Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026

Dr RYAN (Kooyong) (19:17): Older Australians need more aged-care support; I hear that every week in Kooyong. The question before the House is not whether aged care should be adequately funded; of course it should. The question is whether that funding should come at the expense of private health supports for nearly 1.5 million pensioners.

I don't believe that it should, and that's why I've joined the Australian Medical Association, Patients Australia, Private Healthcare Australia, the Australian Private Hospital Association, National Seniors Australia, Catholic Health Australia and others to ask the government to rethink this bill, the Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026.

The private health insurance rebate for Australians aged 65 and over recognises that older Australians, particularly those on fixed and low or moderate retirement incomes, deserve support so that they can continue accessing private health care following decades of contributions to health funds—contributions that they have made in good faith to secure their preferred health care in retirement.

Many constituents have told me that they don't regard their private health insurance as being a discretionary cost. It's so important to them that they are prepared to sacrifice everyday household expenses, dining out, entertainment, social activities and other expenses to keep it. The private health insurance rebate ensures that insurers don't charge older, sicker and less wealthy Australians more than they charge younger and healthier people for the same product.

The rebate is not what it is being portrayed as; it is not a windfall for wealthy retirees. Labor already means tested the rebate in 2012. It did so recognising that low-income retirees and pensioners should maintain that extra support and that wealthier retirees could afford the cost of their private health cover.

Removing the age based rebate will increase the cost of private health insurance for older Australians with low incomes and with limited or no earning capacity—those Australians who are least able to absorb the cost increases. This is not to say that the private health insurance system is perfect—far from it. For years, the gap between premiums paid and benefits received has been widening.

Every year, we pay more and we get less. I hear that from Kooyong constituents pretty much every day. The fact is that out-of-pocket costs continue to increase for the insured.

That's the problem that the government should be fixing. Now, the government could establish a compulsory floor for treatment benefits. It could minimise the variability in benefits that insurers pay.

It could address the no-gap cliff, where a few dollars difference between a doctor's fee and the insurer's benefit can lead to hundreds of dollars of extra cost to the patient. It could modernise the Medicare levy surcharge. It could better target the rebate by looking into whether or not eligibility should be confined to those with silver and gold cover.

It could crack down on specialist fees, on price gouging and on exorbitant equipment costs. The government could establish an independent authority to oversee the private health insurance sector. But it has done none of these things.

Instead, this bill makes private health insurance more expensive for the Australians who need it most, without making it better targeted or better value. The Office of Impact Analysis, the government's own independent assessor, has rated this policy as adequate only. The department has acknowledged that it did not consult industry on the changes in this bill.

The state governments of New South Wales, Tasmania and Queensland have confirmed this in a recent public hearing. Independent modelling commissioned by the department during the 47th Parliament recommended a very different approach to that in this legislation. It recommended that private health insurance rebates for seniors be increased and that cutting the rebate would have an initial net negative fiscal impact.

But, instead, the government has chosen to rely entirely in this instance on its own internal modelling but will not release that modelling to the public or to this parliament. The government has suggested that the average cost to over-65s will be about $260 a year. In contrast, Private Healthcare Australia has suggested that the figure is more likely $655 a year for those under 70 and $800 a year for those over 70.

Again, the government has predicted that only 44,000 retirees will drop their private health insurance as a result of this measure. But, in a survey of 2,000 older Australians, 8.4 per cent reported considering dropping their health cover and 12.5 per cent considered downgrading. That gives us as many as 270,000 people who are considering dropping their insurance as a result of this measure, and as many as 400,000 who are considering downgrading.

The New South Wales government have told the parliament that they're expecting 80,000 people to downgrade or completely group drop their insurance cover. Those who are most likely to drop or downgrade their cover are pensioners and low-income retirees who have no ability to absorb increased premiums. The government is asking us to believe that, of the over three million older Australians with private health insurance who are facing premium increases of up to $800 a year, only 44,000 will drop their cover.

It's a remarkably optimistic assumption about pensioners who are already struggling with the cost of living. The most serious deficiency in the modelling of this reform is that the government has not produced a net savings figure. The $3 billion savings that the government is quoting is a gross savings figure.

It represents the reduction in rebate expenditure. It does not account for the additional costs for state and territory public hospital systems when those older Australians drop or downgrade their private cover and present to our public hospitals as public patients. Patients don't simply disappear from our health-care system when they leave or downgrade their private health insurance.

The department's impact analysis acknowledges that downgrade behaviour—specifically, patients moving from gold to silver or adding exclusions—was not included in its modelling. This could materially worsen the impact on public hospitals. Downgrades typically remove cover for cataracts, hip replacements, knee replacements, hearing aids and mental health care—the services most needed by the 65-plus cohort.

That means that older Australians who have, in some instances, spent decades making payments on their private health insurance may now be forced to wait up to two and a half years in the public system for cataract surgery, typically two to three years for joint replacement surgery and a year or more for acute mental health care. But the government has refused to provide modelling on this.

This bill represents a significant cost impost for more than three million older Australians. It will have a significant impact on our public health system. It is a cash grab from older Australians and a cost shift to our states.

I'm not sure how anyone looking at this proposal with a clear mind could in any conscience support it. The cost shift is going to fall disproportionately on state governments, which carry about 55 per cent of additional public hospital activity under the National Health Reform Agreement, but they won't receive any of the savings from the rebates. Private Health Australia has suggested that the cost shift to the public health system will be $260 million in the first year alone.

The explanatory memorandum for this bill acknowledges the parlous financial state of many private hospitals in this country, but the government is proceeding with a measure that will further reduce demand for private hospital services without quantifying what that means for the public hospital system that will absorb the overflow, and without any binding commitment to act if the impact proves larger than predicted.

In 2023-24, 48.8 per cent of all private hospital admissions in Australia were of people aged 65 and over. Those hospitals with the highest concentration of older patients, the thinnest margins and the fewest alternative options are those in regional and rural Australia, which are often the only private alternative in their catchment. They will bear the impact of these changes most acutely.

Private hospitals are where most Australians get their hips and knees replaced, their cataracts removed and their babies delivered. In Kooyong and across Melbourne, private hospitals provide services that public waiting lists can't currently absorb. The private hospital sector is already under significant stress.

Since 2018, at least 18 private maternity units have closed across Australia. Since 2020, some 80 private hospitals have closed. Similar closures are occurring in private psychiatric services despite a rapidly growing demand for mental health care.

Those closures are happening because the economics of community rating, combined with declining private health insurance participation in high-cost service areas, are making services unviable. In 2023, a Commonwealth Department of Health review found that the private health insurance rebate saves about $554 for each person it helps with these subsidies each year.

The analysis weighed premium rebate subsidy costs plus forgone Medicare levy surcharge revenue against what the government would spend if those people used the public system instead. Specifically, it flagged that benefits are largest when older people take up private insurance. In other words, the net savings to government are not evenly spread with age.

The savings are concentrated in older cohorts who use more health services and would otherwise cost the public system more. Independent modelling commissioned by Avant Mutual found that the rebate generates $1.25 in government savings for every dollar spent. But those findings did not appear in the government's impact analysis.

If this bill produces a larger than predicted exit of older members from private health insurance and the government's own modelling suggests this is a possibility, the downstream consequences for private hospital viability and for public hospital demand will be felt for years. There is no mechanism in this bill to identify that outcome early and no commitment to act if it materialises.

My second reading amendment asks the government for more clarity before this bill proceeds further. First, publish the figures. The $3 billion gross figure is not the number that this parliament needs.

The government can't in conscience claim that the impact on public hospitals will be marginal, while failing to put a net savings number on it. I also want to see a detailed assessment of the effects on private hospital viability and public hospital demand. Secondly, exempt age pension recipients from the bill.

The Parliamentary Budget Office has released an analysis at my request which shows that 1.5 million pensioners will lose $1.5 billion in support at the time they need it most as a result of this legislation. In the first two months alone, when this commences on 1 April 2027, pensioners will lose $111 million. That will rise to a total of nearly $1.6 billion by 2029-30 in savings that the government has chosen to find in the pockets of pensioners.

Debate interrupted.