National Seniors Australia recently made a submission to the Aged Care Taskforce in response to a set of principles proposed to guide funding reform. We also contributed to a joint submission on behalf of a range of consumer organisations.
In our submission, we gave feedback on the principles and shared our research on older people’s views on aged care funding.
The current reform process is an opportunity to make aged care safer, better quality, fairer, and more sustainable, so it meets the needs of current and future generations.
Undoubtedly, older people want aged care improved and largely accept there will be a need for greater contributions to fund the system, through taxes, consumer charges, or a combination of both.
However, significant concerns remain about quality, safety, and transparency. If unaddressed, these will undermine public support for any changes to the tax and transfer system.
Our submission to the Taskforce draws on our extensive surveys of older people, including unpublished findings on the views of approximately 10,000 people aged 50 and older, conducted by National Seniors in partnership with Catalyst Consultancy and Research in June 2023.
We largely supported the six principles put forward by the Taskforce, especially those focused on delivering care at home, increased financial transparency for providers, and safety nets to ensure access to care and support.
When it comes to funding, there are multiple ways government could raise additional resources to pay for reforms and meet the growing demand from an ageing population. These include a levy, aged care insurance, and stronger means-testing arrangements.
These options will vary in terms of their fairness and their acceptance by the public. Aged care funding reform may become politicised if a cautious approach to changing taxes or consumer charges is not taken.
While our research consistently shows support for a levy among older people, for example, applying this via an increase in the Medicare Levy will mean younger taxpayers face an extra burden at a time that living costs are high.
A levy could alternatively be applied to superannuation in recognition that funding later life is a key purpose of super – but this option may be rejected given the low support among older people for changes to superannuation found in our surveys.
Another option is to create an aged care insurance scheme, which is something that is done in other countries, such as Japan and Germany, where people over a certain age – 40 in Japan – are required to purchase aged care insurance. Interestingly, there was strong support for an aged care insurance scheme attached to superannuation in our most recent survey and in previous surveys.
Increases to consumer charges, by altering means testing arrangements, is another option open to government. This could provide a degree of sustainability by leveraging greater contributions from those with the capacity to pay without the need to introduce new taxes.
We know from our own surveys that a main reason older people hold onto their capital is to pay for health and ageing costs, so there is a tacit acceptance of personal contributions.
However, it is vital that government continues to fund care-related costs from general revenue and that adequate safety nets apply for other costs, such as accommodation in residential care.
Our recent survey of 10,000 older people indicated some acceptance that a greater proportion of the value of the home could be included in means testing when determining contributions towards accommodation costs in residential care.
Currently, the entire value of the home is exempt from the means test for two years and even when its value is included, it is capped at $197,735.20. The cap approach is potentially unfair because people whose home is worth very little – for example, rural homeowners – are assessed the same as those whose home is worth a lot.
Regardless of which option/s are chosen, changes should be modest, fair, and introduced slowly over time to give people time to adjust.
Incremental change has been adopted in other policy areas, such as the increase in the Superannuation Guarantee to smooth out the transition and reduce impacts.
We argue in our submission that government would do well to adopt a similar approach when introducing any changes to taxes or consumer contributions.
We must create a flexible and reliable policy framework and system of practices and structures that are evidence-based, take a long-term demographic perspective, and provide dignity, quality of care and safety for older people both now and in the future.
You can read our full submission to the Taskforce here.