Health Minister
The stunning reversal comes after Labor, Greens and the crossbenchers announced on Wednesday they would team up to defeat the changes in the Senate when Parliament returns in February.
The changes were scheduled to come into force on Monday, and would have seen rebates for the short visits fall by $20.
They have attracted fierce criticism from GPs, who have accused the government of imposing radical change without consultation and over the holiday period.
"I am deeply concerned by the misinformation that is causing confusion for patients and confusion for doctors. As a result, I'm announcing today that the changes to level A and B Medicare consultation items will not commence on Monday as planned. The Government is taking them off the table," Ms Ley said.
"I'm announcing today my strong commitment to undertake wide ranging consultation on the ground with doctors and the community across the country in order to come up with sensible options to deliver appropriate Medicare reform."
As late as Thursday morning Small Business Minister
"We'll continue to make the case that this reform is necessary. It is thoughtful, it is prudent. This change is on the table. It is being implemented," Mr Billson said.
Australian Medical Association President Brian Owler, who earlier on Thursday released a letter to Prime Minister
"I think common sense has prevailed and the Minister and PM have ended the uncertainty about these changes and now are going to embark on the process of consultation that the AMA has requested all along they do," Dr Owler said.
"Under the last minister that's when this new policy came in and I think it was very unfair for a new minister to be dumped with this policy that was clearly a very bad policy and only announced a few weeks earlier and to ask her to go out and defend it is not a good start to her role as Health Minister."
In a statement Ms Ley set out four principles that would guide her consultation process, including protecting Medicare in the long-term, maintaining bulk-billing for vulnerable and concessional patients, high-quality care and treatment for all Australians, and the insertion of a modest co-payment as a price signal in the health system.
The measure was part of a reform package announced to replace the mandatory $7 co-payment and was put together by former Health Minister
Ms Ley, who was only sworn into the role in late December and has been on leave for most of the summer period, said the government's decision to dump the plan was final and had been a result of feedback from doctors and her own party colleagues. She did not rule out alternative policies designed to increase GP consultation times, saying "doing nothing was not an option".
But she moved to distance herself from the original plan drawn up by Mr Dutton, saying her style as the new minister would be more consultative.
"What I would say is we're a team. I'm announcing a decision that has been made. We are a team but this is very much my stamp, I believe, on the portfolio, that of consulting, engaging and listening," Ms Ley said.
"I don't want to comment on what went before. I was a minister in another portfolio. I've been sworn in as the Health Minister, this is the approach that I'm taking."
The announcement today marks the second major health policy the government has been forced to dump in less than two months. The original $7 co-payment was abandoned in December after weeks of speculation, with Prime Minister Tony Abbott describing the change of heart as evidence that the government was listening to criticism.
With AAP