Insurance companies and employers will be locked out of the national health database planned to start next year.
Every newborn, as well as every Australian holding a Medicare card or Veterans Affairs card, will automatically be allocated a "healthcare identification" number that privacy groups have branded a de facto national ID card.
The number may eventually be linked to patients' medical records, but anyone who misuses the information will face two years' jail, under draft legislation released by Health Minister Nicola Roxon on Friday.