Mar 12, 2024

Wealthy seniors should pay more for aged care, Gov taskforce recommends

Wealthy older Australians should pay more for aged care
Image Source: Shutterstock

Michelle Grattan, University of Canberra

A government-instituted taskforce has proposed older Australians should pay more of the cost of their aged care, while steering clear of politically fraught options such as a levy or touching the family home to help finance the sector.

Under the recommendations from the Aged Care Taskforce, refundable accommodation deposits (RADs) would eventually be phased out, replaced by a rental-only model. A co-contribution-for-service model for home care would be established.

The taskforce, chaired by Aged Care Minister Anika Wells and with representation from the sector, was charged with examining how funding can be put on a more sustainable basis.

The report says with an ageing population more funding will be needed from both government and participants in the home and residential care sectors.

It contains no costings and the government has not provided its response.

A Royal Commission into the sector under the Morrison government favoured a levy to assist with aged care funding but the commissioners were split over the model. The Albanese government does not want to stir that hornet’s nest.

The report says that over the next 40 years, the number of people over 80 is set to triple to more than 3.5 million.

Government spending on aged care as a proportion of GDP is projected to grow from 1.1% in 2021-22 to 2.5% in 2062-63.

It is estimated that $37 billion investment (in today’s dollars) would be needed to build the extra aged care rooms required in 2050.

Over the decade to 2030 additional investment of about $5.5 billion would be needed to refurbish and upgrade existing aged care rooms, increasing to $19 billion by 2050.

“Current funding arrangements will not deliver the required amount of capital funding,” the report says.

The demand for home care has been increasing strongly: over the next 20 years an average annual increase of 44,000 participants is forecast, totalling nearly two million older people using home care by 2042, compared with about one million now.

“To meet this demand, the home care sector will need to be financially stable and administratively efficient,” the report says.

There are three components in relation to residential care funding: for the care itself, for living costs (food, cleaning, laundry, etc), and for accommodation.

In residential care, the government should continue to focus on care costs, “with a significant role for resident co-contributions in non-care components,” the report says.

At present the government pays for most of the care component (some 94%) and the report suggests taking this to 100%. It wants the daily living component that residents pay boosted, subject to a safety net.

Backing its case for more user-pays, the taskforce says older people are wealthier than in earlier generations, while the tax burden “is being shared among an increasingly smaller group of people as the proportion of the working age population declines”.

“It is appropriate older people make a fair co-contribution to the cost of their aged care based on their means,” the report says.

The report says aged care providers are on average losing $4 per resident a day on daily living costs. They have little flexibility to get more revenue for this.

“There is therefore a critical need for increased funding towards everyday living expenses. The Taskforce believes this should be largely paid for through greater resident co-contributions to ensure sustainability, but with a strong means tested safety net for those who cannot pay a higher rate, such as full-rate pensioners with no other income or assets.”

For residents to meet their daily living costs the taskforce recommends a Basic Daily Fee and a supplement.

The Basic Daily Fee already exists – the taskforce is recommending this continues but with the supplement increased to meet the full cost of everyday living expenses and also means tested so that wealthier residents contribute more towards everyday living.

The taskforce is critical of Refundable Accommodation Deposits, under which people pay an amount which is refundable when they die or leave.

“Phasing out RADs would improve simplicity and equity for residents and reduce liquidity risks for providers.

“RADs create inequity between residents based on how they pay for their accommodation. Wealthier residents who can afford a RAD receive their deposit back in full when they leave care and make no direct contribution to their accommodation costs, while DAP [Daily Accommodation Payment] payers make a significant annual contribution.

“Phasing out RADs will mean all incoming residents will pay using a rental model, making outcomes for residents more consistent, and fees easier for older people to understand.”

The taskforce says that after an independent review in 2030, by 2035 the sector should no longer accept RADs, moving to a rental model. That would be subject to the review finding there was appropriate financial sustainability for the sector and care was affordable for consumers.

In the near term, providers should retain a portion of the RAD to make an immediate improvement in the sector’s financial sustainability, the report recommends.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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  1. One of the bigger issues surrounding nursing homes is finding the staff to attend the many duties required for totally dependent residents. Dementia and the difficulties with behaviours, possible violence, trying to attend personal care, and maintaining nutrition and hydration, it is an extremely hard job. Frailing residents needing lots of time and patience and trying to do this under management’s routine limits. Residents needing to be fed, toileted, showered, cleaning faeces and urine continuously. Attending medications and treatments. Using lifting machines to transfer residents, continuous manual handling. Then the emotional support required for residents transitioning and leaving all they know behind, home, pets, garden and a life, to now sit in gods waiting room, deteriorate and die a possible long miserable death. I wonder how young people would see this career as fulfilling, you need a special kind of humanity to do this work.

  2. The paragraph about RADs being fully refundable is rubbish. Numerous aged care facilities I have investigated in NSW retain part of the RAD and or don’t pay any capital gains nor interest on the RAD and those with funds provide basic daily care fees as well as a Daily Accommodation Payment (DAP), or at least a Contribution (DAC), as well as a Daily Means Tested Fee.

  3. In my opinion the Standards are part of the problem in RACF.
    The recommended 200 minutes a day is way too high.
    Some residents are fully independent , not requiring much time at all.
    The minute requirement should only be applied according to individual care needs once fully assessed. I have worked in aged care for 50 years in management and as an RN.
    CAM/SAM was a good system.
    Please consider .
    Kind regards
    Jenny McCalman

  4. Present incumbents made their individual aged care decisions based on current financial rules and requirements, including means testing. In my case I opted to pay RAD on the understanding it would be repaid IN FULL at the cessation of my agreement with the Provider. As it is, foregone investment income (say, 5% per annum for example) from the RAD payment is already a hidden cost to me. Imposing an additional 3% per annum retention levy on the RAD after being promised repayment in full of the RAD, is blatant breach of contract in my opinion. I entered my agreement with the Provider in good faith, so I expect that to be respected and the agreement honoured in full.
    Presumably, my thoughts would be replicated by many others who signed up to their individual arrangements for residential aged care.
    My view, therefore, is that existing Residential Aged Care Agreements be “grandfathered” and that the proposed new financial arrangements be only applied to new, incoming residents.

  5. This story is nothing new to hard working retirees who have worked extremely hard over their working lives.These people have done everything right. Never had handouts & have continually paid top dollar for everything.
    The Gov should think a bit more about how self funded retirees have saved the economy millions.
    Gov have never had to prop up the self funded individuals.
    Pensioners continue to winge & demand more help.Lets make things fairer for all retirees.The self funded deserve some end of life support too.

  6. Like so many others Michelle Grattan seems to assume that the majority of age care recipients are in residental care whereas in reality we are in the community receiving our age care with home care packages or support in the home. We have rates, maintenance, energy ,laundry and food and backyards to maintain over and above the costs that our package covers and yet we are considered under the one cohort. For someone living solely on a pension with today’s rising cost of living any extra would be a strain . For many of us, the generation that benefitted from free university , we have our own homes. the solution ,despite the governments protest to the contrary is to capitalise on the family home with a home equity grant from Cenrelink. Is this a somewhat underhand solution to the government’s housing and age care crisis ?


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