Millions of older Australians are set to lose the extra private health insurance support they currently receive, with the federal government moving to calculate rebates based only on income from next year.
Liberal deputy leader Jane Hume has condemned the overhaul as “profoundly unfair”, claiming the government is hitting older Australians with what she called a “mean-spirited $11 billion tax” by removing the higher age-based rebate and abandoning an election commitment.
The change, announced by Health Minister Mark Butler ahead of the May federal budget, will scrap the higher private health insurance rebates available to older Australians from April 2027.
At present, Australians aged 65 and above receive a larger government contribution toward private health insurance than younger people with the same income. Those aged 65 to 69 qualify for an increased rebate, while Australians aged 70 and over receive an even greater level of assistance.
From April 2027, age will no longer be a factor in determining the rebate. People on the same income will receive the same level of support, meaning many older policyholders will face higher out-of-pocket insurance costs.
The overhaul could add up to $250 a year to premiums for Australians over 65, while those aged over 70 may pay as much as $500 more annually. Around three million people are expected to be affected by the change.
Under the current rules, for instance, a 72-year-old and a 45-year-old earning the same income receive different rebate amounts, with the older Australian getting a higher taxpayer-funded contribution.
Millions of older Australians will lose the higher private health insurance rebates they currently receive as the federal government shifts subsidies to an income-only model
Sunrise host Nat Barr pressed health minister Mark Butler on why taking money off elderly Australian’s counted as ‘equality’.
But from April 2027, both will receive the same rebate, meaning the 72-year-old could end up paying up to $500 more each year for the same level of private health insurance cover.
Speaking on Sunrise on Friday morning, Senator Hume accused Butler of imposing a ‘mean-spirited $11bn tax’.
‘Mark, you didn’t announce this before the election, and I think it would have made a serious impact on the way people thought about the Labor Party if you had done that,’ Hume said.
‘Let’s face it, a lot of these older Australians are on fixed incomes, and they simply can’t absorb the changes or the new costs you’ve imposed on their private health insurance.
‘They’ve done the right thing for years. They’ve alleviated the pressure on the public system, and now you’re going to tax them more.’
About $3 billion is expected to be saved under the changes, which Butler has pledged will go towards aged care funding.
‘We’re confident that this is the right decision, and it’s important to remember why we’re doing this. We have to find more money for aged care services,’ Butler told Sunrise host Natalie Barr.
‘Every dollar we save through this measure will be invested in more aged care beds, better care, more home care packages, because we know that with every single budget we’re having to find more money to care for people who need that care and deserve that care.
Mark Butler promised the savings generated by the policy would be funnelled into aged care
There are concerns the changes will increase pressure on hospitals already under intense strain
‘There’s no lazy free money lying around. We have to take sometimes quite hard decisions in a budget, and this is a hard decision.’
Barr asked if he was concerned about the possibility of the already strained public system being inundated with new customers.
‘If you take that rebate off those people, how do you know that only 40,000 will go off the private health system?’ she asked.
‘What if your Treasury modelling figures are wrong? What if tens of thousands just say, “You know what? I am sick of this. I’m getting out of private health”, and then more people go into public hospitals?’
Butler said the modelling was based in part on trends observed in customer behaviour in the face of previous fee increases.
‘We have some experience in understanding the behavioural pact of these things,’ he said.
‘But remember, what this will mean now is two households next to each other, for example, on $50,000, one of them over 65, the other household in their 40s or in their 50s with kids, they’ll now both receive the same subsidy from government or from taxpayers to pay for their private health insurance.
‘So, about a quarter of their private health bill will be paid for by taxpayers, and I think that’s a pretty equitable place to be. Two households next to each other give the same subsidy based on their income.’
Barr, however, pressed the minister on why taking money off elderly Australian’s counted as ‘equality’.
Jane Hume accused the government of targeting older Australians with ‘sneaky tax’
‘So, it’s multigenerational equity for people over 70 who have some of this taken off them?’ she asked.
‘We’ve had to find more money to fund aged care services,’ Butler said.
‘We’ve put an eye-watering amount of extra money into aged care over the last two years to get it out of the position that the Royal Commission described it as neglect, and to fund the extra demand that’s coming from the ageing of the baby boomer generation, and that sometimes involves difficult decisions in a budget.
‘I feel like this has been a difficult decision. Of course, I’d prefer not to make it, but I think it takes us back to the old position where people received health insurance subsidies based on their income rather than their age.’
Hume warned that retirees on fixed incomes would flood the public system following the change.
‘This is a false economy, but moreover, it’s another sneaky Labor tax on older Australians.’
