New modelling suggested that reform of Australia’s aged care system would require new funding equivalent to a one percentage point increase in income tax rates.
The modelling, prepared by Deloitte Access Economics indicates that reform would cost far less than what Australian taxpayers are willing to pay to improve the system. A study from Flinders University has previously found that the average taxpayer is willing to pay 3.1 percentage points more to ensure that all Australians can access high-quality care.
Deloitte’s report examines the key reforms currently under consideration. The reforms include measures such as:
This reform package would boost the number of available jobs within the sector, resulting in approximately 30,000 additional full-time equivalent jobs by 2030. An additional 50,000 full-time equivalent workers will be needed to cater for population trends, as Australians live longer and the large cohort of Baby Boomers begin to enter aged care.
Those already employed with the sector will see benefits as well. The report predicts an increase in wages for professionals in the aged care industry, to levels aligned with other health care sectors. This is due to workforce pressure as demand for workers grows significantly faster than general employment growth.
Deloitte’s report notes ‘this will induce wages to rise faster in this sector than the broader economy to attract qualified staff.’ Wages for nurses and other skilled staff in aged care are predicted to rise by an average of around 5.5% per year in the next thirty years, more than double the economy-wide average.
Deloitte’s report notes that ‘quality of care is expected to gradually rise over time’. The quality of aged care will continuously improve in line with rising expectations of older Australians. The report states that ‘access to skilled staff is an important enabler of quality care’ and that ‘productivity growth means providers will be able to deliver care with slightly fewer staff in the future.’ These measures will contribute to many of the current challenges in the sector being overcome, such as insufficient staffing and a lack of access to specialist services.
A tax increase is not the only option under consideration to fund improvements in the aged care sector. Deloitte Access Economics considered two options for funding the reform package: an increase to income tax rates, or an increase to the Medicare Levy.
The increases have been modelled as follows:
| 3 star reform |
4 star reform |
5 star reform |
|
| Medicare levy increase | 0.51% | 0.89% | 1.31% |
| Income tax increase | 0.58% | 1.01% | 1.48% |
Both solutions come with benefits and pitfalls, and both have consequences for the broader economy. As noted in the Flinders University study, most Australians would be willing to pay slightly higher taxes to improve the quality of aged care. However, this willingness can only be realised if people are clearly aware of the purpose of the increase, and the results are made available. The Deloitte report concludes that ‘there may be benefits to a funding approach that is transparent and strongly associated with the need to fund aged care expenditure’.
It is evident that Australians want their aged care industry to be improved and most are prepared to pay for this to happen. The Royal Commission’s hearings into funding and financing are occurring in the coming weeks, and will offer further insight into how affordable and achievable the reforms to our aged care sector could be.
Lift the GST by 1% and bring back retentions. There is your answer
The aged care sector has enough budget, it’s just poorly managed by the providers. (The government knows this and continues to turn a blind eye). You only need to look at the ‘hidden costs’ and undelivered services added to client invoices. The lack of transparency has allowed providers to ride the gravy train all these years.
If the government is serious about fixing aged care, they need a ‘knock-down-rebuild-approach’ rather than the current band-aid approach. The need real checks and balances and real standards, and penalise providers who do the wrong thing.
Stop throwing money at the problem. It won’t lead to an increase in front line staff wages, training and better services. Management will be the big winners with higher salaries, bonuses, more overseas conferences and junkets.
Readers need to ask themselves – would I be happy to go into aged care tomorrow. I’m guessing there’ll be a resounding ‘no’ – which is the starting point for what is needed to rebuild a broken system.
If Aged Care wasn’t for share holders to raise money it might not need to raise taxes.we have to make money to renovate an provide. Some open running costs of hospitals an nursing homes would be great. There is a lot of money made for agencies yet little hours to support home care as well. We still need dedicated staffing numbers with reduced paperwork so residents have more face to face time
Some other thoughts for structura change – as we need to deal with Workforce issues as well:
1. WorkForce : For every month a person works in the aged care sector, they gain credits from the government toward the costs of their own aged care – the longer they work in the sector, the more credits. ( credits are towards future aged care costs and/or % reduction of aged costs that will be charged to the worker )
2. Workforce : The government tops up employees super (not employers). The longer someone works in the industry sector. For each year a person works in the sector, the government contributes another cumulative ‘x’ per cent per year, increasing each year, to a max of 10 years. Example, at the end of year 1, the government contributes an additional 1%, at the end of year 2, the government tops up super, by a cumulative 2% for the two years, i.e. 2% for the second year, and an extra 1% for the first year – so, at the end of the second year, the worker now has effectively had 2% more contributions for BOTH years, and so on up to 10 years.
3. Better use of funding: Like the states have done with high schools, move to a Specialist, rather than Generalist model of provision to funding, assets and specials staff are concentrated. I did write to you previously about this suggestion – see full details in an email dated 18 Nov 2019 – subject: Royal Commission – idea for structural change.
4. Funding: A portion of super for people currently under 30, is quarantined for aged care costs and/or sickness costs in retirement.
5. Funding: Set up legislative changes, such that if a consumer needs aged care which is not self-funded due to lack of cash and paid upfront by the government, then the government has first claim on the estate before assets are distributed to family etc. Refer AFR article recently, where an analysis of baby-boomers super in Sydney, showed they had 8x the value of their super in their house.
Surely people understand Government doesn’t have a ‘bottomless’ pit of money available; so yes we should agree to an extra 1% tax increase. if it goes directly to fixing our aged care; after all the workers who pay it now, may oneday need the improvements made to aged care.
Yes most definitely, a vital industry in crisis