Leading private health insurers in Australia are advocating for an increase in the Medicare levy surcharge for high-income earners as a way to fund support for older Australians. This proposal comes as the Albanese government prepares to eliminate enhanced health insurance rebates for older citizens next year.
Under the current system, individuals aged 70 and over receive the highest rebate of up to 32 percent, while those aged 65 to 69 receive up to 28 percent. The government plans to cap the maximum rebate at 24 percent for all Australians from April 1, 2027, with the amount then determined by income. The government estimates these changes will save the budget approximately $3 billion over four years, with Health Minister Mark Butler stating the move will "re-establish intergenerational equity in the rebate system."
However, industry bodies like Private Healthcare Australia (PHA), along with major insurers such as Bupa and Medibank, argue that these changes will lead to increased health insurance costs for millions of older Australians. PHA estimates that over three million older Australians, including 1.32 million pensioners, could face higher expenses. The organization also warned that up to 62,000 individuals might drop their private health cover entirely, and another 200,000 could downgrade their policies, potentially increasing the vulnerability of older citizens.
PHA chief executive Rachel David suggested that while the government needs to find savings, there are alternative methods to achieve this without making healthcare more expensive for vulnerable populations. Bupa, which insures more than four million Australians, expressed similar concerns in a submission to a Senate inquiry, warning of "significant affordability pressures for older" Australians. The insurer recommended that reforms focus on incentivizing younger and working-age Australians to participate in the private health system rather than reducing support for those already engaged.
The proposed increase to the Medicare levy surcharge would see it rise from the current 1.5 percent of annual income to two percent. For top earners making over $164,000 annually, the surcharge could reach as high as three percent. PHA suggests this approach is preferable to passing the costs onto older Australians through higher premiums. If enacted, this could mean almost one million high-income Australians face thousands of dollars more in taxes annually if they choose not to have private hospital insurance. Those opting to pay the surcharge instead of acquiring private hospital cover could face an additional tax bill nearing $5,000 per year.
According to PHA data, the number of Australians paying the Medicare levy surcharge has nearly doubled in the past year, with over 900,000 individuals currently paying it. Private health insurers have noted that rising costs are making coverage increasingly unaffordable for some, leading more people to rely solely on Medicare instead of opting for private cover.