Labor is calling for calm despite modelling that shows older Australians on the pension will face additional cost pressures if the private health insurance rebate is scrapped.

Treasurer Jim Chalmers announced the scrapping of the private health insurance rebate for Australians over 65s in May as part of the federal budget.

It is intended as a measure to address intergenerational inequity and to help fund aged care.

The rebate people receive depends on income, though some older people recoup 8 per cent more than others on the same earnings. Ending that would save $3 billion over four years, according to the federal budget.

On Monday, modelling from the Parliamentary Budget Office showed about $1.6 billion of the projected savings will come from pensioners by the end of the decade.

A government spokesperson reiterated that the proposed changes created equity in the private health support system by only relying on income to determine subsidy rates and not age.

“Over 65s will still receive significant government-subsidised discounts of up to 24 per cent on the premiums private health insurers charge them, the same as the rest of the population,” the spokesperson said.

But independent MP Monique Ryan has labelled the rebate cut a cash grab that unfairly targeted pensioners who should be carved out from the legislation.

“Punching down on old people in what it claims to be a way of finding cash for aged care is not the way to go about private health insurance reform,” she said on Monday.

“Now that’s going to take away half of the potential financial benefit of it, which I would say brings into question the work of this legislation at all. I would really like to see it shelved.”

Coalition health spokeswoman Anne Ruston said removing the Howard-era rebate was a lazy tax on pensioners.

“The government have got no idea about the details that sit behind this,” Ruston said.

“They still haven’t modelled the cost on our public hospital system, and we know that states and territories are already out there yelling and screaming about the impact on them.”

While some people may choose to ditch private health coverage, Labor has forecast only 0.4 per cent to do so with insurance uptake to increase on the whole.

Australian Medical Association chief Danielle McMullen said the changes would likely shift costs to the public sector by removing the incentive for older Australians to hold on to private health insurance.

“This is at a time when the private health sector is facing significant pressures and our public hospitals are under considerable strain,” she said recently.

University of Melbourne research suggests the impact of the changes will be minimal compared to warnings issued by industry groups.

Research health economics expert Yuting Zhang said there was growing evidence health insurance rebates weren’t cost effective. She said there was no significant impact on insurance take-up when the rebate was introduced in 2005.

-AAP