra and the big banks, are showing interest given they have online payment and supply structures.
Labor has accused the government of attempting to dismantle and privatise Medicare, and has also raised security concerns if companies are given access to private medical records.
Australian Medical Association president Brian Owler said any doctor in the country would agree the current system was outdated and becoming increasingly difficult.
He's concerned about privacy and security issues if the system is outsourced but believes it could work if done in the right way, with proper consultation.
"There is the potential here to make savings and to do something that delivers us a system that is going to serve the needs of patients and the medical profession," he told reporters in Canberra.
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