Older Australians think about health insurance rebate changes

Health Insurance

Sue Donnelly and her husband Peter are thinking about ending their private health insurance now. (Supplied: Sue Donnelly)

In short:

The federal government has proposed reducing private health insurance rebates for Australians aged over 65.

Insurance industry estimates say 62,000 older Australians may end their insurance and 200,000 may downgrade as a result of the change.

What's next?

A Senate Community Affairs Legislation Committee's inquiry into the bill will be presented on October 7.

For most of her life, Sue Donnelly has paid for private health insurance.

But now, with price increases on the way, she and her husband are considering ending their cover.

"We're 78 and 81; we really need to have it," Ms Donnelly said from her home in regional Victoria.

The federal government this year proposed legislation to reduce the private health insurance rebate that currently applies to over-65s.

The change would mean rebates would be "age-neutral" and determined by income alone, leaving impacted premiums with an increase of between 4 and 8 per cent.

Ms Donnelly said she didn't have a lot of incoming funds and was worried about how the change would impact them.

"It's money I have to really make sure I put to one side every month," she said.

Public system under pressure

Estimates from Private Healthcare Australia show 62,000 older Australians would likely cease their private health insurance as a result of the proposed changes, with another 200,000 potentially downgrading theirs.

The Shadow Regional Health Minister and Member for Mallee, Anne Webster, said she was worried about how the public health system would cope if a large cohort of older Australians suddenly shifted away from private health insurance.

"When private services disappear, patients do not. They are pushed into the public system," she said.

Anne Webster wants to see the legislation walked back, following backlash from the states, insurance companies and senior advocates. (ABC Mildura Swan Hill)

Dr Webster said the Mildura Base Public Hospital, located in her electorate of Mallee, already has "enormous wait times" and concerns around staffing, which she said could worsen under the change.

Health ministers from South Australia, New South Wales, Queensland and Tasmania have also spoken in opposition, citing concerns for older Australians and hospitals in their own states.

Funds already losing members

Mildura Health Fund is a not-for-profit member-owned fund, with more than 40,000 members, 41 per cent of whom are over 65.

Chief Executive Officer Gerard Op de Coul has been lobbying against the proposed legislation. He said rising costs had already led to customers ending their cover, even before the proposed reduced rebate comes in.

National Seniors Australia has a cost calculator on its website to help people estimate how much their bill will increase by if the bill becomes law.

The organisation estimated, from the rebate cut alone, annual payments could grow by more than $1,000 for a couple with "gold level" cover.

Gerard Op de Coul says the increase in memberships at Mildura Health Fund is not as strong as usual. (Supplied: Mildura Health Fund)

However, Mr Op de Coul said premiums could increase by as much as 12 per cent for older Australian come April, due to a mix of both the proposed rebate reduction and rising costs in the medical industry.

"Our [over-65] membership base is above average, so we would expect that we would be hit harder than in other areas."

Minister says no 'material impact'

The rebate change was first put forward in in the 2026-27 budget and is tipped to save the government $3 billion over four years.

Mark Butler says there will be no impact on public hospitals as a result of the change. (ABC News: Ian Cutmore)

Speaking on ABC Radio Perth, Health Minister Mark Butler hit back against claims the public health system would get busier.

"Some of the modelling put about by the private health insurance industry itself thinks that it will, but our modelling says no, there won't be a material impact on private health insurance membership," he said.

A government spokesperson revealed the commonwealth expected the overall number of people with private health insurance would increase, including for people aged over 65.

Mr Butler said "every single dollar" saved through the change would be invested in new aged care services "that, frankly, we just have to start putting in place if older Australians are going to get the care and dignity that they deserve".

Conflicting data

University of Melbourne Professor Yuting Zhang is the co-author of a recent report analysing how tax penalties and subsidies impact private health insurance.

Professor Zhang says older Australians need to evaluate benefits versus cost. (Supplied)

She said it was unlikely older Australians would end their private health insurance, as the benefits outweigh the costs.

"[The impact on public hospitals] is going to be quite small because not a lot of people are going to drop [their private health insurance] because of this bill," Professor Zhang said.

"[Older Australians] still get lots of benefit by holding their private cover and they are most likely not going to switch into the public system."

The report estimates about 42,000 people would drop their cover across Australia.

The National Seniors Australia director of policy and research, Brendon Radford, said the organisation was "disappointed" by the bill and said the government was "downplaying" the issue.

Dr Radford says private health insurance is one of the top concerns in terms of affordability for older people. (Supplied: National Seniors Australia)

He said the data used in the government's models was "not as good as it should be".

"It only accounts for people dropping their policy," he said.

A Senate Community Affairs Legislation Committee's inquiry into the bill will be presented on October 7.

The government will need the support of the Greens or crossbench to pass the legislation.

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