Coalition and Greens unite to revolt against Labor’s private health ‘pensioner penalty’

Coalition and Greens senators have united against the government’s controversial plan to scrap the private health insurance bonus for over-65s as new modelling reveals most of the older Australians that would be hit by the change take home less than $37,000 a year.

The move jeopardises the reform’s passage through parliament and the $3 billion in savings Labor is banking on to fund thousands of aged care beds as well as cover its backdown from making older Australians pay for at-home care services such as showering and dressing.

On Wednesday, a Labor-led Senate inquiry into the government’s push to repeal the insurance rebate benefit for seniors approved of the proposal despite a revolt from non-Labor committee members.

The Coalition and Greens sounded the alarm that low- and fixed-income pensioners would be the least able to absorb the extra cost, estimated to be hundreds of dollars a year for those with the highest cover.

The government has repeatedly been forced to reverse course on its aged care reforms under pressure from the opposition and crossbench as it wrangles with the ballooning $40 billion sector that is buckling under an ageing population.

Health Minister Mark Butler has argued that repealing the bonus would make the system fairer by basing it on income instead of granting older Australians a rebate up 8 per cent higher than younger people on a similar income.

The committee report pointed to widespread support for the need to increase investment in aged care, and the department’s assessment that the change would create a more simplified system. But it also noted objections from the Australian Medical Association, which said greater investment should not come at the expense of private health insurance holders, and the Council of the Ageing Australia, which warned an equal rebate across age groups was not necessarily equitable.

Coalition health spokeswoman Anne Ruston accused Labor senators of ignoring evidence from hundreds of inquiry submissions in service of the government’s agenda.

“This is an aged pensioner penalty, pure and simple,” Ruston said. “Older Australians keep private health insurance not simply because they prefer it but because they cannot afford to be without it.”

Ruston rejected the government’s characterisation of the change as a budget saving, saying the costs would instead be pushed onto state and territory health systems, none of which have backed the move.

The senator released Department of Health modelling on the income brackets of those with private health insurance, which she said was done only after months of pressure from stakeholders.

More than 2 million over-65s with private health insurance would earn less than $37,000 annually, according to the department’s modelling for 2028-29. Just under another 600,000 would be earning between $37,000 and $68,000. Those figures are based on income, so don’t necessarily reflect how many people are pensioners.

More modelling from the department showed 96 per cent of over-70s and 90 per cent of those aged between 65-69 had gold or silver coverage, compared to 59 per cent under 65, which Ruston said proved older Australians were paying their fair share.

“Older Australians are already doing the heavy lifting. They pay for the highest levels of cover in the system and Labor is punishing them for it,” she said.

The Greens said in their dissenting report they would work with the government to make amendments to prevent unintended harms.

The minor party’s health spokesman Jordon Steele-John said he was seriously concerned pushing people off private health would put pressure on a public health system already stretched too thin.

“The committee heard that higher private health insurance costs could force people to drop their cover or downgrade it,” he said in a statement. “That means more people could end up relying on public hospitals, which are already under the pump and have long waiting lists.”

Treasury has forecast 44,000 of the 3 million over-65s with private health insurance would be pushed into the public health system because of the changes. Sentiment surveys from industry groups and advocates say the numbers could be much higher, particularly among pensioners.

The committee’s deputy chair and Greens spokeswoman for older people, Penny Allman-Payne, said Labor was robbing pensioners to fund repairs to its “catastrophic” aged care reforms.

“For someone on a pension or a part-pension, a few hundred dollars a year in additional costs can be back-breaking,” she said.

“Driving up the cost of their private health insurance is just another kick in the guts that could have devastating consequences for their health, independence and quality of life.”

A government spokesperson said over-65s would receive the rebate relevant to their income.

“The current additional rebate is simply not the best way to spend precious taxpayers’ dollars on behalf of older Australians when we need to do so much heavy lifting in aged care.”

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