Labor’s bill to cut private health insurance rebate blocked by Greens over pensioner carve-out

Labor’s bid to cut the private health insurance rebate for over-65s has been blocked in parliament, with the Greens insisting they will withhold support unless pensioners receive a carve-out from the new rules.

The proposed changes, which were due to take effect from April 2027, would save the federal budget $3bn.

It marks another defeat for a key cost-saving measure after the government was forced to back down on its plan to cap allied health payments for veterans which would have saved $748m over three years.

People who are 65 or over currently receive a larger rebate on their premium, with the rebate higher for those 70 and over.

The Greens, Coalition and crossbench senators teamed up in the Senate on Wednesday to block Labor’s bill. In a rare move, the bill was discharged from the upper house, meaning it will need to be reintroduced if Labor tries to push ahead.

The health minister, Mark Butler, said the government planned to reintroduce the same bill to parliament on Thursday.

“It is important that the parliament have a proper debate, that these really important questions for older Australians are not held hostage to political stunts, but instead that the elected members of the House of Representatives and elected senators take these issues seriously and debate them properly,” he said.

Almost 80,000 older Australians are expected to ditch their private health cover by 2028-29 as a result of the Albanese government’s proposal, according to health department modelling released under freedom of information laws.

Greens leader David Shoebridge said the party would only offer its support for the changes if the government excluded pensioners.

“We say to Labor, 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. But we will not be joining with Labor to punch down on pensioners in the middle of a cost of living crisis.”

Butler said the new Greens leadership “spied a political opportunity” to team up with the coalition.

The chief executive of the Council on the Ageing Australia, Patricia Sparrow, rejected the planned savings being linked to aged care funding commitments.

“Older Australians shouldn’t have to choose between protecting their health and paying for everyday essentials. Nor should they be asked to choose between affordable healthcare and a properly funded aged care system,” she said.

The shadow health minister, Anne Ruston, said the policy would have affected up to 1.5 million pensioners.

“The idea that a government would have to cut the health system to need to pay for the aged care system … just reflects the fact of how much this government has lost control of their budget bottom line,” she said.

The proposal has been criticised by the states and territories, which warn their health services will come under increasing pressure.

The Victorian health minister, Ingrid Stitt, said she had raised concerns with Butler, vowing to oppose “any move that makes it harder for Victorians to get the care they need”.

“Any commonwealth savings shouldn’t come at the expense of older Victorians or simply shift pressure on to our public hospitals,” she said.

The New South Wales health minister, Ryan Park, said the state was already experiencing “significant pressure” on its public health system due to the commonwealth’s failure to provide sufficient aged care placements.

“This is not good for [the aged] and they deserve better,” he said.

The Queensland health minister, Tim Nicholls, said the “additional pressure will come at the expense of the thousands of older Australians already stuck in hospitals right across the country”.

The Tasmanian health minister, Bridget Archer, said the federal government was “already refusing to provide solutions to get aged care patients out of hospital and this dog of a policy will make things even worse”.