How Labor’s Cut to the Aged Care Rebate Will Work and What the Response Has Been

Before those aged 65-69 currently receive a 28 percent rebate, while those aged 70 and over receive 32 percent.

An elderly man in Brisbane, Australia on April 27, 2016. AAP Image/Glenn Hunt

The Health Minister Mark Butler’s has pledged to cut the higher private health insurance rebate for older Australians over 65 in a bid to raise funds to drive Labor’s aged care initiative.

The policy will cut the Howard-era government’s rebate by about four to eight percent.

Labor says the funds will be redirected to towards its $3 billion aged care initiative, which was announced alongside major cuts to the National Disability Insurance Scheme.

How Will the Changes Work?

The new plan will see the minister remove aged-based loadings.

Those aged 65-69 currently receive a 28 percent rebate, while those aged 70 and over receive 32 percent.

Both groups will now drop to the standard 24 percent rebate paid to Australians under 65. The extra four to eight percentage points of support will be cut.

This change is estimated to impact about 1.4 million Australians over 65 and could lead to premiums rising by up to $640 (US$459) a year for those on higher level cover. The total premium depends on fund and level of cover.

Private Healthcare Australia said the government’s decision would disappoint thousands of older Australians.

CEO of Private Healthcare Australia Rachel David said, “Reducing funding that goes directly to patients for private hospital and medical care will place further strain on an already pressured sector.”

“It will hurt consumers, impact the viability of private hospitals, and limit health funds’ ability to deliver better patient experiences.”

60,000 Could Be Moved onto Public Health System: Opposition

Shadow Aged Care Minister Anne Ruston warns up to 60,000 more older Australians could be forced to rely on public hospitals due to Labor’s plan to cut private health insurance subsidies.

“Based on the Minister’s own estimates, around 60,000 older Australians will be forced to drop their private health cover as a result. That’s 60,000 more people relying on our public hospitals at a time when they are already overrun,” she said in a statement.

Premiums to Increase by 5-11 Percent for Some

A senior household with a combined hospital and extras policy pays about $6,000 per year on private health insurance before rebates according to the Members Health Fund alliance.

“Analysis indicates premiums would increase by around five percent for people aged 65–69, and by up to 11 percent for people aged over 70, the equivalent of around three years’ worth of premium increases in a single year,” said Members Health CEO Matthew Koce.

“For a senior household paying an annual premium of around $6,000 before rebates, this would mean an increase of approximately $240 per year for people aged 65–69, and nearly $500 per year for those aged over 70.” Koce said.

Minister Says Rebate Not Fair

Health Minister Butler argues that the higher rebate for older Australians was inequitable because it provided more taxpayer support to one age group.

“I just think this is an inequitable scheme. John Howard introduced it in the 2004 election period. It was frankly an election sweetener,” he said.

“There is no policy rationale for paying a higher subsidy to older Australians than for the rest of the population.”

Butler argued that taxpayer dollars for older Australians should go to aged care rather than a an “unsubstantiated, inequitable” private health insurance rebate system.

The minister also pushed back on claims that people would move out of private health insurance in droves.

He argued that modelling showed only a very small drop and said that private health membership had been increasing.

“Our modelling indicates that there will be a very, very small reduction in private health insurance membership as a result of this, maybe about 0.4 percent of membership,” Butler told ABC Radio National on April 23.

“And this is in a scheme that’s been growing at about two percent a year. It’s had 22 quarters of consecutive growth, so private health insurance membership is on the up and it has been for several years.”