Aged care funding changes branded ‘lazy’

Seniors who are financially stressed may risk poorer aged care, the withdrawal of aged care providers and the closure of aged care services because of the Federal Government’s aged care funding reforms. 

The reforms, which are now legislated, aim to cut the taxpayer subsidy of aged care. 

The Federal Government projects the reforms will save $18.88 billion. However, that will be achieved by shifting more costs onto consumers of home and residential care, and by expecting providers to absorb the risk of bad debts. 

That threatens the financial viability of many aged care services, particularly smaller, regional providers and community aged care providers who lack the reserves to absorb bad debts, according to aged care expert and Aged Care Royal Commission advisor, Professor Kathy Eagar. 

Talking to the HelloCare newsletter, Professor Eagar said the financial burden on providers was “unsustainable”. 

“The government proposes a massive increase in consumer charges, expecting providers to collect these payments. If consumers cannot pay, providers face the dilemma of delivering unfunded services or ceasing care altogether. This creates a significant financial strain and jeopardises service quality.” 

She also doubts the government’s assumption that older Australians can shoulder increased costs.  

“There’s a perception that baby boomers are cashed up, but by the time they need aged care, most have depleted their resources,” she said. 

HelloCare says data supports her claim: only 13% of Australians aged 85 or older have more than $100,000 in superannuation. 

“The reality is that these savings projections are overly optimistic and likely unachievable,” Professor Eagar warns. “If the revenue gaps become too large, some providers may reduce services or close entirely, further exacerbating the aged care crisis.

Consumers will pay more for the government’s proposed Support at Home program. 

“When they say the top package is worth $78,000, that amount includes the consumer’s sizeable contribution – it’s not additional,” Professor Eager said. 

For independence services such as personal care, self-funded retirees could be expected to contribute up to 50% of the cost. For everyday living services such as domestic assistance, self-funded retirees can expect to contribute a massive 80% of the cost. 

“You’re talking about people potentially paying $30,000 or more a year in some cases,” she says, adding that “many won’t be able to afford it”. 

She predicts this will lead to a rise in the cash economy, with individuals hiring unregulated workers for tasks such as housekeeping, further compromising care quality. 

Additionally, the limited hours of support under these packages – a maximum of about 17 hours per week – are insufficient for older Australians with complex needs. 

Professor Eagar warns the reforms could lead to a significant strain on public hospitals, with frail older people unable to secure residential care beds. 

“In my region … 20% of all public hospital beds were occupied by people awaiting nursing home places.” 

This situation, she argues, underscores the need for changes in the Commonwealth-state health reform agreement, due for renewal in 2025. 

“The states and territories need to be negotiating a special clause in that agreement about funding … to actually cover the full costs of care for people approved for residential care who are sitting in public hospital beds.” 

While there is a lifetime cap on consumer contributions to their aged care, the lifetime cap applies only to what the government refers to as non-clinical care. There is no lifetime cap on accommodation. Self-funded retirees will typically pay $127,000 a year in residential care, with half of that in daily accommodation payments. 

Professor Eagar is adamant about what the government should have done. 

“I would position aged care with Medicare,” she said, so that aged care is treated as a public entitlement, much like the healthcare system, and could be funded by a levy, similar to the Medicare levy. 

“We all contribute to Medicare from the day we start working, and I think it’s politically palatable to introduce an aged care levy halfway through your working life,” the professor said. 

This approach would position aged care as a publicly funded and regulated system, similar to how Medicare is viewed today. “Medicare isn’t just public hospitals… it’s private doctors, private specialists, non-government organisations,” she explains. 

By shifting the narrative from a private, for-profit industry to a public entitlement, she believes aged care could be embraced as an essential public service.