An independent investigation will look into claims of fraud within Medicare, attempting to estimate the cost of rorting within the scheme.
The federal government has ordered the inquiry, arguing every dollar in the $32 billion scheme should be directed at patient health.
The inquiry follows a joint ABC-Nine Newspapers investigation that uncovered flaws in Medicare that made it difficult to detect fraud.
A 2020 report from the Australian National Audit Office estimated the cost of non-compliance in Medicare at up to $2.2 billion a year.
The new review will be led by health economist Pradeep Phillip, a partner at Deloitte and former senior public servant in Victoria.
The work is expected to be completed in a few months, with an interim report to be handed to the government in late January, and a final report in late February.
It will also look at Medicare's compliance systems.
Health Minister Mark Butler said the health system in Australia was under great pressure, and the report was timely.
"Australians know that the overwhelming bulk of Australia's doctors and health professionals are honest, hardworking and comply with Medicare rules," he said.
"But they also understand that, after nine years of cuts and neglect, every dollar in Medicare is precious and must be spent directly on patient care."
He said the Health Department had already looked into suggestions the scheme was subject to up to $8 billion in fraud, and found no evidence to support the figure.
"I've asked Dr Philip to measure and report on the true extent of non-compliance in Medicare and identify fixes to protect the integrity of the system, for all who use it," he said.
"All governments must apply strict compliance standards to any publicly funded system — including Medicare — to ensure that the small minority that do the wrong thing are picked up quickly and dealt with."
The Australian Medical Association said the Medicare review must consider the complexity of the scheme, arguing it is a major cause for confusion in the billing process.
President Stephen Robson said there was a need for genuine reform and new funding.
"Compliance is something the AMA takes very seriously, and we will work with the Medicare integrity review that has also been announced today," he said.
"The profession has nothing to hide and has a strong record of working to ensure that Medicare funding is directed to support patients, including on two recent legislative packages to improve the integrity of the Medicare system."
