Senate votes 38-23 to remove Labor's over-65 health insurance rebate cut from its agenda

The Australian Senate has thrown out Labor's plan to cut the private health insurance rebate for over-65s, voting 38-23 on Wednesday, Oct. 14, to remove the bill from its notice paper.

The motion, number 797, came from independent Senator Jacqui Lambie and Coalition health spokesperson Anne Ruston. The Greens and other crossbenchers backed it. The Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026 now has to be reintroduced if Labor wants to continue.

Butler says it will be. He told reporters the government will bring back the same bill Thursday morning, Oct. 15, and "press ahead."

What the bill does

The measure, announced in May's budget, would strip the additional rebate that people 65 and over receive on their private health premiums. The higher uplift currently applies from 65 and rises again from 70. The changes were due to start in April 2027.

The government projects about $3 billion in savings, which it wants to redirect into aged care.

Base rebates are not touched. Individuals earning up to $164,000 and families up to $328,000 would still receive them, and people under $105,000 would keep the maximum 24 per cent rebate.

More than three million older Australians hold private cover, according to the Coalition. About 1.2 million of them are pensioners. Ruston has put the number of affected pensioners at up to 1.5 million.

The dispute over who drops cover

Butler has defended the bill by saying about 44,000 people would drop private insurance because of it. Health Department modelling released under freedom of information laws puts the figure much higher: almost 80,000 by 2028-29.

Independent MP Monique Ryan, who commissioned a Parliamentary Budget Office analysis, says the government "went out of its way to hide the impacts." She argues those departures would push costs onto public hospitals, and that the government has refused to say how much that would cost the states.

Health funds have also given evidence to a Senate inquiry. HBF CEO Lachlan Henderson said removing the higher rebate would cost an HBF-member couple in their 70s an extra $579 a year on gold cover, or $493 on silver plus. HBF expects 271,000 of its members to be affected.

HBF modelled 2.3 per cent of affected members cancelling and 4.1 per cent downgrading, more than 17,000 people. Henderson said that if the pattern held across insurers, the total would exceed the government's 44,313 projection.

Medibank has estimated premium increases of 4 to 6 per cent for members aged 65 to 69. It estimates 9 to 12 per cent for those 70 and over.

Labor's case

Finance Minister Katy Gallagher went after the Greens and the Coalition on the Senate floor. "This is the 'Noalition' back together voting to discharge a bill that would have seen $3 billion reinvested to deliver more aged care beds, while at the same time responsibly managing the budget," she said.

She quoted the Greens' published policy supporting a shift of public subsidies for private insurance into the public system. "They run a mile away from what it says on their own website," she said. She told Greens Senator Penny Allman-Payne the party was "denying $3 billion injection into the aged care system."

Butler called the result "an absolute travesty" that contradicts the Coalition's professed commitment to sound budgeting. He blamed new Greens leader David Shoebridge, saying the government had been negotiating with the crossbench earlier in the week and was surprised by the outright rejection. He also said the aged care changes the savings were meant to fund will go ahead whether the bill passes or not.

The Greens' price

Shoebridge says the Greens support trimming private health rebates in principle. Their objection is to pensioners being included.

"If you want to bring this bill back, carving out 1.2 million pensioners from this attack, come and talk to us," he said. "We will pass it in a heartbeat."

That carve-out has a cost. Figures previously published by the ABC indicate about $1.6 billion of the projected savings would come from pensioners. Ryan's PBO analysis points to roughly half of the $3 billion. Butler and Ruston both declined to say whether they would support a pensioner exemption.

Ruston has taken the opposite line from the Greens: drop the cuts entirely. "This is a win for every pensioner who has paid their premiums for decades and was about to be punished for it," she said. Earlier she said the Albanese government "has declared war on older Australians" and has lost control of its budget if it must cut the health system to fund aged care.

Patricia Sparrow, chief executive of the Council on the Ageing Australia, rejected tying the savings to aged care commitments. "Older Australians shouldn't have to choose between protecting their health and paying for everyday essentials," she said.

A pattern of setbacks

Monique Ryan says this is only the tenth government bill discharged from the Senate in the past ten years.

The defeat came shortly after the government dropped a planned $5,000 cap on allied health services for veterans, which was meant to save $748 million over three years.

What comes next

The timing is awkward for insurers. They must submit proposed 2027 premiums to the government in November, before Parliament decides the bill's fate. HIF general manager Amanda Bell said that work "will conclude on the 11th of November."

Ruston noted the minister's instructions let insurers revise applications if Parliament makes "material changes" after the deadline. Henderson said he had not been told how that would work.

The reintroduced bill is due Thursday, Oct. 15. Whether Labor offers the pensioner carve-out Shoebridge has demanded, and how it would fund aged care without that revenue, is unresolved.