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The private healthcare rebate for Australians over 65 will be cut back as the Albanese government scraps a Howard-era bonus for seniors in a controversial move aimed at making the tax system fairer for younger Australians.
Health Minister Mark Butler revealed on Wednesday that Labor would reverse a 2004 change that increased the rebate provided to older people by up to 8 per cent more than younger people on a similar income.
The government is also gearing up to reverse a Howard-era capital gains tax discount. Both changes will be pitched under the umbrella of restoring intergenerational equity in the budget due in May as Prime Minister Anthony Albanese seeks to win support among younger generations with fewer assets.
Butler argued there was no merit in the increased rebate for seniors, introduced when the cash-rich Coalition was battling in the polls before an election at which Labor was campaigning on health.
“I understand this won’t be a welcome decision for many, but it’s the right thing to do,” Butler said in a speech at the National Press Club. “[The change will] re-establish intergenerational equity in the rebate system and free up funding to provide more dignity and care to older Australians.”
Butler claimed the government’s modelling showed the change would prompt just 0.4 per cent of people with private health insurance to scrap their memberships.
The savings will help fund $4 billion in extra aged care spending.
Of the extra funding, Butler said $3 billion would deliver 5,000 aged care beds a year, $1 billion would make showering, dressing and continence management free of charge during at-home care, and a further $200 million would go towards dementia care units.
Coalition health spokeswoman Anne Ruston condemned the move, saying Labor’s failures on aged care would be funded by penalising those whose insurance premiums took pressure off the public system.
Butler, a close ally of the prime minister with a mandate to reshape the NDIS and aged care systems, sounded the alarm on the nation’s ability to care for ageing Baby Boomers.
Acknowledging that younger Australians were getting a raw deal in the tax and housing systems, Butler said serious changes were required to ensure people aged with dignity as the nation struggles to build enough aged care homes.
“At a time where the budget is constrained and where we have to find more funds for aged care, we have to do more heavy lifting in aged care,” Butler said.
“There’s another profound generational challenge in Australia, which sits at the other end of the age spectrum. Providing dignity to that fast-growing cohort of Australians over 80.”
“Just as young Australians need us to invest in their opportunity, those older Australians who built the country we’re privileged to enjoy today also need us to invest in their dignity”.
The budget’s expenditure review committee has been knocking back spending requests in many portfolio areas because the government is worried that its spending could further fuel inflation. But Butler and Aged Care Minister Sam Rae were able to secure out a few billion more in funding for aged care.
Ruston said that if “Australians aged over 65 can no longer afford to pay for private health insurance, this will only add to the burden on our public health system.”
“Based on the minister’s own estimates, around 60,000 older Australians will be forced to drop their private health cover as a result. That’s 60,000 more people relying on our public hospitals at a time when they are already overrun.”
Rachel David, chief executive of the Private Healthcare Australia lobby group, said Labor’s policy would put more strain on the already-struggling private health system.
“It will hurt consumers, impact the viability of private hospitals, and limit health funds’ ability to deliver better patient experiences,” she said.
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Paul Sakkal is Chief Political Correspondent. He previously covered Victorian politics and won a Walkley award and the 2025 Press Gallery Journalist of the Year. Contact him securely on Signal @paulsakkal.14.Connect via X or email.From our partners
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