Aged Care Overhaul: Free Basic Services, Higher Insurance Costs for Seniors

"Basic care services aren't optional extras" — Aged Care Minister Sam Rae

The Australian federal government has announced it will remove co-payments for basic personal care services under the Support at Home program, effective from October. The funding for this change will be partially offset by reducing the additional private health insurance rebate currently available to Australians aged 65 and over. Health Minister Mark Butler outlined both measures in a pre-budget speech to the National Press Club.

Aged Care Policy Change

Removal of Co-Payments for Basic Care

The government will reclassify services including showering, dressing, and continence care from the "independence" category to the "clinical support" category under the Support at Home program. This change removes the requirement for recipients to pay out-of-pocket for these services.

• Under the previous policy, introduced in November, recipients paid co-payments of 5% to 50% of service provider fees for these services.
• Some recipients reported paying approximately $50 per hour for showering assistance.
• The change applies to current Support at Home recipients and approximately 100,000 individuals on the waiting list.
• Co-payments for non-clinical care, such as cleaning and home maintenance (categorized under "everyday living"), will continue.

Funding and Background

The Support at Home program was launched in November with a principle of "vertical equity," designed so that those with greater financial means contribute more to their care costs. The policy reversal addresses "horizontal equity," ensuring similar clinical needs receive similar support regardless of financial means.

• The government estimates the financial impact of removing these co-payments will exceed one billion dollars.
• Funding will be redirected from savings achieved by adjusting the private health insurance rebate for seniors.
• The government has also previously taken action to address home care package waitlists by adding 20,000 additional packages.

Reactions

"These basic services aren't optional extras" — Aged Care Minister Sam Rae, stating they should be accessible without cost concerns.

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 substantial amounts for showering assistance.

Ageing Australia chief executive Tom Symondson supported the decision, describing it as "common sense" and noting it could help rebuild trust in the reforms. Symondson acknowledged that providing fee-free services has associated costs and that the government had aimed to make the aged care budget more manageable.

Private Health Insurance Rebate Adjustment

Changes to the Seniors' Rebate

The government has announced it will reduce the additional private health insurance rebate available to individuals aged 65 and over. This additional rebate, introduced in 2004 under Prime Minister John Howard, provided seniors with up to 8% higher rebates compared to younger individuals with similar incomes.

• Government modeling estimates the change affects 3.2 million Australians aged over 65.
• Affected individuals are expected to pay an average of $226 to $255 more per year for their private health insurance.
• Government modeling estimates approximately 0.4% of policyholders (about 44,000 people) will discontinue their coverage.
• Coalition health spokeswoman Anne Ruston cited a separate estimate suggesting 60,000 older Australians may drop their coverage.
• The change is projected to save the government approximately $3 billion over four years.

Where the Money Goes

The redirected funding will be allocated to aged care spending, including:

• $3 billion to deliver 5,000 additional aged care beds annually starting in 2029
• Over $200 million for 20 new dementia care units and a hospital-to-nursing-home transition program

The change requires legislation to pass parliament.

Reactions

"Not fair between generations" — Minister Butler, stating the current system is harder to justify in 2026.

Shadow Aged Care Minister Anne Ruston criticized the move, stating the government is "targeting" older Australians already struggling with cost-of-living pressures. She expressed concern the change may lead people to drop private health insurance, increasing pressure on the public health system.

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

Minister Butler's speech also addressed plans to manage National Disability Insurance Scheme growth, with some savings redirected to aged care.

The government has not yet evaluated whether the Support at Home program is achieving its intended effect of increasing access to clinical and capacity-building services. Researchers plan to compare service usage between the previous home care scheme and the current program.

Advocacy groups have expressed hope for further aged care announcements before the budget, including reduced wait times and changes to assessment methods.