Key facts
- Removing the higher private health insurance rebate for Australians aged 65 and over is set to take effect in April 2027.
- The rebate will become income-dependent, aligning with rules for those under 65.
- Research indicates the change could save the government between $730 million and $940 million annually by 2028-29.
- An estimated 14,821 to 42,498 older Australians may drop their private health insurance cover.
- The government plans to direct savings towards aged care.
- Critics argue the changes will strain public hospitals and are 'callous' towards older Australians.
The Australian government is set to remove a higher private health insurance rebate for individuals aged 65 and over, aligning the policy with income-based rules for younger citizens from April 2027. This change aims to generate significant government savings, estimated between $730 million and $940 million annually by 2028-29, which are earmarked for aged care.
Health economists from the University of Melbourne, including Associate Professor Kevin Staub and Professor Yuting Zhang, analyzed a decade of tax data for approximately 130,000 Australians. Their research suggests that the age-based rebate incentive has a minimal impact on private health insurance uptake, with habit and health needs being the primary drivers. They estimate that between 14,821 and 42,498 older Australians, or 0.1% to 0.4% of the insured population, might drop their cover as a result of the policy change, a figure consistent with government projections of 44,000.
Staub described the policy as 'good policy change,' arguing that the government spends substantial funds to retain individuals in insurance who would not otherwise cancel their coverage. Health Minister Mark Butler echoed this sentiment, stating that the changes are not expected to materially impact public hospital activity and that savings will be redirected to aged care. He dismissed concerns from the Australian Private Hospitals Association and the Australian Medical Association (AMA) about increased pressure on public hospitals.
Luke Slawomirski, a health economist at the Australia Institute, supported the University of Melbourne's empirical analysis, noting that subsidies for private health insurance show little evidence of relieving pressure on public hospitals due to shared clinical workforces and the nature of private coverage. The Australia Institute concluded the removal of the age-based rebate is a fair and modest change, highlighting that private insurance already involves younger, healthier members subsidizing older, sicker ones. They argue that the substantial government expenditure on private health insurance subsidies should yield clearer benefits to health outcomes or public hospital relief.
The AMA has urged the government to exempt low-income older Australians, such as pensioners, from the changes, as they currently benefit from the maximum rebate plus an age-based bonus. Shadow Health Minister Senator Anne Ruston criticized the reforms as 'callous,' particularly for pensioners, and pledged to oppose them in the Senate, questioning the government's approach to policy implementation.