Government Announces Major Aged Care and Health Insurance Reforms

Key changes: Free basic personal care for at-home recipients, offset by reduced private health insurance rebates for Australians over 65.

Health Minister Mark Butler is scheduled to formally announce two related policy changes during a National Press Club speech, reshaping support for older Australians while redirecting billions in health spending.

Aged Care Policy Change: Removal of Co-Payments for Basic Services

Details of the Change

The government will remove co-payments for basic aged care services—including showering, dressing, and continence management—for recipients of the Support at Home program.

These services were previously categorized under "independence" support, subject to co-payments ranging from 5% to 50% of the fee. They have now been reclassified as "clinical support," for which no co-payment is required.

Timeline and Scope

The change takes effect from October 2025.

The policy reversal applies to current Support at Home recipients and approximately 100,000 individuals on the waiting list. Notably, the co-payment policy had only been introduced in November 2025 as part of earlier aged care reforms.

Previous Policy

Under the previous policy, recipients paid between 5% and 50% of service provider fees for personal care services. Some recipients reported paying approximately $50 per hour for showering assistance.

Co-payments for non-clinical care, including everyday living services such as cleaning and home maintenance, will continue unchanged.

Financial Implications

The financial impact of the policy change on taxpayers is not specified, but estimates exceed one billion dollars.

Private Health Insurance Rebate Changes

Details of the Change

The government will reduce the age-based rebate bonus for private health insurance, a policy introduced in 2004 under the Howard government. This bonus provided individuals aged 65 and older with rebates up to 8% higher than younger individuals with similar incomes.

The change requires legislation to pass parliament.

Estimated Impact

Government modeling estimates that approximately 3.2 million Australians aged over 65 will pay an average of $226 to $255 more per year.

The government projects that approximately 44,000 individuals will discontinue their private health insurance coverage as a result. Coalition health spokeswoman Anne Ruston cited a separate estimate that 60,000 older Australians might drop their coverage.

Projected Savings

The change is projected to save the government $3 billion over four years (per one source) or $4 billion (per another). All savings will be redirected to aged care spending.

Funding Allocation

According to the government's announcements, the redirected funds will be allocated as follows:

Health Minister Butler stated that a new aged care facility needs to be opened every three days for 20 years, requiring 10,600 additional places annually. Last year, the net increase in beds was just 800.

Statements

Health Minister Mark Butler stated that the basic care services "aren't optional extras" and should be accessible without cost concerns. Regarding the rebate change, he stated the decision "re-establish[es] intergenerational equity in the rebate system" and will "free up funding to provide more dignity and care to older Australians."

"The current system is not fair between generations and harder to justify in 2026." — Minister Butler

He acknowledged the decision would not be welcome for many but described it as necessary.

Coalition health spokeswoman Anne Ruston criticized the move, stating the government is "targeting" older Australians already struggling with cost-of-living pressures, warning the change may lead people to drop private health insurance, increasing pressure on the public system.

Council on the Ageing acting chief executive Corey Irlam described the announcement as "welcome but overdue."

Older Persons Advocacy Network's Samantha Edmond reported receiving accounts of people paying "from $50 upwards" for showering assistance.

Ageing Australia chief executive Tom Symondson supported the decision, calling it "common sense" and noting it could help rebuild trust in reforms. He acknowledged that providing fee-free services has associated costs.

Private Healthcare Australia CEO Rachel David acknowledged the decision would disappoint older Australians but noted it would mostly affect wealthier individuals unlikely to drop coverage. She warned it could hurt consumers, impact private hospital viability, and limit health funds' ability to improve patient experiences.

Additional Context

Health Minister Butler noted that approximately 80,000 Australians will turn 80 this year, compared to just 17,000 in 2011—a dramatic demographic shift.

A review of aged care accommodation funding has recommended an interest-free loan scheme providing $2 billion annually to providers, with funding linked to the proportion of low-means residents. Butler stated the findings are under consideration.

The policy reversal follows previous government action to address home care package waitlists by adding 20,000 additional packages. Advocacy groups have expressed hope for further aged care announcements before the budget, including reduced wait times and changes to assessment methods.