The government has now admitted that the decision to cut the private health insurance rebate will affect 1.2 million Australians on the old age pension.
Cutting the private health insurance rebate for older Australians will only shift more patients onto overburdened public hospitals, the AMA argues, as pressure mounts on the government to abandon the policy.
At this stage, it said, the only way it would support the passage of the bill was if there was an amendment to preserve the existing age-based rebate tiers for Australians on low income.
The association’s submission to the Senate Community Affairs Legislation Committee consultation on the Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026 was published just hours before the revelation that roughly 1.2 million pensioners would be affected by the changes, should the government proceed.
Originally proposed as part of the May budget, the planned changes would equalise rebate rates across ages for each income tier, effectively removing the age-based rebate uplift for Australians over 65.
To be clear, older Australians would still be eligible for a private health insurance rebate based on their income – it just would not be a larger rebate than the one for younger Australians.
In its own submission to the senate inquiry, the Department of Health, Disability and Ageing confirmed, for the first time, that the estimated number of age pension recipients who had private health cover was in the 1.2-million-person ballpark.
At the same time, it noted that its analysis suggested that most people aged 65 or over who already had private health insurance were not pensioners.
“The department acknowledges that the Rebate changes will place additional financial pressure on some lower-income households, including full-rate age pension recipients,” it said.
“However, the change will maintain the income-tested Rebate and align support for age pensioners with that provided to younger people on similar incomes, including those receiving other forms of income support.”
DoHDA’s modelling suggested that the change will generate federal savings of around $3 billion over four years and have a limited effect on private health insurance participation.
It plans to reinvest this money into aged care services.
The AMA welcomed the aged care funding but was “concerned” at the removal of a “longstanding incentive” for older Australians to maintain private health insurance.
“The AMA is particularly concerned the claimed fiscal savings reflect reductions in federal rebate expenditure do not adequately account for the broader costs that may arise elsewhere in the health system,” the association said.
When people cancel their insurance, the AMA pointed out, they do not stop getting sick.
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“Instead, [their activity] risks being shifted to already overstretched public hospitals, increasing cost pressures for governments and reducing access to timely care for patients,” it wrote.
“Where older Australians who have been holding private health insurance for decades choose not to relinquish their insurance, they might seek to offset the increased cost of the premium by foregoing other care, such as general practice or referrals to imaging or specialists, potentially delaying necessary care and worsening their health outcomes.”
The association called for more evidence on the likely impact on private health insurance participation, the effect on private hospital viability, the consequences for public hospital waitlists and whether the changes would be a net saving or a net expense.
“At this point, the AMA could only support the Bill if it was amended to allow existing aged-based PHI rebates for those aged 65‒69, and those aged 70 years and older, to be retained for those on Medicare Levy Surcharge ‘base tier’ incomes (i.e. $105,000 or less for singles; $210,000 for a couple/family, in 2026–27),” it said.
“This is because demand for private health insurance is much more price sensitive among older Australians on relatively low incomes than it is for those on higher incomes.”
Shadow health minister Anne Ruston called the plan to axe the higher rebates for over-65s “a lazy cost shift to the states”.
“We will be fighting to block these callous cuts in the Senate,” she said.
“It is unconscionable that the Government designed an $11 billion tax grab without bothering to find out who it would hurt and only ran the numbers once stakeholders and the Coalition forced its hand.
“These are around 1.2 million pensioners – most of them full-rate pensioners with no capacity to absorb it – and the Government did not so much as count them before deciding to make their health insurance more expensive.”
State health ministers from NSW, Queensland, Tasmania and now reportedly South Australia have also voiced concern about the impact on hospitals if the age-based rebate increase is scrapped.
Several private health funds, including Bupa, have also criticised the proposal.
If it goes ahead, the changes will take place from April 2027.
