Highlights

  • Private Healthcare Australia has proposed lifting the Medicare levy surcharge to 1.5% for Tier 1 earners and 3% for Tiers 2 and 3.
  • The industry group estimates the change would raise a net $410 million and bring 383,000 more people into private cover.
  • The current surcharge is 1% to 1.5%, on top of the 2% Medicare levy, for higher earners who do not hold appropriate private hospital cover.
  • The proposal is an industry idea, not government policy, and no bill has been introduced.

Private health insurers have put forward a different way to raise money while the government's plan to cut the private health insurance rebate for over-65s remains stalled in the Senate. Private Healthcare Australia wants the Medicare levy surcharge lifted to as much as 3% for higher earners without private hospital cover. The proposal would hit those who have chosen to opt out of private cover, rather than reducing support for existing older policyholders.

What Private Healthcare Australia Is Proposing

According to reports, Private Healthcare Australia proposed lifting the surcharge to 1.5% for Tier 1 earners and to 3% for Tiers 2 and 3. The industry group estimates the change would raise a net $410 million and bring 383,000 more people into private cover. Those are the group's own estimates and have not been independently costed. The proposal would fall on people without private hospital cover rather than reducing support for older members who already hold it - the key difference from the government's rebate bill.

How the Surcharge Works Today

The Medicare levy surcharge is separate from the 2% Medicare levy most taxpayers pay. It applies on top of that levy to people whose income for surcharge purposes is above a threshold and who do not hold an appropriate level of private hospital cover. For 2026-27: the base tier has a 0% surcharge for singles on $105,000 or less or families on $210,000 or less; Tier 1 charges 1% for singles on $105,001 to $123,000 or families on $210,001 to $246,000; Tier 2 charges 1.25% for singles on $123,001 to $164,000 or families on $246,001 to $328,000; Tier 3 charges 1.5% for singles on $164,001 or more or families on $328,001 or more.

Under the industry plan, today's top rate of 1.5% would become the entry rate for Tier 1, and the rate for Tiers 2 and 3 would double or more.

Why Insurers Are Pitching It Now

The timing is linked to the rebate bill. The Senate rejected the bill cutting the over-65s rebate on 15 October, and Health Minister Butler reintroduced the same bill a day later. Department of Health figures show about 3 million over-65s hold private cover, about 1.2 million of them pensioners. Greens leader Senator David Shoebridge said the Greens will back the rebate bill with an amendment protecting pensioners, but not if part-pensioners are included. Every pensioner exempted reduces the bill's savings, which is where an alternative revenue source becomes attractive.