Health minister Mark Butler has confirmed the government will proceed with plans to reduce higher private health insurance rebates for people aged 65 and over, despite strong opposition from insurers and advocacy groups. The policy, announced before last week's budget, aims to bring rebates for older Australians in line with those under 65.
Policy Details and Expected Impact
The federal government anticipates the change could increase private health insurance costs for the affected cohort by up to $250 per year. Industry estimates suggest approximately three million older Australians will be impacted, with up to 44,000 potentially abandoning their cover. However, leading health economist Dr Stephen Duckett from the University of Melbourne has described the move as a “wise move” that will have minimal consequences for the public health system.
“There’ll be almost no impact on the public health system,” Duckett stated. He noted that the projected 44,000 people who might drop insurance are spread across eight states and territories, making the effect statistically undetectable. Duckett also highlighted that previous modelling on the rebate’s introduction in 2004 found it had little impact on private health insurance uptake among older Australians.
Government Justification and Use of Savings
The health minister, Mark Butler, announced the change on 22 April alongside major reforms to the National Disability Insurance Scheme. The policy is expected to save $3 million over four years, which will be redirected to increasing the number of beds in aged care homes. Butler argued the current system is “not fair between generations,” as two households with the same income receive different rebates based solely on age.
“I recognise this is an unwelcome change for many older Australians,” Butler told the ABC. “But at a time where we need to find every dollar we can to plough into aged care services, continuing to pay people a higher subsidy for their private health insurance not on difference in income, but difference in age, was just difficult to sustain.”
Concerns from Advocacy Groups and Insurers
The Council on the Ageing (Cota) has expressed serious concerns about the additional financial pressure on older Australians already grappling with rising living costs. Cota’s chief executive, Patricia Sparrow, said the peak body had heard from many older Australians worried about the policy’s impacts. “For some people, the added cost may be manageable, but for many others living on fixed or modest incomes, every extra dollar matters,” Sparrow said.
Dr Rachel David, chief executive of Private Healthcare Australia, warned of wider consequences. “We are concerned many older Australians will move to cheaper policies with significant exclusions or restrictions and only discover they are not covered when they need treatment,” David said. “This creates a flow-on effect for public hospitals because patients who lose or downgrade cover do not disappear from the health system – they end up relying more heavily on publicly funded care.”
However, Duckett countered that redirecting savings from rebate reductions to aged care beds is far more cost-effective. “If a person is stuck in a public hospital bed, they’re often there for 100 days or so, which is about 20 patients being admitted to the hospital at an average length of five days, so it’s a really important initiative in getting the public hospital system to work better,” he explained.
