(Refiles to fix personal pronoun in final two paragraphs)
By Matt Siegel
CANBERRA May 13 (Reuters) - Healthcare in Australia is set for its biggest shake-up since the introduction of universal coverage in the 1970s, as part of a tough federal budget on Tuesday that critics fret is taking the country towards a U.S.-style system.
An audit of the Australian economy released last month recommended broad structural changes and a tight rein on costs to stem what the government warns is a looming "fiscal crisis" as the country's decade-long mining boom slows.
But of the sectors examined by the National Commission of Audit it was healthcare, which accounted for 8.9 per cent of GDP in 2010-2011 according to OECD figures, that was singled out as the country's most serious long-term fiscal challenge.
In support of that position, the audit recommended an A$15 ($14) fee for doctors' visits and proposed a U.S.-style healthcare model in which all Australians would be required to buy private health insurance, with lower wage earners receiving a subsidy.
That puts Australia in the odd position of moving away from universal coverage even as U.S. President Barack Obama has spent years of political capital trying to introduce it in his country, the last holdout against universal coverage in the developed world.
"Australia is the only country heading in the opposite direction," Lesley Russell, an Adjunct Associate Professor at the University of Sydney's Menzies Centre for Health Policy, who advised Obama's administration on its healthcare reforms, told Reuters.
"I think that what we are getting is this very old-fashioned ideological view of what healthcare used to be in 1950. And everybody else has moved on from that."
Like many wealthy countries, Australia provides universal healthcare for all of its citizens regardless of income through a taxpayer-funded system called Medicare, similar to Britain's National Health Service.
Australian spending on healthcare was slightly lower than the OECD average of 9.3 percent of GDP in 2011, putting it behind the United States at 17.7 per cent and a number of European countries including France, Germany and the United Kingdom.
But Prime Minister Tony Abbott's government argues that healthcare costs are unsustainable and must be reined in as part of reforms aimed at ending what Treasurer Joe Hockey calls "the age of entitlement".
"There is no such thing as a free visit to a doctor," Hockey said earlier this month.
"Government services are somehow deemed to be magically free but of course they're not free. They are paid for by the taxpayer."
It remains unclear which recommendations the government will adopt in the budget, but it has been widely reported that a A$7 doctor's fee will be instituted alongside increases in co-payments for medications covered under the scheme.
Another possibility is that high-income Australians could be opted out of the system through private insurance, moving it closer to the system in the United States.
Russell said the proposals ran contrary to global healthcare trends moving towards universal healthcare, she said, citing the reforms in the United States as a prime example.
Although it was too soon to compare the changes directly to the much maligned U.S. system before the so-called Obamacare reforms, she said, the proposals "send shivers down your spine".
"Medicare works in Australia because the richest and the poorest of us have the same stake in the system. And if they change that, that really scares me. That's the end of Medicare," she said.
The possibility that changes will unfairly impact low-income Australians, for whom a A$7 fee would be a deterrent to visiting a doctor, is a sticking point in a country that prides itself on a "fair go for all".
Rishu Malepati, a cleaner in Sydney, argued that the A$7 fee was indeed a high cost on top of what Australians already pay for healthcare through their taxes.
"We should not have to pay for this added cost. I don't like this," he said.
But Robyn Carr, who owns an eye-wear shop in Sydney, said that she felt people abused the system and that the fee was so small that it would likely not hurt anyone.
"It doesn't bother me," she told Reuters. ($1 = A$1.07) (Reporting by Matt Siegel in CANBERRA and Maggie Lu Yueyang in SYDNEY; Editing by Nick Macfie)