Proposed changes to the health insurance rebate will encourage more than 1.6 million Australians to drop private hospital cover, a new survey shows.
The report by market research company ANOP and consultant Deloitte surveyed health insurance members about the federal government's plan to means test the 30 per cent rebate.
The report rejected Treasury's forecast of 25,000 consumers dropping their private health cover in the first year the changes come in.
"You are looking at very significant percentages that are going to drop or downgrade for hospital and even bigger numbers in terms of dropping or downgrading their extras cover," ANOP chairman Rod Cameron told media in Canberra on Wednesday.
In the report, 1.6 million insured Australians would drop private hospital cover over five years while 4.3 million would downgrade their policies.
Australian Health Insurance Association (AHIA) chief executive Michael Armitage said the government had underestimated the potential impact of this policy.
"In an attempt to find savings, the government has developed a policy which will demand a greater financial injection than it saves in order to repair the health system," Dr Armitage said.
Labor has tried to means test and reduce the rebate for individuals earning more than $75,000 a year and couples earning more than $150,000 a year.
It has been blocked twice by a hostile Senate but the plan could be passed when the Australian Greens take the balance of power in the upper house from July 1.
The government will be claiming savings in the budget of around $2 billion over four years through changes to private health insurance measures.
Health Minister Nicola Roxon said the government rejected claims by AHIA of 1.6 million Australians dropping hospital cover due to means-testing of the private health insurance rebate.
"The findings are based on general questions being asked of 2000 people via a telephone poll without all the relevant financial information available," Ms Roxon said.
"People don't make decisions about family budgets during telephone polls. They make them in a more considered fashion with all the facts available."
She said means testing the rebate was fair as 90 per cent of lower-income adults should not subsidise private health cover for the top 10 per cent.
The proposals could change the overall demographic of those holding health insurance, Mr Cameron said.
"People who are going to drop out or downgrade their private health insurance are the more healthy and younger (people), leaving a less healthy pool in the privately health-insured population," he said.
"Of course, (this) is going to have, by itself, impacts on premiums."
Deloitte estimates the policy change would increase private health insurance premiums by 10 per cent more than otherwise by 2016.
Opposition health spokesman Peter Dutton said the coalition had blocked the proposed changes as there would be consequences to the public system.
"It also shows that our public hospitals will be swamped with close to an additional million admissions above normal growth over the next five years and that the costs of that to the taxpayer will be billions of extra dollars," Mr Dutton said.
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