The Turnbull government denies it plans to privatise Medicare, insisting that it's only looking at ways to bring the authority's 30-year-old payments system into the 21st century.
"We need to move it on, and we need to make it work for everyone," Health Minister Sussan Ley told ABC radio on Wednesday of a payment system that was designed in 1984.
"We're not privatising Medicare."
The government is considering outsourcing the payment of benefits but insists it would still be responsible for determining how much was paid to doctors and patients in rebates.
A number of private companies, including telcos such as Telstra, EFTPOS providers and the big banks, are showing interest given they have online payment and supply structures.
The government-owned Australia Post has also flagged its willingness to take on more responsibilities for payments and services.
Ms Ley said the health records of Australians would not necessarily be available to a private sector provider of payments.
Health Department secretary Martin Bowles said suggestions the private medical records of Australians could be sent offshore to places like India were madness.
"Just because something is done by some other group doesn't mean you hand over the keys to the kingdom on everything," he told a Senate estimates hearing in Canberra.
Mr Bowles said the payments system had paper issues and was frustrating for patients.
He insisted the department was still exploring options and no decision on whether to outsource or not had been made.
"We could get to the end of this process and say `yeah, that's a great idea but we could do that'.
"We might come to the end of this process and find `that's a great idea but we've got no chance of doing that'."
But Mr Bowles conceded government probably wouldn't be the most innovative.
Labor opposes the move, accusing the government of trying to destroy Medicare.
"This is the first step towards the dismantling of Medicare and the privatisation of health care in this country," opposition human services spokesman Doug Cameron told reporters.
"We don't want and will never accept the Americanisation of our health system ... this is a challenge we will fight."
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