An estimated 78,000 older Australians could drop private health insurance by 2029-30 under the federal government’s proposed rebate changes, according to Health Department modelling obtained by the ABC.
Meanwhile, COTA Australia has warned that some older people may cut healthcare spending and other essentials to maintain their cover.
For aged care providers, the debate over private health insurance for seniors raises questions about hospital demand, discharge planning and funding for additional aged care services.
Senate private health insurance legislation: What is changing?
The government wants to remove additional age-based private health insurance rebates for Australians aged 65 and over from 1 April 2027.
At the base income tier, the rebate for people aged 65–69 would fall from 28.139% to 24.118%, while those aged 70 and over would see a reduction from 32.158% to 24.118%.
On 14 October, the Senate voted 38–23 to remove the bill from its agenda. The motion was moved by independent senator Jacqui Lambie and opposition health spokesperson Anne Ruston, with support from the Greens.
Health Minister Mark Butler reintroduced the legislation the following morning.
The government argues rebates should be based on income rather than age. The proposal forms part of broader changes to aged care and disability support announced by Butler earlier this year. It expects approximately $3 billion in savings over four years to fund additional aged care beds and home care services.
However, the Greens want pensioners exempted, while the Coalition opposes the changes.
COTA warns older Australians could cut healthcare spending
A COTA Australia survey of 1,332 supporters aged over 65 found one in three respondents would cancel or change their insurance if the additional rebate were removed.
Another 34.2% said their most likely response would be to cut spending elsewhere to keep their existing cover.
Asked what they would consider cutting if they kept their cover and premiums increased, 54.7% nominated at least one health or aged care expense, 41.2% food or groceries and 26.3% energy costs.
The survey reflects respondents’ stated intentions and isn’t representative of all older Australians.
COTA CEO Patricia Sparrow says that retaining insurance shouldn’t be mistaken for being able to afford higher premiums.
“Older people are telling us they want to keep their private health insurance, but many are looking at some incredibly difficult sacrifices to do so,” she said.
“The government should be making it easier for older Australians to look after their health, not creating a situation where paying for one form of healthcare means cutting back on another.”
COTA also cited Parliamentary Budget Office evidence that almost half of the proposed $3 billion savings would come from pensioners.
Exempting pensioners could therefore substantially reduce the funding available for the government’s aged care commitments.
Private health cover over 65: Could public hospitals face pressure?
The Health Department’s earlier modelling projected 44,000 fewer older Australians holding private cover by 2028-29, compared with the latest estimate of 78,000 by 2029-30.
Catholic Health Australia’s separate modelling suggests more than 200,000 older Australians could drop or downgrade hospital cover, potentially shifting $675 million annually onto public hospitals.
Catholic Health Australia has also previously called for private health insurance to cover hospital-level care at home, arguing it could reduce hospital admissions and improve continuity of care for older Australians.
However, health economist Stephen Duckett has argued the impact on public hospitals could be relatively small.
These competing assessments leave uncertainty about whether reduced private coverage would increase public hospital demand, affect discharge planning or create additional pressure on aged care services.
What should aged care boards plan for?
For aged care boards and operators, the legislation presents several possible outcomes.
If it passes unchanged, providers may need to monitor hospital referral patterns, demand for aged care services and changes in older people’s healthcare spending.
If pensioners are exempted, substantially less than the projected $3 billion may be available for additional aged care capacity.
If the bill remains blocked, questions persist about how the government will fund its promised investments.
For aged care boards and operators, the immediate task is to assess how each scenario could affect hospital referrals, service demand, capacity planning and future investment.
