Federal health minister Sussan Ley says some people misunderstand Medicare to mean free health care but what it really offers is universal access to care.

People who believe the Medicare system guarantees free access to health care are wrong, federal health minister Sussan Ley says.

Ms Ley said on Thursday that in order to remain strong, the Medicare system had to adhere to its three founding principles of universal access, equitable cost distribution and simple administration.

"Our intention is for those three principles to remain, in fact they all do need to remain to keep Medicare strong," the minister told a Centre for Independent Studies event in Sydney.

"Sometimes people misinterpret what Medicare means and believe that it's about free or no-cost access to the system, and it never was - it was always universal access and that still remains."

In April Ms Ley announced a broad review of the Medicare Benefits Scheme, which will examine 5500 items on the payments schedule to try to eliminate poor-value and ineffective procedures now attracting rebates.

Ms Ley also established an advisory group for primary health care, led by former Australian Medical Association president Steve Hambleton, to look at improving efficiencies between federally funded GP and primary care and state-funded hospital care.

"For us to have this dividing line between how one level of government supports primary care and another level of government supports public hospitals, and not to have the incentives between the two is putting us in a situation where, if it's not ridiculous, it doesn't make a lot of sense," she said.

The federal government was forced to drop a proposed $5 GP co-payment in March after strident opposition from doctors and community groups and has declared the policy "dead".

The about-face leaves the government facing a $1 billion budget shortfall that must be funded through other measures.

Ms Ley said she wanted the MBS review completed within four years but has said it is not a savings exercise.

"At the end of that it will be a hell of a lot better than it is now," she said.