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Fairer Private Health Insurance Rebate

Friday, March 23, 2012

Means testing the private health insurance rebate is about readjusting this subsidy to make it fairer and more sustainable into the future. The vast majority of taxpayers with private health insurance will not be affected by the means testing this legislation introduces.

Making it fairer

Under the Liberals, the top income earners received far more of their fair share of this subsidy. Labor is readjusting the subsidy so that the top 13% of income earners (singles earning over $80,000pa and couples earning over $160,000pa) will receive about 13% of the pool of funds, not double that like under the Howard Government. Far from being an attack on families, this change will ensure that the greatest share of benefits are provided to those on lower and middle incomes.

Making it more sustainable

As spending on the private health insurance rebate is growing rapidly and is expected to double as a proportion of health expenditure within the next 40 years. These reforms will result in savings of around $2.8 billion over the next four years.

How it works

Rebates for low- and middle-income earners and older Australians will remain in place.

Tier 1 will apply to singles with an income of more than $80,000 a year and couples and families with an income of more than $160,000. For these people the private health insurance rebate will be 20% for those up to 65 years and higher for those over 65. The Medicare levy surcharge will remain at 1%.

Tier 2 applies to singles earning more than $93,000 a year and couples and families earning more than $186,000. The rebate will be 10% for those up to 65 years and higher for those over 65. The surcharge will be increased to 1.25%.

Tier 3 affects singles earning more than $124,000 a year and couples and families earning more than $248,000 a year. No rebate will be paid for people in the third tier and the surcharge will be increased to 1.5%.

Unlike claims by some opposed to these reforms, members of the industry have publicly stated that there will be minimal impact on the number of people in private health insurance. All these reforms will do is make the system fairer and more sustainable for the future.

More information is available at the Department of Health website.

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