State and territory health ministers met in Sydney on Friday to press the federal government to abandon its plan to remove the higher private health insurance rebate paid to Australians aged 65 and over, a budget measure worth $3 billion over four years that is due to start on 1 April 2027 if the Senate passes it. A Senate committee examining the bill sat in the same city on the same day.
The rebate is already means tested. What the bill introduced by Health Minister Mark Butler on 25 June would remove is the age loading on top of it. A single earning up to $105,000 currently gets 24.118 per cent of their premium back if they are under 65, 28.139 per cent between 65 and 69, and 32.158 per cent from 70. The bill sets the rebate by income alone, so a base-tier policyholder over 70 loses about eight percentage points of premium support. Butler told the House in August the average cost would be "in the order of $220 to $250 a year" and that about 3.2 million people are affected. The insurers' lobby, Private Healthcare Australia, puts the loss for a couple over 70 on top-tier hospital cover at $1,614 a year.
The states' case is about who pays for the people who drop out. New South Wales Health Minister Ryan Park said the change "will place additional pressure onto NSW's public hospitals at a time when health services are already experiencing significant demand", and released departmental modelling that up to 80,000 residents over 65 could cancel or downgrade cover, sending more than 23,000 extra surgeries a year into public hospitals. Queensland's Tim Nicholls called it "robbing Peter to pay Paul, and Paul hasn't been paid yet". Victoria's Ingrid Stitt said any change that left older Victorians worse off and put pressure on public hospitals was "unacceptable". Tasmania's Liberal government has called it a cost shift from the Commonwealth to the states; the Labor governments in Sydney, Melbourne and Adelaide say the same thing.
The Commonwealth is not moving. In a statement to the ABC it said it projected that "around 0.4 per cent" of people would leave private insurance because of the change, and that the January hospital funding agreement gives the states an additional $24.4 billion over five years. Butler's argument for the measure is one of equal treatment. "It will mean that two households next door to each other on exactly the same income will receive the same support from government for their health insurance, regardless of age," he told the House in June. The age loading was added by the Howard government in 2004; Labor means-tested the rebate in 2012. Every dollar saved, Butler says, goes to aged care, including $1.7 billion to build 5,000 residential beds a year.
Because the rebate already cuts out for singles earning more than $164,000, the change lands entirely on older people below that line, and mostly at the bottom of it. Members Health, which represents not-for-profit funds, says 70 per cent of insured Australians over 65 earn $55,000 or less. The Council on the Ageing says 1.2 million pensioners are affected, a figure it has not sourced; Private Healthcare Australia says more than 400,000. National Seniors chief executive Chris Grice put it to the ABC in May: "This isn't an age situation, it's a wealth situation. It's rich versus poor, it's not one age versus the other age." Shadow Health Minister Anne Ruston has released a departmental Finity report, obtained under freedom of information, which she says shows public hospitals bear $1.20 in extra admissions for every dollar the Commonwealth saves.
The bill's fate is in the Senate. The Coalition will vote against it. Jacqui Lambie and One Nation have said they will too. The Greens, whose votes Labor needs, have not decided; Senator Jordon Steele-John said in July the government "should have been taxing gas exports" instead. David Pocock is still consulting. The Community Affairs Legislation Committee, which heard evidence in Sydney on Friday, received 33 submissions of which 30 opposed the bill, including those of the New South Wales, Queensland, South Australian and Tasmanian governments. It reports on 7 October, a month before insurers lodge their 2027 premium applications.
The ministers had a second item on Friday's agenda that belongs to the same ledger. The ABC reported more than 3,700 aged care patients are now stranded in public hospital beds nationally, up from about 2,500 a year ago, with one Queensland patient there for more than 1,000 days. South Australia's Blair Boyer called it "the singular biggest issue that the South Australian health system faces today". The beds that would take those patients are what the rebate saving is meant to build. Whether the Senate lets the Commonwealth raise the money that way will be settled after 7 October, and the states will be back at the table before then.
