Health funds push for Medicare tax hike on high earners without cover
Wealthy Australians ditching private health insurance could be slugged with a Medicare Levy Surcharge (MLS) of up to 3 per cent if a Senate proposal is green-lit.
Private Healthcare Australia (PHA) wants to increase the tax for higher earners who choose to go without hospital cover.
High earners without private health cover could face a 3 per cent Medicare surcharge under a new Senate proposal. iStock
The proposal forms a key part of the industry body’s submission to a Senate inquiry, where it’s lobbying against planned cuts to private health insurance rebates.
At issue is a federal push to lower the higher rebate for people aged 65 and over to match the rate younger policyholders receive on the same income, effective April 1, 2027.
The government says the $11 billion in savings from the policy change will be invested in aged care services in a move hoped to promote intergenerational equity.
But PHA claims its own recommended tax changes could bring an extra $410 million into government coffers and encourage 383,000 people to take out insurance.
The current MLS ranges from 1 to 1.5 per cent of income for the 2026–27 financial year and applies only to higher-income earners without appropriate private hospital cover.
Health Minister Mark Butler said the changes would promote intergenerational equity. Alex Ellinghausen
More than 900,000 high-income Australians currently pay the surcharge rather than take out cover, according to PHA.
Under its proposal, the surcharge would rise to 1.5 per cent for tier-one earners and 3 per cent for those in tiers two and three.
PHA argues that bringing hundreds of thousands of new customers into private health insurance would help curb premium increases while pouring extra cash into the public purse.
To offset the cuts, the health lobby proposed a tax hike as an alternative savings measure, warning that government plans could force 62,000 older Australians to drop their cover next year.
PHA Chief Executive Dr Rachel David warned that seniors who can no longer afford private insurance will be forced onto public health waiting lists for major procedures.
“If someone loses their health cover and needs a hip or knee replacement, they will likely end up on a very long public hospital waiting list,” David said.
David said patients who drop their insurance risk waiting years in the public system if they end up needing a hip or knee operation. 9News
Rather than across-the-board cuts, PHA says it wants to protect lower-income older Australians from rebate reductions, arguing any cuts should strictly target higher-income policyholders.
“PHA recommends the Bill only reduce the Rebate for older Australians earning over $105,000 (singles) and $210,000 (couples) to the same rates as those under 65,” the submission states.
“Older Australians earning below these thresholds (on the base tier) would maintain the additional Rebate to help them afford their private health insurance.”
The group also called for reducing the regulated prices paid for medical devices in private hospitals, arguing that Australian rates remain well above international benchmarks.
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