Private Healthcare Australia has warned that the federal government’s plan to remove higher rebates from more than three million older Australians would trigger a large “cost shift.”
This comes months after federal health minister Mark Butler announced cuts to the higher private health insurance rebate for older Australians aged 65 and over to raise funds to drive Labor’s $3 billion aged care initiative.
The peak body said the change would force tens of thousands to abandon or downgrade cover, and has the potential to “destabilise” the health system.
Private Healthcare Australia (PHA) said the bill would raise premiums for older Australians by up to $600 a year. This means that older Australians would pay more than $900 million extra.
“The proposed rebate cuts are essentially a large cost-shift from the Australian Government to more than three million Australians holding private health insurance,” Private Healthcare Australia stated (pdf). “These cuts could destabilise the health system as a whole, not just disadvantage those directly affected.”
The comments were made in its submission to the Senate Community Affairs Legislation Committee inquiry into the Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026. The committee is due to report by Oct. 7.
PHA estimated 62,000 people would drop cover, and around 200,000 would downgrade, mostly from Gold to products with exclusions.
“PHA is particularly concerned that low-income Australians across the country will drop or downgrade their private health insurance if this legislation passes,” the submission said.
The peak body called the bill a “massive cost shift” that must be reconsidered. The submission warned that Tasmania, the Sunshine Coast, and the north coast of New South Wales would be disproportionately affected.
Hundreds of Thousands Older Aussies Will Be Affected: HCF, Medibank
Meanwhile Hospitals Contribution Fund (HCF) Australia’s largest not-for-profit fund, said the changes would hit more than 400,000 of its members.
The fund said (pdf) the cuts would accelerate lapses and downgrades. Participation would weaken and extra pressure would fall on public hospitals.
Older members could experience the equivalent of approximately three years of average premium increases in a single change on April 1, 2027.
HCF modelling shows about 20.4 percent of its members would be affected. Member research conducted by HCF found 63 percent said changes like this make private health insurance feel unpredictable or unstable.
Only 29 percent thought private health insurance would remain affordable for people aged 65 and over.
Meanwhile, Medibank warned in its submission of unintended consequences for affordability and system capacity.
More than 700,000 of its customers aged 65 and over face higher costs, with around 70 percent aged 70 and over.
“We are concerned that removing the age-based Private Health Insurance (PHI) rebate for Australians aged 65 years and over may have unintended consequences for affordability, PHI participation and broader health system sustainability,” Medibank stated (pdf).
Many long-standing members would be hit hardest, the insurer said.
Analysis by Medibank indicates that about 78 percent of affected customers have held cover with Medibank or AHM for over 10 years.
Members aged 65 to 69 could experience premium increases of around four to 6 percent, while members aged 70 and over could face rises of nine to 12 percent.
Similarly to PHA, Medibank said affordability pressures may lead some customers to downgrade from Gold products to lower-cost options.
The insurer warned this long-term movement away from comprehensive cover could place upward pressure on premiums for remaining policyholders.
Australian Private Hospitals Association Opposes Bill
The Australian Private Hospitals Association (APHA) made it clear it was against the bill.
“Older Australians keep private health insurance not simply because they prefer it, but because they cannot afford to be without it,” the association said (pdf).
APH private hospitals deliver 44 percent of all the admitted episodes of care to people over 65 in Australia.
APHA claimed the health department “misunderstands” why older Australians take out and keep private health insurance.
“Older Australians keep private health insurance not simply because they prefer it, but because they cannot afford to be without it,” the association said.
APH said older people often have “serious and ongoing health needs,” noting that public hospital wait times may be “too long” to safely manage these conditions.
The Epoch Times has contacted the Minister’s office for comment.
What the Government is Proposing
The bill would remove the higher private health insurance rebate for people aged 65 and over from April 1, 2027.
Currently people aged 65 to 69 receive a 28 percent rebate, which is just over four percentage points higher than those under 65.
Meanwhile, people aged 70 and older receive a 32 percent rebate, just over eight percentage points higher.
Minister Mark Butler defended the changes as necessary to restore “intergenerational equity.”
“The Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026 will address intergenerational inequity, simplify, and better target the rebate for private health insurance premiums,” Butler told parliament (pdf) in June.
“And the current model is simply not the best way to spend taxpayers’ dollars on behalf of older Australians when there is a significant need to expand access to aged-care services.”
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