More than three million Australians aged 65 and older will pay an average of about $250 more per year for private health insurance from April 2027 if a rebate is scrapped.
Currently, the older group receives a higher government-funded rebate than younger insurance policy-holders, but the preferential treatment is due to be replaced by a purely income-based system.
Health ministers from NSW, Queensland and Tasmania have said they believe the cut will further strain their healthcare systems, particularly public hospitals, as seniors ditch their insurance.
Federal Health Minister Mark Butler on Sunday acknowledged the government had made a difficult and unpopular decision, savings from which would help fund greater support for home care services for the elderly.
"It is, in policy terms, pretty hard to argue with that - people should receive the same level of support for their private health insurance according to their income, rather than according to their age," he told News24.
The policy change has yet to pass the Senate and would need the Greens' support as the coalition opposes it.
The minor party is leading an inquiry into the matter.
Almost 40 per cent of 1505 over-65s surveyed about the rebate said they would drop their insurance cover if it were lowered, Redbridge polling released on Friday showed.
But Treasury has forecast only 44,000 of three million privately covered people 65 and older would move back to the public healthcare system with the change.
State governments and the coalition were "parroting" health insurance modelling instead of relying on the Treasury figures, Mr Butler said.
"We're very confident that this is the right thing to do, including by way of the public hospital system," he said.
It was recently revealed Labor ignored advice from the Health Department that some older Australians would have to rein in already stretched spending to afford medicine and health care with the change.
Opposition frontbencher Dan Tehan said he had heard real concerns from people in his regional Victorian electorate.
"I had a dear old lady approach me in her mid-70s, battling cancer," he said.
"She literally scrims and saves so she can afford her private health insurance to help her deal with the cancer that she's suffering from."
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