Nearly one million high-income Australians could face a top tax rate of 50 per cent if they fail to take out private cover under a shock new plan being pushed by private health insurers.

Private Healthcare Australia, which represents insurers including Medibank and Bupa, is floating this option as an alternative to slashing health cover rebates for older Australians.

Health funds want the Albanese government to increase the Medicare levy surcharge for top earners as an alternative to axing age-based rebates for the elderly.

The proposal would double the 1.5 per cent Medicare Surcharge Levy for wealthy workers to 3 per cent if they fail to take out health cover.

But under that scenario, when you combine the top tax rate of 45 per cent with the 2 per cent Medicare Levy and a new 3 per cent Medicare Surcharge Levy, you end up with an effective top tax rate of an eye-watering 50 per cent.

“Ideally, nothing would change, but the government has gone to slash the rebate paid to older people to help with their premiums,” CEO of Private Healthcare Australia Rachel David told news.com.au.

“A more equitable measure would be to increase the Medicare levy surcharge or the fines for people who are on higher incomes who don’t have health insurance.”

For families enjoying a combined income of $300,000, they could face a shock $10,000 a year ‘fine’ for failing to buy private health insurance.

Who would pay?

According to the private health proposal:

-A single person earning $120,000 would pay an extra $600 per year.

-A single person earning $150,000 would pay an extra $2655 per year.

-A single person earning $180,000 plus would pay an extra $2700 per year.

-A family with two children earning $220,000 per year would pay an extra $1100 per year.

-A family with two children earning $280,000 per year would pay an extra $4900 per year.

-A family with two children earning $350,000 per year would pay an extra $5250 per year.

These figures can all be essentially doubled, as they already pay the same amount under the existing 1.5 per cent levy.

Who is paying the Medicare levy surcharge?

According to ATO data, the number of people paying the Medicare levy surcharge has nearly doubled in the past year to more than 900,000 people.

The shock plan to double the Medicare Levy surcharge would generate revenue increases of $483 million, with this revenue offset by $73 million in additional private health insurance rebates paid out for new members.

The Commonwealth Government receives $410 million more net revenue a year, or roughly $1,640 million over the forwards.

‘Tricky, sneaky, new tax’

The Albanese government’s plan to force more than 3 million Australians aged over 65 to pay hundreds of dollars more for their private health insurance has been slammed by the opposition as a “sneaky tax” on seniors.

Health Minister Mark Butler announced changes for those over 65 before the budget, confirming older Australians will have to pay the same amount for health insurance as people in their 50s.

The removal of higher private health insurance rebates for those aged 65 is expected to increase private health insurance costs by up to $250 a year and cause around 44,000 to abandon their cover, according to some calculations.

At the time, Mr Butler said the current policy was “not fair between generations” but pledged the $3 billion saved over four years would be spent on aged care.

“But we’re confident that this is the right decision, and it’s important to remember while we’re doing this, we have to find more money for aged care services,’’ he said.

“Frankly, and there’s no lazy free money lying around. We have to take sometimes quite hard decisions in a budget, and this is a hard decision.”

“So it’s multigenerational equity? For people over 70 who have some of this taken off them?,’’ Sunrise host Nat Barr asked.

“Well, we’ve had to find more money to fund aged care services,’’ Mr Butler replied.

“We’ve put an eye-watering amount of extra money into aged care over the last two years to get it out of the position that the Royal Commission described it as neglect, and to fund the extra demand that’s coming from the ageing of the baby boomer generation, and that sometimes involves difficult decisions in a budget.

“I feel like this has been a difficult decision. Of course, I’d prefer not to make it, but I think it takes us back to the old position where people received health insurance subsidies based on their income rather than their age.”

Senator Hume slammed the move as another broken promise.

“This is a tricky and sneaky, and dare I say, mean-spirited $11 billion tax on older Australians,’’ she said.

“They’ve done the right thing for years. They’ve alleviated the pressure on the public system, and now you’re going to tax them more.

Senator Hume said her office had been inundated with “emails and letters from older Australians that are telling me that they’re either going to have to go back to work or they’re going to have to give up on their private health insurance.”

“And what that means for younger Australians, if they don’t have private health insurance, if they have an accident or they get sick and they turn up to an emergency ward, well, they’re going to have to take a queue and stand in a queue behind older Australians that have given up on their private health insurance,’’ she said.

Asked about pensioners, Mr Butler said they would still get a rebate, but a lower one.

“No, you get a rebate. You just get the same rebate, the same rebate that the household next door in their 50s with kids will be getting for their private health insurance,’’ he said.

“So if you’re a pensioner, taxpayers will still pay about a quarter of your private health insurance. There was a premium that older Australians would get. They’d get a better payment than the household next door to them that happens to be in their 40s and 50s.

“Now we’re going back to the position. We’re going back to the position where people get that subsidy based on their income, and every dollar we save here.”