Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026 [No. 2]

Mr BUTLER (Hindmarsh—Minister for Disability and the National Disability Insurance Scheme, Minister for Health and Ageing and Deputy Leader of the House) (09:41): I move: That this bill be now read a second time. Today I reintroduce the Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026. This important bill will address intergenerational inequity, better target the rebate for private health insurance premiums and, importantly, free up much-needed funds to deliver more aged-care services.

Currently, the government provides a rebate that supports Australians to take up and to hold private health insurance. Each year, the government invests approximately $8 billion in the rebate to help keep private health insurance more affordable and to take pressure off our public health system. In the election environment of 2004, with a boom economy driven by global economic activity, the Howard government increased the private health insurance rebate, but only for people aged 65 and above.

In order to protect the Commonwealth legally from what was obviously an age discrimination, the Howard government, at the same time, was forced to amend the Age Discrimination Act. In 2026, that is difficult to defend. The higher rebate for people aged 65 and above means that two households on the same income receive different levels of government rebate based only on their age.

This is in addition to older people's health insurance claims already being cross-subsidised by younger policyholders under community rating, meaning that everyone pays the same premium for the same policy, regardless of how much they use their insurance. Older Australians are more likely to retain private health insurance, and they receive significantly higher benefits on average than younger Australians.

This means the inequitable targeting of the rebate simply does not align with its purpose to incentivise take-up. And the current model is simply not the best way to spend taxpayers' dollars on behalf of older Australians when there is a significant need to expand access to aged-care services. Therefore, to re-establish intergenerational equity, and to better target and simplify the rebate, this bill will amend the Private Health Insurance Act 2007, removing the higher rebates paid for people aged 65 and over.

The rebate will remain means tested—a change Labor made in 2012—paid at a higher rate for those on lower incomes. The rebate changes, if passed by the parliament, will take effect on 1 April 2027. I understand that this will not be a welcome decision for some, but it is the necessary and the right thing to do.

It will mean that two households next door to each other on exactly the same income will receive the same support from government for their health insurance—regardless of age. It also allows government to invest an additional $3 billion in critical funds to deliver more residential aged-care beds, more Support at Home packages, shorter wait times and better care for older Australians.

This investment will: build on changes that we already delivered in our first term that incentivised construction of beds for aged care residents give providers the certainty they need to build and maintain quality residential accommodation make Support at Home fairer and more affordable for older Australians continue the government's work to set the aged-care system up for generations to come.

The change will impact approximately 3.2 million people aged 65 and over who have a taxable income below the rebate cut-off. It's expected the average increased premium for those impacted older Australians will be around $250 per year—or around 70c per day. For some older Australians who choose more expensive policies, that increase may be higher.

It's expected that the number of older Australians with health insurance will continue to increase, including people aged 65 and above. It's estimated there will be about 44,000 fewer people aged 65 and over insured by 2028-29 than if the rebate had remained unchanged. That is 0.4 per cent fewer insured people than otherwise expected, in a sector that is growing on average by two per cent per year, or five times that amount.

This is a relatively low change in participation compared with the volume of services in hospitals, which means the impact on hospital admissions is expected to be marginal. The bill will implement the rebate change by amending Part 2-2 of the Private Health Insurance Act 2007 so the rebate calculation applies in the same way for people aged 65 and above as it does for those aged under 65.

The bill will also make a technical amendment to the Age Discrimination Act 2004, removing a reference to an exemption previously required for the discriminatory operation of those higher rebates for older Australians, protecting the Commonwealth, as they did at the time, from legal action from younger Australians based on the obvious discrimination based on age.

While this will remove the current preferential rebate for older Australians, they will continue to be supported through the rebate of up to 24 per cent off their premiums. They'll be supported through community rating and through indexation of the rebate thresholds, which this government reintroduced, of course, after it was frozen under the previous Liberal government.

All of this will help keep private health insurance more affordable. The Australian government has to balance its support for privately insured patients with the funding it provides right across the health, disability and aged-care systems. Savings from this rebate change will provide important support for older people through improvements that are absolutely necessary to aged care.

This decision reflects responsible budget management in challenging times. The government will invest the $3 billion in estimated savings from this measure in delivering more aged-care beds, more packages, and better care for older Australians. This will enable more people to access aged care, address delayed discharge from hospital and provide dignity and care to older Australians towards the end of their lives.

Reinvesting the savings from the rebate in aged care capacity will relieve pressure on the public hospital system. The government is committed to moving ahead with this bill. Older Australians deserve better aged-care services, and we're determined to do everything we can to deliver those services.

This bill was introduced and referred to the Senate Community Affairs Legislation Committee for inquiry and report on 25 June 2026. The Senate committee held four public hearings and received 665 submissions. On 7 October 2026, the Senate committee issued its report recommending the bill be passed noting it is an important part of the government's broader health reforms.

It found that the changes will promote fairness by ensuring policyholders pay the same premium for the same private health insurance policy, regardless of age, while retaining means-tested support for people on lower incomes. The committee acknowledged concerns about affordability, participation and the potential effects on the health system, particularly in regional areas.

However, it noted independent evidence that the existing age-based rebate has a limited effect on participation and that private health insurance participation is projected to continue growing under the reform. Lower-cost products will remain available, and all Australians will continue to have universal access to treatment as public patients through Medicare.

The committee welcomed the investment of the $3 billion in savings over the four years from 2026-27 in critical aged-care services, including additional residential aged-care beds and Support at Home packages. It concluded that this investment should help address delayed hospital discharge and relieve pressure on the public hospital system. The committee also encouraged the department to continue consulting stakeholders and to monitor the reform's effects as it is implemented.

I note the dissenting reports from the Greens and the coalition. The government is of the view that it is important that the parliament have a proper debate on these matters. I commend the bill to the House.

Debate adjourned.