The federal government has proposed legislation to reduce the private health insurance rebate that currently applies to Australians aged over 65, a move that would make the rebate "age-neutral" and determined by income alone. The change would push impacted premiums up by between 4 and 8 per cent and is tipped to save the government $3 billion over four years. That’s the arithmetic of power: a budget line on one side, older people’s monthly bills on the other.
Who Pays for the Savings
Sue Donnelly, 78, said she and her husband, who is 81, were considering ending their cover. "We're 78 and 81; we really need to have it," Ms Donnelly said from her home in regional Victoria. "But, at present, I'm paying $349 a month and it's going to go up further." She said, "It's money I have to really make sure I put to one side every month," and added, "Surely, they don't need more from us. I think that's not fair."
Insurance industry estimates say 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. Private Healthcare Australia said the figures showed the scale of the impact, while National Seniors Australia said annual payments could grow by more than $1,000 for a couple with "gold level" cover. The organisation also said premiums could increase by as much as 12 per cent for older Australians come April, due to a mix of the proposed rebate reduction and rising costs in the medical industry.
Mildura Health Fund chief executive Gerard Op de Coul said rising costs had already led to customers ending their cover, even before the proposed reduced rebate comes in. He said the fund has more than 40,000 members, 41 per cent of whom are over 65. "This is going to affect a huge amount of people locally … there will be people dropping out," he said. "Our [over-65] membership base is above average, so we would expect that we would be hit harder than in other areas."
What Happens When Coverage Shrinks
The bill’s defenders say the change won’t break the system. Health Minister Mark Butler said on ABC Radio Perth, "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." A government spokesperson said the commonwealth expected the overall number of people with private health insurance would increase, including for people aged over 65.
But the people who actually run hospitals and fund cover are warning about the pressure below. 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. "Regional hospitals are already struggling with workforce shortages, long waiting lists and limited specialist access." Dr Webster said the Mildura Base Public Hospital, located in her electorate of Mallee, already has "enormous wait times" and staffing concerns that 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. The warning is plain enough: when the private market sheds people, the public system absorbs the damage.
The Reform Trap and the Senate Gate
University of Melbourne Professor Yuting Zhang, co-author of a recent report analysing how tax penalties and subsidies impact private health insurance, said it was unlikely older Australians would end their private health insurance because 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.
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. 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. "There are [also] the significant number of people who will actually downgrade their policy, which is just as much of a concern, because when they downgrade their policy, the private health insurers need to find money elsewhere, so they'll raise prices."
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." The promise comes wrapped in the usual language of managed compassion, while the bill still moves through the machinery that decides who pays and who waits.
A Senate Community Affairs Legislation Committee 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. For now, the whole thing sits inside the same parliamentary bottleneck: a proposal from above, a bill for those below, and a vote still needed to make the cut.