Australia Ends Higher Private Health Rebate for Over-65s From April 2027

Australia will end the higher private health insurance rebate for people aged 65 and over from April 2027, making their rebate depend solely on income like younger Australians. Health economists at the University of Melbourne analysed a decade of tax data and found the change is sound policy. The government expects to save $730m to $940m annually by 2028-29, with savings directed to aged care.

What is changing and when

Currently, Australians aged 65 and over receive a larger rebate on private health insurance premiums than someone under 65 earning the same income. The rebate rises again for those 70 and over. From April 2027, this age-based advantage ends. Everyone’s rebate will depend only on income, removing the extra subsidy for older Australians. Health Minister Mark Butler said the savings would go towards aged care.

How many people will drop coverage

University of Melbourne researchers estimate 14,821 to 42,498 older Australians will cancel their private health insurance after the change, representing 0.1% to 0.4% of the total insured population. This aligns with government modelling that predicts 44,000 people will drop cover. Associate Professor Kevin Staub said the rebate change reflects that private health insurance uptake is driven by health needs and habit, not financial incentives.

Why economists support the policy

Staub and colleague Professor Yuting Zhang found the government was spending heavily to keep people in insurance they would not drop without the incentive. “The government is spending a lot of money to keep people in health insurance who wouldn’t actually drop it without the incentive,” Staub said. He concluded the policy change is sound because it removes wasteful spending while barely affecting coverage rates. The research examined how both the rebate and the Medicare Levy Surcharge tax penalty influence insurance decisions.

The Medicare Levy Surcharge debate

Health insurers are pushing back against the rebate cuts by calling for higher tax penalties on high-income earners without private cover. The Medicare Levy Surcharge has almost doubled in the past year to over 900,000 people, averaging $1,500 annually for those above the income threshold without insurance. Insurers argue higher penalties would offset revenue lost from removing age-based rebates.

Final Thoughts

The April 2027 rebate change will save Australia $730m-$940m yearly while affecting fewer than 1 in 1,000 insured people. Health economists back the policy as sound, though insurers are pushing for higher tax penalties on uninsured high earners to compensate.

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