The Australian Medical Association has issued a pre-emptive warning to the government against a major expansion of the role of private health insurers, arguing the public did not want a US-style “managed care” system in primary care and hospitals.

The AMA president, Brian Owler, said the government would need to change the law if it wanted to allow private health insurers to insure for the “gap” payment for GP consultations, but warned that this would lead to “all sorts of problems”, including straining the traditional doctor-patient relationship.

Owler told the National Press Club in Canberra on Wednesday that he feared private health insurers were leading a concerted effort “to undermine and control the medical profession” and that the government was “looking towards” a system in which insurers dictated the care that patients received and which medical professionals they visited.

He also reaffirmed the AMA’s separate concerns about the government’s budget plan for a $7 co-payment for GP visits, pathology and diagnostic imaging from July next year, arguing it “threatens the very foundations of the health system”, including universality and affordability.

He did not outline details of an alternative model that the AMA would soon present to the government as a possible compromise, saying only that it would provide protections for vulnerable patients and “value general practice”. The AMA opposed any reduction in the Medicare rebate.

But it was in the area of private health insurance that Owler offered some of his most forthright comments.

He said that, unlike the US arrangements, Australia had a community-rated health insurance system, which allowed patients with chronic conditions to obtain coverage and ensured patients could not be refused private health insurance or have their policy withdrawn if they became ill or too expensive to care for. The cost of expensive care was therefore shared among insurers.

“Despite the protests of innocence, I fear a concerted effort on behalf of private health insurers to undermine and control the medical profession,” Owler said.

“The stage is being set for a US-style managed care system in both the primary care and hospital settings. I am concerned that the government is also looking towards such a system.”

Owler said private insurers were looking at avenues to access general practice and primary care, citing as an example the Medibank private and independent practitioner network trial in which the insurer paid an administrative fee in return for Medibank’s patients receiving priority appointments.

“That might work in this trial, but how does that work with multiple insurers and practices? Those without insurance, often those that most need health care, will have less access to a GP,” Owler said.

“There is talk of private health insurers tendering to provide support to general practice through the new primary health networks. The AMA has concerns about the appropriateness of such an arrangement and the inherent conflicts of interest.

“Recently we have become concerned about processes that have been introduced for pre-approval of certain medical procedures.

“The AMA supports a strong role for private health insurers but we will not allow private health insurers, motivated by profits and market share, encroaching into the doctor-patient relationship.”

Owler said the government had “engaged very closely” with private health insurers and had asked them for information about how they might contribute. The AMA had written to the government outlining its concerns.

The health minister, Peter Dutton, has previously said the government “would never go down the path of an American system”, but was open to talks with the health insurance sector.

“If insurers are prepared to spend money on patients in addition to what is being spent on Medicare – say, five years earlier before somebody has type 2 diabetes; if they can help pay for a podiatrist or a dietitian or to supplement money that we couldn’t spend just on Medicare – if they want to spend that money in a preventive way then I’m happy to have that discussion,” Dutton told the ABC last month.

“But that would not involve people opting out of Medicare. We will not have a two-tier system but we will wait to see what the trials recommend. The trials that have been taking place in Queensland and Victoria will be important but the Coalition is thoroughly committed to Medicare and we demonstrated that in the budget.”

Owler said private health insurers and the government understood the public did not want a US-style managed care system. “But it doesn’t matter what name you call it, if it interferes with the doctor-patient relationship and interferes with the autonomy of being able to prescribe and indicate the treatment patients should have, that is what managed care is,” he said.

“The private health insurers’ motivation is profit and it is market share and while we understand that there are some areas in primary care where private health insurers may have a role, I think we need to be very careful about how that is done.”

Labor’s health spokeswoman, Catherine King, seized on the AMA’s warnings.

“The cuts and structural changes announced in the budget put Australia on the path to the US system of managed care and it is clear this is what the Abbott government’s long-term intention is,” King said in a statement.

As previously reported, Owler said the prime minister had asked the AMA to come back with an alternative proposal for the GP co-payment. Owler said while the AMA was not necessarily opposed to co-payments, the government’s proposal lacked protections for vulnerable patients.

Owler said it went against health policy to encourage people to see the family doctor for vaccinations and monitoring of health problems and jeopardised efforts to “close the gap” in Indigenous health outcomes.

Labor, the Greens and the Palmer United party have declared their clear opposition to the co-payment, indicating it cannot pass the Senate.

Owler also stressed the importance of preventive health and challenged the government’s arguments about the affordability and sustainability of the health system.

He said in the lead-up to the budget Australians “were pre-medicated on a constant narrative of an out-of-control health care system”, yet Australia spent a lower than average amount on health compared with other OECD countries.

Owler criticised the government’s budget decision to end the national health reform agreement, which would have required the commonwealth to contribute 50% of growth funding. He said shifting to funding public hospitals by the consumer price index plus population growth from 2017 “turns the federal government from a lifter into a leaner”.