A leading health economist says the removal of higher private health insurance rebates for those aged 65 and over will have “almost no impact” on the public health system, despite backlash from insurers and advocacy groups.

Before last week’s budget, the federal government announced older Australians would see a reduction in their private health insurance rebates, bringing them into line with those aged under 65.

Labor anticipated the move could increase private health insurance costs for the cohort by up to $250 a year and see 44,000 abandon their cover – of about three million people that the industry estimates the policy change will impact.

But Dr Stephen Duckett, a health economist and honorary professor at the University of Melbourne, said the policy was a “wise move”.

“There’ll be almost no impact on the public health system,” Duckett said.

“Even the government’s projections of the number of people who might drop health insurance is quite small.”

He said the estimated 44,000 people who could ditch their insurance were spread across eight states and territories, meaning “you won’t be able to discern [that] in the overall statistics”.

Duckett said previous modelling on the number of older people who took up private health insurance due to the rebate – introduced by the Howard government in 2004 – found the impact of the policy was very low.

“It had more or less no impact when it was introduced, so it’s going to have almost no impact when it’s taken away,” he said.

The health minister, Mark Butler, had announced the move – alongside drastic changes to the national disability insurance scheme – at the National Press Club on 22 April. He had said the policy would recoup $3m over four years, which would be spent on increasing the number of beds in aged care homes.

Justifying the changes, Butler said the current policy was “not fair between generations” and that two households on the same income should not receive different rebates based on age.

On Tuesday, Butler told the ABC the government would push ahead with the changes, despite the backlash and community concern.

“I recognise this is an unwelcome change for many older Australians,” Butler said. “But at a time where we need to find every dollar we can to plough into aged care services, continuing to pay people a higher subsidy for their private health insurance not on difference in income, but difference in age, was just difficult to sustain.”

The Council on the Ageing (Cota) said it had serious concerns over the additional pressure the changes would place on older Australians already absorbing the rising cost of living.

Cota’s chief executive, Patricia Sparrow, said the peak body had heard from older Australians worried about the policy’s impacts.

“For some people, the added cost may be manageable, but for many others living on fixed or modest incomes, every extra dollar matters,” Sparrow said.

Dr Rachel David, the chief executive of insurance industry body Private Healthcare Australia, warned that the changes would have wider consequences.

“We are concerned many older Australians will move to cheaper policies with significant exclusions or restrictions and only discover they are not covered when they need treatment,” David said.

“This creates a flow-on effect for public hospitals because patients who lose or downgrade cover do not disappear from the health system – they end up relying more heavily on publicly funded care.”

But Duckett said that it was far more cost effective for the government to use the money saved from reducing the rebates and put it into increasing aged care beds.

“If a person is stuck in a public hospital bed, they’re often there for 100 days or so, which is about 20 patients being admitted to the hospital at an average length of five days, so it’s a really important initiative in getting the public hospital system to work better.”