HIGH- and middle-income earners are big losers from the winding back of the private health insurance rebate - but the measure will generate $1.9 billion in savings to the tax payer over four years. The 30 per cent rebate will start to reduce for couples with incomes of $150,000 (singles: $75,000) and tail off completely for those on $240,000 (singles: $120,000).
This means a couple or family on a typical health fund package will face about $1000 a year extra in premium costs as the 30 per cent tax rebate fades out.
But the idea of dropping insurance altogether and banking on the public system is not an economic option for these people, as a result of a pincer arrangement the Labor Government has devised over the past year.
The Government argues that the changes are in line with the principle underpinning the tax transfer system: that the largest benefits should go to those on lower incomes.
The measure is forecast to push few people out of insurance, thanks to the Government's move in the previous budget to lift the income threshold at which consumers have to choose between paying the 1 per cent Medicare levy surcharge or taking out health insurance.
Treasury estimates 99.7 per cent of people will retain insurance because those on high incomes would face higher tax costs if they did not take out insurance.
The changes mean that couples on $150,000 (singles: $75,000) will have the rebate reduced from 30 per cent to 20 per cent. For those on higher incomes up to $240,000 (singles: $120,000), the rebate drops to 10 per cent.
The rebates drop in equivalent stages for people 65 and older, who currently get rebates of 35 per cent, and the over 70s, who receive a 40 per cent discount.
The Treasury calculations are likely to blunt plans by the Opposition to resist the changes in the Senate.
The budget papers state that about 14 per cent of single taxpayers who have incomes above $74,000 receive about 28 per cent of the total health insurance rebate paid to singles. Under the changes, these taxpayers will receive about 12 per cent of rebates. Figures for couples are comparable.
The rebate costs more than $3.5 billion a year and that is growing quickly, the Government says.
PRIVATE HEALTH
MARK METHERELL
P High-income earners face a $1000-a-year rise in costs
P Government to save $1.9 billion over four years from means-testing the rebate
