Private health insurance rebates will be slashed for older Australians 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 the change required honesty about how taxpayer dollars were being spent, Health and Ageing Minister Mark Butler said.
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.
People aged 65-69 presently 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," Mr Butler said of the previous rebates scheme in an address to 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 said the changes to the Support at Home packages were made following concerns from residents, families and providers.
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 showed the rollout of reforms in the sector were rushed, opposition aged care spokeswoman Anne Ruston said.
"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?"
Council on the Ageing Australia acting chief executive Corey Irlam said basic care should never have come with a price tag attached.
Ageing Australia chief executive Tom Symondson welcomed the decision to scrap payments for help with showering, which was particularly alarming given increasing evidence older people were reducing the number of showers they had due to cost.
The changes announced on Wednesday were part of a broader $3 billion package, which will also deliver an additional 5000 aged care beds a year and an extension of dementia supports including 20 additional specialist dementia care units.
"Whilst today's announcement is a good start, we have been very clear with government that much more will be needed if we're going to build 10,000 additional beds each and every year over the next two decades," Mr Symondson said.
Mr Rae also said he was looking into the integrated assessment tool - an automated system used to determine an older person's eligibility for Support at Home services - after the Commonwealth Ombudsman announced it would investigate the tool.
The Australian Human Rights Commission welcomed the investigation.
