A Howard-era decision to increase private health insurance subsidies for over-65s will be scrapped to help pay for elderly support services.
Older Australians will have their private health insurance rebate slashed to fund essential home care services such as showering and dressing support.
The federal government has backed down on a requirement that people receiving aged care support pay $50 an hour for the support services.
But Health and Ageing Minister Mark Butler said the change required honesty about how taxpayer dollars were being spent.
The government will fund the $1 billion to make the support packages free by reversing the Howard-era decision to increase private health subsidies for over-65s.
Currently, people aged 65-69 get back 28 per cent of their private insurance premiums, over 70s are returned 32 per cent, but people under 65 only get 24 per cent back.
The changes mean everyone will receive the same 24 per cent rebate, regardless of age.
'In 2026, it's a policy that's harder to defend,' Butler said of the previous rebates scheme in an address to the National Press Club on Wednesday.
Health and Ageing Minister Mark Butler revealed the news at the National Press Club on Wednesday
'It means two households on the same income receive different levels of government support, based only on their age.
'That's simply not fair between generations, and it's simply not the best way to spend precious taxpayers' dollars on behalf of older Australians, when we need to do so much heavy lifting in aged care.'
Previous changes, which came into effect in November, required some recipients to pay more for help with their basic needs.
While the reforms were meant to improve the care levels offered, those on Support at Home packages had fees attached to services such as help with showering.
It meant that in some cases, elderly residents were forced to choose between receiving help with showers and getting other care services covered.
But the reversal in policy won't kick in until October, meaning out-of-pocket costs will still apply for several months.
Aged Care Minister Sam Rae conceded the changes to the Support at Home packages were made following concerns from residents, families and providers.
'We said when the Aged Care Act commenced that we'd keep watching how the reforms landed and fix what needed fixing,' he said.
Opposition aged care spokeswoman Anne Ruston said the rollout of reforms was rushed
The changes to aged care packages stemmed from 2021 recommendations from a royal commission into the sector.
As part of the overhaul, more tiers of home care were introduced to ensure needs were more closely met, while also making wealthier Australians pay more for services.
The changes announced on Wednesday were part of a broader $3billion package, which will also deliver an additional 5,000 aged care beds a year, and an extension of dementia supports including 20 additional specialist dementia care units.
Opposition aged care spokeswoman Anne Ruston said the changes showed the rollout of reforms in the sector were rushed.
'Removing charges for personal care is the right outcome, but these are essential services that should never have been classified as anything less,' she said.
'Older Australians also deserve to know why the government is waiting until October to implement this change. How many will go without essential care in the meantime?'
Ageing Australia chief executive Tom Symondson welcomed the decision to scrap payments for help with showering.
'Sweeping reforms will always have unintended consequences, and we've been clear from the outset that charging contributions for showering needed to be kept under constant review to ensure the best possible outcomes for older people,' he said.
Everyone will receive the same 24 per cent private health insurance rebate, regardless of age (stock image)
'Particularly alarming has been the increasing evidence that older people were reducing the number of showers they had or forgoing them altogether due to cost. That is the worst possible outcome.''
Council on the Ageing Australia acting chief executive Corey Irlam said basic care should never have come with a price tag attached.
'This will make a real difference to older Australians who've had to choose whether they could afford a shower,' he said.
'It removes the price tag anxiety many older people have raised with their MPs and puts the focus back on the person and the care they need.'