Executive director Roger Styles says the government had done well to address a range of issues in the public health sector, but the ongoing cost pressure through the health sector was "testing the affordability of health insurance for those over 65."

"With the population ageing, the government has the opportunity to act now to ensure insurance plays a key role in funding health care for the over-65s in the future," he said in a statement. "The Health Funds Association supported National's proposal for a targeted rebate. There are ways to maximise the public benefits while containing costs."

A leaked National Party health document in the lead-up to the 2008 election proposed a rebate on health insurance by as much as 30%, though this was dropped by the party in its official policy that it campaigned on.

Styles said the pick-up in the economy, as forecast by The Treasury's half-year update makes it "timely to give the rebate serious consideration.

He estimates a targeted rebate for over-65s would have an initial fiscal cost of $45 million per annum, though it would provide additional elective surgery funded over the medium-term. More than a third of the $500 million worth of elective surgery every year is for the over-65 group, he said.

"While nearly half of 55- to 59-year-olds have health insurance, this drops to just 25% of those over 65," and the rebate would help slow this, he said.