Yes, having a medicare card satisfies the 8501 condition, but to get a medicare card you need proof of your visa. Hence the catch-22 in my thread title.
I'm going to try going into the Medicare office tomorrow and see if they will do it without proof of the visa. It seems easier than trying to go to DIAC and get the visa granted automatically. Someone on another forum said DIAC won't talk to you directly if you've appointed a migration agent anyway (which pisses me off more than a little).
I guess if we can't do it that way we might have to get insurance and then cancel it. That also pisses me off because the insurance they offer to 457 visa holders only covers the same things that we get from the reciprocal agreement anyway.