Private Healthcare Australia says the Greens and Coalition are right to raise concerns in their dissenting opinions despite the Labor-led inquiry’s recommendation to pass the bill unchanged.
A Labor-led Senate committee has waved through the government’s $3 billion cut to private health insurance rebates for older Australians, despite warnings it could drive pensioners to downgrade or dump their cover and shift thousands of additional patients into already stretched public hospitals.
The committee that investigated the Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026 has tabled its report with just one recommendation.
“The committee recommends the bill be passed.”
Both the Greens and the Coalition submitted dissenting reports and Private Healthcare Australia, the peak body for private health insurers, said the opposition parties were right to raise concerns.
PHA chief executive Dr Rachel David said the concerns raised by the Greens about pensioners and Australians on fixed incomes should serve as a warning to the government.
“The Greens are right to question whether cutting private health insurance support for older Australians is the right way to fund aged care reforms,” Dr David said.
“This policy will hit older Australians who are living on fixed incomes and have very limited capacity to absorb additional costs.
“Many of these people have maintained private health insurance for decades because governments encouraged them to do so, and now they’re going to be forced to pay more when they are likely to need to use it.”
The intention of the Bill is to remove the higher age-based rebate for people aged 65 years and over, however the rebate would remain income-tested.
The changes are due to take effect on 1 April 2027 and are expected to affect around 3.2 million people aged 65+ who currently qualify for an age-related rebate. The government has estimated the average additional premium cost at about $250 a year, although people with more expensive policies could pay more.
The committee noted that many submitters were worried about the financial impacts that the reform would have on them.
“The committee is reassured that the rebate will remain means tested. Older Australians on low income will receive a higher rebate, on par with younger Australians,” the report said.
It noted that the evidence indicated the higher age-based rebate would have a limited effect on participation.
“The Departmental modelling projections have PHI participation continuing to grow under the proposed changes to the rebate, albeit at a slightly slower rate than under current arrangements.”
Departmental modelling predicted about 44,000 fewer older Australians will hold private health insurance by 2028-29 than would otherwise have been the case.
The report noted that there were concerns about unintended impacts that the reform might have on the health system, especially in the regions.
“The committee encourages the Department to monitor the impacts of the reform,” said the report.
“The committee is of the view that the $3 billion in estimated savings will contribute to addressing delayed discharge from hospitals and ultimately relieve pressure on the public hospital system. The committee sees this bill as an important step within the suite of health reforms currently underway by the Government.”
The Greens noted that they had significant concerns about whether reducing the PHI rebate for everyone over 65 would increase intergenerational equity.
“Of particular concern are the impacts of these changes on specific cohorts, particularly the financial impact on people over 65 who are on low incomes, including pensioners and part-pensioners,” said the Greens’ dissenting opinion.
“Pensioners and part-pensioners generally live on fixed incomes and have limited capacity to absorb additional costs. The committee heard that many may struggle to meet higher private health insurance premiums, potentially forcing people to downgrade their level of cover or to cut back on other essentials such as heating, cooling and putting food on the table.”
They said there were other choices available to the government to increase investment in aged care and the public health system, “without shifting additional costs onto the older people who are least able to afford them”.
“The Australian Greens have a policy position of redirecting public funds that are currently used to subsidise private health insurance, including the tax rebates, to the public health system. The Government has not linked the revenue enabled by this bill to investment in the public health system,” the statement said.
Dr David said these concerns echoed evidence heard throughout the inquiry.
“Taking almost $3 billion out of the pockets of older Australians will inevitably force some people to make difficult choices about maintaining their health cover,” she said.
“Australians should not have to choose between paying their health insurance premiums and paying household bills.”
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The Coalition said it believed the policy will achieve only two things:
- “Inflicting financial and emotional hardship on more than 3.2 million older Australians in the middle of a cost-of-living crisis, including about 2 million over-65s who live on less than $37,000 a year”; and
- “Damaging Australia’s public-private hybrid healthcare system, eroding the viability of private hospitals and driving more patients into public hospitals already under severe strain.”
It said the government’s Impact Analysis was limited as it only modelled the number of individuals likely to abandon private health insurance completely and “failed to analyse the number of older Australians who would downgrade their cover and, therefore, the consequences of those downgrades”.
“Catholic Health Australia, which undertook its own substantial modelling, estimated one in five affected over-65s will change their level of cover, vastly more than the one-in-75 assumed by the Government, with about 665,000 downgrades to occur over the first three years of full operation,” the dissenting opinion said.
The Coalition was also concerned that it was predicted that half the cost burden of the rebate cut will be borne by age pensioners.
“It seems unconscionable that when considering a policy change of this magnitude, the Minister would fail to assess the impact on the most vulnerable.”
The Coalition said the policy was nothing more than a cost-shift.
“Coalition Senators consider this policy and associated Bill to be unfair, rushed, ill-conceived and detrimental to the health and wellbeing of older Australians and Australia’s health system.
“Coalition Senators categorically reject the Government’s false choice between funding aged care and supporting older Australians with private health cover. A government that believes it must cut health funding to pay for aged care is a government that has lost control of its own budget. This is particularly galling given the Government has botched the implementation of its own aged care reforms and is now using that failure to justify this ill-considered measure.”
Opposition health and aged care spokesperson Senator Anne Ruston said this afternoon that Labor Senators used their numbers on the committee to pass the recommendation with the Greens, Coalition and independent Jacquie Lambie all recommending the Bill not be passed.
“This is an aged pensioner penalty, pure and simple,” Senator Ruston said.
“Evidence from older Australians, their advocates, doctors and other healthcare professionals agreed this ill-conceived policy would have a profound impact on vulnerable older Australians.
“Older Australians keep private health insurance not simply because they prefer it but because they cannot afford to be without it. Forcing them to make a decision between their healthcare and meals or heating and cooling is downright cruel.”
She said no state or territory had supported Labor’s Bill, with most warning of longer elective surgery waits and millions in extra costs for state taxpayers.
“This isn’t a saving. It’s a cost shift from Canberra onto state hospitals, and it will be older Australians stuck in the queue.”
Dr David said:
“This debate is ultimately about whether Australia should be making healthcare more affordable or less affordable for older people.
“When concerns are being raised not just by health insurers, but by pensioners, doctors, hospitals, state governments, the Coalition and now the Greens, the government should take a step back and reconsider.
“There is still time to find a better way to support aged care without making private health insurance more expensive for 1.5 million pensioners and millions of other older Australians.”