The Australian government’s plan to remove the higher private health insurance rebate for individuals aged 65 and over, effective April 2027, has been described by health economists as a sound policy move unlikely to significantly increase pressure on public hospitals.

Currently, Australians aged 65 and above receive a larger rebate on their private health insurance premiums compared to younger policyholders with equivalent incomes. The rebate further increases for those aged 70 and over. The proposed reform will standardise the rebate based solely on income, aligning it with the rules applied to people under 65.

Researchers at the University of Melbourne analysed a decade of tax data from approximately 130,000 Australians to assess the impact of these changes. Their findings indicate that the incentives provided by the private health insurance rebate and the Medicare Levy Surcharge—a penalty applied to high-income earners without insurance—have minimal influence on individuals’ decisions to maintain private coverage. According to Associate Professor Kevin Staub, a co-author of the study, private health insurance uptake is primarily determined by health needs and personal habits, rather than financial incentives. He noted that currently, the government spends substantial funds maintaining coverage for older Australians who likely would retain insurance regardless of the rebate.

The researchers estimate that between 14,800 and 42,500 older Australians may discontinue their private health insurance following the policy change, representing about 0.1% to 0.4% of the insured population. This aligns closely with government projections that estimate a loss of coverage among 44,000 individuals. The reform is expected to save between AUD 737 million and AUD 940 million annually by 2028-29.

Health Minister Mark Butler affirmed that the cost savings will be redirected to aged care services. He dismissed concerns raised by the Australian Private Hospitals Association and the Australian Medical Association (AMA) that the changes would exacerbate demand on public hospitals, asserting that no significant increase in public hospital activity is anticipated.

Supporting the findings, health economist Luke Slawomirski of the Australian Institute praised the University of Melbourne’s research as a rigorous empirical analysis. The Australian Institute’s submission to a Senate inquiry, due to report in October, argues that subsidising private health insurance provides limited relief to public hospitals, as both sectors share clinical staff resources, not all private procedures would otherwise be performed publicly, and private insurance typically does not cover emergency care.

Slawomirski characterised the removal of the age-based rebate uplift as a fair and modest adjustment within a system where younger, healthier members subsidize older, sicker ones. He challenged warnings from private health lobby groups about increased pressure on public hospitals, highlighting the government’s annual expenditure of around AUD 8 billion in private health insurance subsidies and emphasising the need for clear evidence demonstrating policy benefits for public health.

Government modelling indicates that low-income individuals, including pensioners who currently receive the maximum rebate plus the age-based bonus, are most likely to forgo private coverage under the proposed changes. The AMA called on the government to exempt low-income seniors from the rebate reduction. Opposition figures have criticised the reform as harsh. Shadow Health Minister Senator Anne Ruston labelled the measures “callous” and pledged to oppose them in the Senate, highlighting concerns over the government’s approach to aged care and pensioner support.