Objective To analyse Medicare expenditure by State/Territory, remoteness, and Indigenous demography to assess funding equality in meeting the health needs of remote Indigenous populations in the Northern Territory. Methods Analytic descriptions of Medicare online reports on services and benefits by key demographic variables linked with Australian Bureau of Statistics data on remoteness and Indigenous population proportion. The Northern Territory Indigenous and non-Indigenous populations were compared with the Australian average between the 2010/2011 and 2019/2020 fiscal years in terms of standardised rates of Medicare services and benefits. These were further analysed using ordinary least squares, simultaneous equations and multilevel models. Results In per capita terms, the Northern Territory receives around 30% less Medicare funds than the national average, even when additional Commonwealth funding for Aboriginal medical services is included. This funding shortfall amounts to approximately AU$80 million annually across both the Medicare Benefits Schedule and Pharmaceutical Benefits Scheme. The multilevel models indicate that providing healthcare for an Aboriginal and Torres Strait Islander person in a remote area involves a Medicare shortfall of AU$531-AU$1041 less Medicare Benefits Schedule benefits per annum compared with a non-Indigenous person in an urban area. Indigenous population proportion, together with remoteness, explained 51% of the funding variation. An age-sex based capitation funding model would correct about 87% of the Northern Territory primary care funding inequality. Conclusions The current Medicare funding scheme systematically disadvantages the Northern Territory. A needs-based funding model is required that does not penalise the Northern Territory population based on the remote primary health care service model.