High-income earners would lose access to Medicare while everyone else would have to pay more to see a doctor under proposals for the health system.
Rich and poor patients would face greater out-of-pocket costs as the commission warned soaring medical bills were the biggest long-term strain on the Federal Budget.
One option calls for singles earning more than $88,000 a year and families earning more than $176,000 to no longer be eligible for basic Medicare services.
Instead, they would be forced to take out private health insurance to cover as a minimum doctors' visits as well as treatment in public hospitals.
But the 30 per cent private health insurance rebate would not be available to these people.
The Medicare levy surcharge would be raised from 1-1.5 per cent to 3-3.5 per cent to penalise high-income earners who did not join a health fund.
Private health insurers would also be given flexibility to take into account risk factors when setting premiums, such as smoking.
For people remaining in Medicare, they would be slugged a co-payment for all Medicare services, including visits to GPs and specialists, eye tests and pathology tests.
The co-payment would be set at $15 for general patients and $5 for concession cardholders such as pensioners.
Once a patient exceeded 15 visits a year, their co-payment would fall to $7.50 or $2.50 respectively.
Audit commission chairman Tony Shepherd said people visited doctors on average 11 times a year but GP survey statistics actually put this figure at five to six a year.
State governments would be able to introduce co-payments for public hospital emergency departments to deter sick patients from seeking free treatment there. The hospital co-payment would apply only to less urgent conditions more appropriately treated by GPs.
Co-payments would also be raised for medicines on the taxpayer-subsidised Pharmaceutical Benefits Scheme. General patients would pay $5 more per script ($41.90 below the safety net, $11 once they hit it).
Concession cardholders would still pay $6 a script but when they hit their $360 safety net, they would pay $2 co-contribution instead of getting their medicine free.
But cheaper medicine prices could flow from the establishment of a new independent drugs tsar to oversee the PBS.
Rules protecting chemists from competition would also be relaxed, including the possibility of supermarket chains being allowed to dispense scripts.
As part of its rationalisation of bureaucracies, the commission recommends merging a raft of health bodies into one new agency.