Labor could lose half its savings under private health compromise with Greens

Labor could be forced to forfeit up to $1.6 billion in budget spending that had been earmarked for aged care to land a compromise deal on its contentious private health insurance changes.

The Greens doubled down on their rejection of Health Minister Mark Butler’s bill on Thursday, saying they would not pass laws scrapping the Howard-era private health insurance bonuses for over-65s unless pensioners were ringfenced from the changes.

Butler announced before this year’s budget that he wanted to get rid of more generous private health insurance rebates for 3 million older Australians. That $3 billion saving would be redirected to aged care, including 5000 extra beds, as the system deals with growing demand.

The move would reverse a 2004 change that increased the government rebate for older people by up to 8 per cent more than younger people on a similar income.

However, Butler was dealt a blow on Wednesday when the Coalition, Greens and crossbench teamed up to knock the government’s bill out of the Senate because it would saddle 1.5 million pensioners who have private health insurance with extra costs and force others onto the public health system.

Health department analysis released this week estimated about 78,000 Australians aged 65 and over would drop their private health cover by 2030 under the changes.

Butler re-introduced the legislation without changes on Thursday, saying the Senate’s job was to debate bills, not get them thrown out.

“We recognise the reality we don’t have a majority in the Senate but we need a constructive debate that determines whether or not we can find a path forward that has majority support from the Senate,” he said.

“I wish I didn’t have to bring this measure to the parliament but at the end of the day there is not a money tree out there to fund the huge expansion that is needed in aged care in particular.”

But Greens leader David Shoebridge said nothing had changed. “It’s the same Senate today as it was yesterday,” he said.

“We say again to the government that if you want this legislation through we’ve got you a pathway. You cannot punch down on pensioners... But we will support the balance of the reforms. We know that is an important revenue measure and we would ask the government to come and engage with us directly on that.”

Independent MP Monique Ryan commissioned the Parliamentary Budget Office to provide a breakdown of how the rebate is allocated last month.

The analysis found that about $1.56 billion in the government’s savings would come from aged pension recipients with private health insurance. About $1.58 billion would be saved from scrapping the bonus for over-65s who don’t receive the pension.

If the government follows the Greens’ demands, it would forfeit half its planned savings.

As the Coalition accused the government in question time of waging war on older Australians on Thursday, Prime Minister Anthony Albanese insisted it was sensible reform that would level the playing field for all Australians.

“Whether someone is 64 or 65, they will receive the same private health rebate. What could be fairer than that? The system will be based on a person’s income, not their age.”

He also took aim at the opposition for knocking back a budget saving. “You can’t come before the parliament and say that we need tighter fiscal policy and less spending and then oppose every single saving that is before the parliament,” he said.

“That measure... came in by the Howard government during the mining boom, where they had to actually make changes to the Aged Discrimination Act in order to bring it in, because they had rivers of gold flowing in.”

The Coalition’s aged care spokeswoman, Anne Ruston, said the measure was not a budget saving but cost-shifting.

“That cost, in effect, was shifted to 1.5 million pensioners who were being asked to pay for the government’s budget mess. That seemed to me incredibly unfair,” she said.

“The Inspector-General of Aged Care conceded that there is a lot of extra money that’s been put into the aged care system, but it is not being well spent. We need to ensure that every dollar in the aged care budget is being used to benefit the older Australians it’s meant to support.”

The government has repeatedly been forced to reverse course on its aged care reforms under pressure from the opposition and crossbench as it wrangles with pressure on the $40 billion aged care sector, caused by an ageing population and the need to improve standards exposed by the aged care royal commission.

The unlikely alliance between the Greens and Coalition has already forced the government to spare Meals on Wheels from a merger, provide more human oversight of the algorithmic assessments of clients’ needs and fast-track 20,000 home care packages.

On Thursday, the Albanese government agreed to commission an independent review of the aged care assessment algorithms in separate negotiations with the Coalition.

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