Labor claims 1.2 million pensioners will be affected by its decision to scrap the private health insurance rebate for over-65s, a figure the government says it worked out only after stakeholder pressure, and that it still does not have a “reliable contemporary count”.
The peak body for private health insurers said it was “particularly concerning” the government had not produced these figures before, and opposition health spokeswoman Anne Ruston said it was “unconscionable” that the government has only produced these figures now.
At the same time, the country’s biggest private health insurer has questioned federal modelling that said scrapping the private health insurance rebate for over-65s would see 44,000 people dropping cover, citing external modelling that it says indicates that over double that estimate – 91,000 – could drop cover entirely.
Medibank also warned this would raise costs for everyone else who remains in top-tier private health insurance coverage given a shrinking pool would mean fewer people to share the risk.
The interventions follow South Australia’s Labor government joining NSW, Queensland and Tasmania in rebelling against the federal proposal to raise private health insurance costs for over-65s for private health insurance in a bid to make budget savings.
The Health Department said in a submission to the Senate inquiry on the bill that it does not accurately know how many pensioners – who are likely to be lower-income and hence have less capacity to absorb higher costs – have private health insurance.
But “further analysis in response to stakeholder concerns” estimated there would be about 1.2 million pensioners with private health insurance, it said.
This means that of the three million people aged over 65 who have private health insurance, 40 per cent receive the pension.
“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.
A trio of the biggest private health insurers – Medibank, HCF and Bupa – have also warned of unintended consequences and disproportionate impact on poorer retirees and older Australians in regional areas.
Medibank said that Labor’s budget measure would reduce private health insurance affordability and cited third-party modelling to suggest between 44,000 and 91,000 would drop their cover as a result of the policy.
More people downgrading cover would also raise costs for everyone else, Medibank said, given the risk would have to be shared among a smaller pool.
“The impacts may be particularly pronounced for pensioners and lower-income older Australians, who often have less capacity to absorb increases in insurance costs and are more likely to be living on fixed incomes,” it said.
Senator Ruston said it was “unconscionable that the Albanese government designed an $11bn tax grab without bothering to find out who it would hurt and only ran the numbers once stakeholders forced their hand”.
“The government has been forced to admit in writing that their policy will apply financial pressure on around 1.2 million age pensioners, most of whom are full-rate pensioners with no capacity to absorb it,” she said.
“It is predatory to design a policy that relies on older Australians being too frightened of losing access to care to walk away from their cover – that is not a genuine choice, it is entrapment.
“Doctors across every specialty are warning this will mean worse health outcomes for all generations because longer public waiting lists can turn a treatable illness into a far more serious one.”
The peak body for private health insurers also slammed the Health Department admission.
“The government’s own figures now confirm this policy will hit an enormous number of pensioners,” Private Healthcare Australia chief executive Rachel David said.
“It is particularly concerning the government did not have this basic information when it decided to introduce the policy in April.
“The question for the Senate is now simple: Is it fair to increase the cost of health insurance for more than a million pensioners at a time when household budgets are already under pressure?
“Many of these people have been making sacrifices to invest in their health insurance for decades and now they may be forced to drop it altogether and rely on the stressed public hospital system where waiting times can stretch to years for common procedures including hip and knee replacements.”
The Australian Medical Association in its submission said it was “unconvinced” that this bill would bring about “genuine net savings to Australia’s broader health system” and it does not think the downstream effects on public hospitals will be as minor as the government suggests.
When contacted for comment, Health Minister Mark Butler’s office maintained it projected only 0.4 per cent of people would leave private health insurance because of the changes.
“Under the proposed changes, all Australians will now receive the same private health support, based on their income, not age,” a government spokeswoman 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.”
