Pensioners to shoulder huge portion of private health insurance 'cash grab'

Pensioners will be hit hard by the federal government's controversial private health insurance rebate changes, with new analysis revealing that about half of the $3 billion in forecast savings will be clawed back from those on lower incomes.

The Parliamentary Budget Office (PBO) analysis, exclusively obtained by the ABC, found that about $1.6 billion will be raised from age pensioners, with opponents arguing the cohort is "least able" to afford the changes.

The federal government is moving to wind back the rebate those aged 65 and over receive on their private health cover, banking about $3 billion to spend elsewhere in the aged care system.

Ditching the Howard-era policy will mean more than three million older Australians will have to pay hundreds of dollars more for their private health insurance each year from next April.

About 1.5 million pensioners hold private health insurance, according to the PBO analysis.

It also found about $1.6 billion would come from those aged 65 and over who are not receiving the age pension.

The age pension is means-tested, so you can only qualify if your income and relevant assets are below certain limits, with the family home generally excluded.

A study by the Australian Council of Social Services (ACOSS) found 28 per cent of old age pensioners live below the poverty line.

Independent MP Monique Ryan, who commissioned the analysis, said the government's move has proved to be "a cash grab aimed at older Australians on low and fixed incomes during a cost-of-living crisis."

"The PBO has confirmed what older Australians and the private health sector have feared: these cuts will disproportionately affect those least able to afford them," Dr Ryan said.

She said the proposal could force many older Australians on low incomes to drop or downgrade their cover, pushing them onto already overburdened public health systems.

The federal government has been under increasing pressure over the proposal, with the health insurance sector, aged care groups, federal Coalition and states and territories all raising concerns about the impact on older Australians and the broader public system.

Its modelling suggests about 44,000 Australians would dump their private health insurance as a result of the change.

Those figures have been backed by independent modelling from health economists at the University of Melbourne, who said the impact on hospitals would likely be small.

However, New South Wales, South Australia, Victoria and the Northern Territory are among the states and territories concerned by the proposal, fearing extra pressure on their public systems at a time of great demand.

The Queensland LNP and Tasmanian Liberal governments have gone further, calling for the plan to be ditched entirely.

"I think there are real concerns about the downstream consequences of this legislation," Dr Ryan said.

Health Minister Mark Butler last week vowed to press ahead with the changes, saying while he recognised they would be a cost-of-living hit for older Australians, the federal budget's bottom line meant there was little money available for new aged care spending.

"I don't think people should have to make a choice between funding their health care needs and funding aged care; both are really important," Council on the Ageing (COTA) CEO Patricia Sparrow said.

"This is clearly showing that those who are least able to afford it will be significantly affected."

The Coalition has said it will block the legislation in the Senate, meaning the federal government will need the Greens, which are yet to land on a formal position, on board to get the legislation through parliament.

A Senate inquiry is also underway examining the impact of the changes.

Dr Ryan will move a legislative amendment in parliament this week calling on the government to carve out pensioners from the changes.

"What it would do is protect older Australians who are certainly worthy of respect and whose contribution to the private health system over decades should be marked," she said.

"It should be taken into account when formulating policy that's going to affect them really quite significantly."

Some experts have publicly supported the proposal, with health economist and former health department boss Stephen Duckett saying the impact on the system will be "trivial".

The federal government declined to respond to questions about the PBO modelling, and instead directed the ABC to a previous statement which said the changes would re-establish fairness between generations.

"Under the proposed changes, all Australians will now receive the same private health support, based on their income, not age,"

last week's statement said.

"While some people may choose to leave private health insurance because of this change, we project this would be around 0.4 per cent."