Australia's peak medical body will no longer have a say on who leads the agency investigating potential Medicare fraud.

New laws introduced to federal parliament on Wednesday will remove the veto power of the Australian Medical Association over the government's choice of director for the Professional Services Review agency.

The independent agency investigates possible inappropriate practice by doctors within the Medicare system, but its head could only be appointed with the medical association's approval.

The law changes come following a review by health economist Pradeep Philip, which found Medicare fraud was likely costing up to $3 billion per year.

The Philip review made 23 recommendations, including removing the veto power of the medical association.

Assistant health minister Ged Kearney said the powers of the medical association created the potential for a conflict of interest.

"The government considers that this veto power is not consistent with public expectations and undermines confidence in the independence of the PSR as a regulator," she told parliament on Wednesday.

"This veto power has also never been exercised, raising further questions of the need for this requirement."

As part of the new laws, direct consultation will be able to be carried out with other medical peak bodies surrounding appointments to the review, instead of having the medical association coordinate the process.

Ms Kearney said the changes would allow for the Medicare oversight body to be more independent.