Health Minister Mark Butler has vowed claims of billions of dollars being rorted each year from the Medicare system will be investigated.
The examination of the system follows revelations by the ABC and Nine newspapers alleging some practitioners are ripping off Medicare and charging for services that are not delivered.
It was estimated Medicare could be ripped off by up to $8 billion a year.
According to the report, some doctors have been billing dead people and falsifying patient medical records to lift their incomes, while others are making mistakes on claims.
Mr Butler said on Monday he had asked the Department of Health to carry out a report of compliance and audit measures, as well as professional services review programs.
The minister also said the department would carry out an analysis from the work of experts who had examined Medicare claiming and compliance.
"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," Mr Butler said in a statement.
"Australians know that the overwhelming bulk of Australia's doctors and health professionals are honest, hardworking and comply with Medicare rules."
Treasurer Jim Chalmers said the allegations made about Medicare needed to be examined.
"If these numbers are true, it's absolutely atrocious. Every dollar rorted, whether it's from Medicare or the NDIS, is a dollar thieved from people who need and deserve good health care," he told reporters in Canberra on Monday.
"If you're stealing from Medicare or the NDIS, you're a grub. It means that money that's not exactly thick on the ground in the budget is not going to people who need it."
However, the country's peak medical body has called the claims of Medicare being defrauded a slur on the profession.
Australian Medical Association president Steve Robson said the vast majority of doctors did the right thing by their patients.
"Doctors will be sickened by today's reporting, which is an undeserved attack on the whole profession based very much on anecdotes and individual cases," he said.
"The AMA works closely with the Department of Health on compliance and we have never seen any concerns or numbers that would support the figures reported today."
Professor Robson said the AMA did not tolerate fraud and the figures were "grossly inflated".
"The vast majority of doctors do the right thing, and are working hard for their patients under tremendous pressure within the system," he said.
Government Services Minister Bill Shorten said while most of the general practitioners did the right thing, payment integrity was a problem.
"It drives taxpayers to despair if they think that some people are opportunistically rorting the system," he told Nine's Today show on Monday.
"Crooks do leave footprints ... obviously we have got to make sure there is complete confidence in the system but we need to put the crooks on notice that you will get caught."
