Older Australians with private health cover could see a smaller government rebate on their premiums from April 2027, if a bill the Senate has already thrown out once makes it through on a second attempt. The proposal would remove the extra rebate paid to people aged 65 and over. With the government chasing savings ahead of its December budget update, the rates at stake are worth understanding now.

Dumped, then reintroduced within a day

On 14 October, the Coalition, the Greens and Senator Jacqui Lambie voted 38–23 to remove the Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026 from the Senate notice paper.

Health Minister Mark Butler brought back identical text the next day, 15 October.

The ATO's tax law and policy update lists the new version as the Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026 [No. 2], introduced on 15 October with a proposed start date of 1 April 2027.

It is a bill before Parliament, not law. Its fate in the Senate has not been settled.

What the bill changes

The private health insurance rebate is a government contribution towards the cost of eligible hospital and extras cover. Its rate depends on income and, currently, on age.

People aged 65 and over receive a higher rebate percentage than younger policyholders. The bill would remove that age-based uplift from 1 April 2027.

At the base tier, the proposed rates are:

  • Ages 65 to 69 would fall from 28.139 per cent to 24.118 per cent.
  • Ages 70 and over would fall from 32.158 per cent to 24.118 per cent.

In other words, older policyholders would receive the same base-tier rebate as everyone else. The biggest proportional cut would fall on those aged 70 and over. Their base-tier rate would drop by 8.04 percentage points, or about a quarter of the current rebate. For those aged 65 to 69, the drop is 4.021 points, or about 14 per cent of their current rebate.

The rebate is income-tested, so people on higher incomes already receive lower percentages, and those in the top income tier receive none. The base-tier figures above apply to people below the first income threshold.

Hypothetical example: what it could mean in dollars

Hypothetical example: a single policyholder at the base income tier pays a premium of $5,000 a year before the rebate.

If they are aged 70 or over, the current rebate at 32.158 per cent is worth about $1,607.90. At 24.118 per cent, it would be about $1,205.90, a reduction of $402 a year.

If they are aged 65 to 69, the current rebate at 28.139 per cent is about $1,406.95. At 24.118 per cent, it would be about $1,205.90, a reduction of about $201 a year.

These numbers assume the premium stays the same, which is unlikely given annual premium increases, and actual rates for future years may differ. Couples, families and people in higher income tiers face different rates.

The estimates and the savings case

The industry and the government have put very different figures on the impact.

Private Healthcare Australia estimates a member aged 70 or over on Gold hospital cover could pay about $807 a year more. That figure includes the effect of the regular premium rise, not just the rebate change.

Butler has put the average impact at about $250 a year.

The gap reflects different assumptions. A person on a top-level policy pays a larger premium, so a percentage cut to the rebate costs them more in dollar terms.

The measure is expected to save about $3 billion over four years, with the money directed to aged care.

That fits the government's broader search for savings. The Expenditure Review Committee met on 2 and 3 November ahead of the mid-year budget update, due in December. Treasurer Jim Chalmers said: "We know that there is more work to do to make the budget as tight as it can be." He did not say what savings the update would contain. Some Labor MPs privately want means testing and net savings in that update.

Cost-of-living pressure is the backdrop. The Reserve Bank lifted the cash rate to 4.85 per cent on 3 November and said "inflation is now forecast to remain elevated through much of 2027." For retirees on fixed incomes, a smaller rebate would add to rising premiums.

The Senate numbers and how the rebate is claimed

With the Coalition and the Greens both voting to dump the first version, the government would need at least one of those blocs to change position for the bill to pass.

Greens leader David Shoebridge has said the bill would pass "in a heartbeat" if pensioners were carved out. That suggests a possible path to a deal, although no amended version had been reported.

Lambie was blunter, saying Butler would "get another slap".

Until the Senate votes, the current age-based rates continue to apply.

Most people receive the rebate as a reduction in their premium, which their insurer applies directly. Others pay the full premium and claim the rebate in their tax return.

Either way, the rebate is reconciled against income when you lodge. If the percentage changes from 1 April 2027, the new rate would apply to premiums covering the period from that date.

What to watch

  • Senate sitting weeks: the No. 2 bill must pass the Senate to take effect. Watch for any amendment carving out pensioners.
  • December: the mid-year budget update may confirm whether the $3 billion saving remains in the forward estimates.
  • Early 2027: insurers typically announce annual premium changes ahead of 1 April.
  • 1 April 2027: the proposed start date for the uniform rebate rates, if the bill passes.