Senate vote on health insurance rebate means testing provides poll trigger

The defeat means individuals earning more than $75,000 a year and couples on more than $150,000 a year won't be forced to pay more for their health cover - unless Labor is prepared to call an early election on the issue.

Then the government could get its proposal through a joint sitting of both houses of Federal Parliament.

Last month, the Senate defeated related legislation which would have penalised wealthier Australians without private health insurance by charging them a higher Medicare levy.

Federal Labor argues the measures - which were initially defeated in September - would save $100 billion over the next 40 years.

But Health Minister Nicola Roxon wouldn't say if the government was willing to fight a early poll on private health insurance.

"We are more interested in being able to reform our health system, delivering the better health and better hospitals that (people) need, than collecting double-dissolution triggers," the minister said through a spokeswoman.

In a statement Ms Roxon slammed the opposition for blowing a $2 billion hole in the current budget.

"Failure to implement reforms such as this is financially irresponsible and risks the ability of our health system to cope with rising demand from our growing and ageing population," she said.

"The recent intergenerational report showed that the private health insurance rebate will be the fastest growing area of health expenditure."

Ms Roxon insisted just 0.3 per cent of people would drop their cover as a result of the changes.

But health insurers celebrated the legislation's defeat. They said it was a win for the health system generally.

"The means-testing of the rebate would have had a disastrous impact on the balance between the public and private health sectors," Australian Health Insurance Association chief executive Michael Armitage said.

"It would have put extra pressure on the public hospital system and put upward pressure on premiums."

Family First's Steve Fielding and independent Nick Xenophon voted with the coalition to defeat Labor's legislation.

Senator Fielding wanted the government to take into account how many children a family had. Senator Xenophon didn't believe Labor should be allowed to break an election promise.

Before the 2007 poll both Prime Minister Kevin Rudd and Ms Roxon guaranteed they wouldn't touch the 30 per cent rebate or increase the Medicare levy surcharge.

Opposition health spokesman Peter Dutton said the Senate had done the right thing by holding them to account.

"The coalition has today delivered a victory for the 11 million Australians who have private health insurance," he said in a statement.

"This was a broken election promise and the coalition was not going to support a bill that would jack up prices of premiums for private health insurance."

Labor has an existing double-dissolution trigger on emissions trading.

Mr Rudd can call a regular election between August 7 and April 16, 2011.

An early double-dissolution poll can be held up until October 16.

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