The Coalition has accused Labor of slugging older Australians with “another sneaky Labor tax” amid controversial changes that will strip higher private health insurance rebates from millions of over 65s.

Deputy Opposition Leader Jane Hume labelled the policy “tricky, sneaky and mean-spirited”, arguing it would leave pensioners and retirees on fixed incomes paying hundreds of dollars more each year while piling extra pressure on the public hospital system.

WATCH THE VIDEO ABOVE: Mark Butler and Jane Hume clash over private health insurance shake-up

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The attack comes as New South Wales, Queensland and Tasmania demand the federal government rethink the changes, warning they could drive more Australians into the already stretched public health system.

Under the budget measure, the government will abolish the higher private health insurance rebate currently available to Australians aged over 65.

On a $6000 annual premium, those over 65 would lose about $250 a year, while Australians over 70 would lose around $500.

Hume said the Coalition had been inundated with complaints from older Australians who feared they would no longer be able to afford to stay in the private system.

“Mark you didn’t announce this before the election, and I think it would have made a serious impact on the way people thought about the Labor party if you had have done that,” she said.

“A lot of these older Australians are on fixed incomes, and they simply can’t absorb the changes ... they’ve done the right thing for years, they’ve alleviated the pressure on the public system, and now you’re going to tax them more; that seems profoundly unfair,” she said.

Deputy Opposition leader Jane Hume has hit out at Mark Butler in a heated Sunrise debate over changes private health insurance rebates for seniors. Credit: Sunrise

Hume warned the changes would have consequences well beyond retirees, arguing younger Australians would also face longer waits if more elderly people were pushed back into the public system.

“What that means for younger Australians, if they don’t have private health insurance, if they have an accident or they get sick and they turn up to an emergency ward, they’re going to have to take a queue behind older Australians that have given up on their private health insurance. They’re going to be on waiting lists for critical care behind older Australians that would have otherwise been in the private system,” she said.

“This is a false economy, but moreover, it is another sneaky Labor tax on older Australians,” she said.

Health minister defends ‘hard decision’

Despite the criticism, Health Minister Mark Butler insisted the government’s modelling showed only a “very marginal” impact on private health insurance membership, forecasting around 40,000 older Australians will abandon their plans. 

“We’re confident that this is the right decision and it’s important to remember why we are doing this, we have to find more money for aged care services. Every dollar we save through this measure will be invested in more aged care beds, better care, more aged care home care packages,” Butler told Sunrise.

“Every single budget we are having to find more money to care for people who need that care, and deserve that care.

“There’s no lazy free money lying around; we have to take, sometimes, quite hard decisions in a budget, and this is a hard decision,” he said.

Butler said the government had factored in the likelihood that some Australians would choose to leave private health insurance but believed the impact would be minimal.

“Increases happen to private health insurance fees every year, so we have some experience in understanding the behavioural impact of these things,” he said.

He argued the changes would create a fairer system by ensuring households on the same income received the same level of support, regardless of age.

“What this will mean is two households next to each other, for example on $50,000 (with) one of them over 65, the other household in their 40s or 50s with kids, they’ll now receive the same subsidy from government or by taxpayers to pay for their private health insurance,” he said.

“So about a quarter of their private health bill will be paid for by taxpayers.

“I think that’s a pretty equitable place to be, two households next to each other getting the same subsidy based on their income rather than a different subsidy based on age,” he said.