Health Minister Mark Butler’s home state has come out in opposition to his controversial overhaul of private health insurance, as the industry says the changes will force 200,000 people aged over 65 to downgrade their cover and 62,000 to drop out entirely.
South Australia’s Labor government now joins the NSW Labor government and the Tasmanian and Queensland Coalition governments in publicly lashing federal Labor’s move to scrap the larger private health insurance rebate for those over 65.
The criticism comes from the department overseen by Mr Butler’s home state factional ally, SA Health Minister Blair Boyer, seen as a leading Left faction figure in the SA parliament and a potential future leader.
Mr Butler has said the policy move – to remove the higher rebate rate over-65s received for private healthcare – was a “hard decision” but that it was necessary to free up more money to put into aged care.
The SA health department told a federal Senate inquiry the federal policy relies on a “simplistic measure” and does not “adequately consider” whether public hospitals can take on more demand.
“While the fiscal objectives underpinning the reform are acknowledged, the removal of age-based rebate tiers may have unintended consequences for access to care and place additional pressure on the public hospital system,” department chief executive Robyn Lawrence wrote in a submission to a Senate inquiry.
The federal government’s regulatory impact statement relies on an “assumption increased demand is easily absorbed based on the simplistic measure of additional separations as a proportion of total projected public hospital admissions and does not adequately consider whether the relevant public hospital services have the capacity to absorb this additional demand”.
“A 1 per cent increase across public hospital admissions could have a material impact if additional demand is concentrated in particular specialties, hospitals, regions, or procedures already experiencing capacity constraints,” Dr Lawrence wrote.
This shift from the private system to the public one would “materially impact” capacity and would risk longer elective surgery waitlists, increased demand for outpatient assessment, pressure on pre-admission and perioperative services, and additional demand for rehabilitation and post-acute care, she said.
The federal government should consult further with states and territories, and consider transitional or targeted mitigation measures to reduce the impact, she said.
Contacted for comment, Mr Boyer declined to add to the submission.
Contacted for comment, Mr Butler’s office maintained the effects to the system would be small.
“Under the proposed changes, all Australians will now receive the same private health support, based on their income, not age.” a government spokesman said.
“Under the proposed changes, over-65s will still receive significant government-subsidised discounts of up to 24 per cent on the premiums private health insurers charge them, the same as the rest of the population.
“While some people may choose to leave private health insurance because of this change, we project this would be around 0.4 per cent.
“Despite this change, the overall number of people with private health insurance is expected to continue to increase, including in people aged over 65.
“Labor is investing over $3bn in delivering more aged-care beds, more packages and better care for older Australians through the 2026-27 budget.”
The private health insurance industry peak body produced modelling that questioned the government’s claim that this would see 44,313 drop out of insurance.
“PHA estimates 62,000 people dropping their cover, which is significantly higher than the government’s estimate of 44,000 on a base of over three million people,” Private Healthcare Australia wrote in its submission.
“However, these numbers alone provide a misleading picture of the full effects on lower-income Australians and our health system.
“PHA modelling suggests that around 200,000 people will downgrade their health cover, predominantly dropping from gold to an insurance product with exclusions.
“This will put pressure on the rest of the system, but also increases the risk of consumers not being covered for services they need.”
The measure would amount to a “massive cost shift of $3bn from the Australian government to older Australians”, it said.
And as a result, states and territories will be liable for “almost $260m per annum additional expenditure”, it claimed.
