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Taskforce recommendations to shake up aged care

It was late on Monday night (11th March) when the Government released the much-anticipated report from the Aged Care Taskforce, discussing how to fund aged care services to ensure sustainability and what it is likely to cost us to access the care we need.

The Royal Commission into Aged Care found that improvements are needed for the aged care system to ensure higher standards and quality of care, but achieving this raises two significant challenges:

  1. How to support people’s desire to age at home
  2. Where the money comes from to ensure aged care providers can afford to meet people’s increasing demand and expectations, particularly with an expected increase in the number of older Australians.

Older Australians want greater choice and more control, but they are also worried about how much care costs and whether they can afford the care they need. Care providers are worried about the cost of delivering care and whether they can afford to meet people’s expectations. The Government is worried about the projected increases in aged care expenditure and how to ensure a system that works for us all.

The Taskforce’s report focusses on all of these challenges with some key principles that should form the basis for government policy. It tries to navigate a path that ensures a fair and equitable system that delivers quality care.

While the report gives us some clues on what changes we might expect, it is important to note that the Government has not yet commented on their policy position. So, we do not yet know what changes the Government might accept and put forward as legislative change. All eyes will now be on the May Federal Budget.

Aged care needs more money

The Federal Government is the major funder of aged care - both home care and residential care. However, there is a limit to their ability to support the increase in costs needed in the future. Government spending on aged care as a proportion of gross domestic product (GDP) is projected to grow from 1.1% in 2021–22 to 2.5% by 2062–63.

To make care sustainable we need to inject more money and the Government has ruled out imposing a specific levy or increasing taxes to fund aged care. Therefore, the additional money will need to come from either Government (using current taxpayer funding) or from the people who access care services (fees and co-contributions). Efficiencies and better business models for care providers may also help to direct more of the available money into better care services.

An overriding principle adopted throughout the report is that we should have one aged care system. At entry a person should have their needs assessed and then they can choose where they want to live and how to access this care. This will create greater alignment and equity across government subsidies for home care and residential care.

It is also clear that the portion of costs paid by people accessing care will be higher. Currently the people accessing care only pay (on average) 25% of the ongoing costs of residential care and 6% of home care costs.

What to expect for home care

Home care is a cashflow conversation. People accessing home care have sorted out their own accommodation and funded those costs. Home care is about what support you need and who pays the costs.

The Taskforce’s report divides these costs into three groups, with principles around what people should pay for:

  • Clinical (medical) care – it is suggested that this should be fully or mostly paid by government.
  • Support to facilitate independence and safety – this is where most of the money is currently spent and includes services such as allied health and social supports. It is suggested that this should have a compulsory contribution by people accessing the care but still be heavily subsidised by government.
  • Everyday living expenses – these are the normal expenses associated with living in a home such as cleaning, laundry and maintenance and it is suggested that they should be mostly (or totally) funded by the person.

This model will require clear guidance from government on what services can be subsidised and which ones cannot and is likely to result in people needing to fund more costs on their own.

The suggestions also aim to address the problem with many people not spending all of their available package (unspent funds) and freeing up these amounts to fund care for a greater number of people.

If the changes are implemented, people will need a lot more support and guidance with managing cashflow and will need to focus on what services will help them to improve and maintain their quality of life, personal safety and healthcare management.

What to expect for residential care

A similar model to categorise services is suggested for residential care, but residential care has the added complexity of funding accommodation.

The cost of accommodation and daily care expenses (eg food, electricity, laundry etc) is suggested to be considered as personal expenses. The government should only subsidise these costs for a person who is determined to have low financial capacity.

The cost of accommodation is one of the biggest concerns for residents with costs that amount to hundreds of thousands of dollars. This may be made more affordable through the person’s choice to pay this cost as a daily fee (rent) or a lump sum – with each option having different financial outcomes. The report suggests moving away from the lump sum option to a rent only option, but this needs to be done slowly to give providers confidence to invest and increase the supply of aged care beds and ensure a rental only option is sustainable. It is proposed that lump sum refundable accommodation deposits (RADs) could be fully phased out by 2035.

In the interim, we need to ensure providers can have confidence to build more residential care homes and upgrade the existing rooms. Some of the suggestions in the report may see the cost of rooms increase, with changes to make it easier for providers to charge higher RADs and the ability for providers to keep a portion of any RAD paid (the suggestion is up to 15% over a 5-year period). A safety net for low-means residents is still a key measure under these suggestions.

The ongoing daily fees and split into two components: care and daily living needs. it is suggested that the care needs that are directly related to health and impairment should continue to be fully (or mostly) funded by government, potentially removing the currently costly and expensive system of means-testing these fees.

Some of the costs currently allocated as “care costs” may also be transferred into the category of daily living costs. The category of daily living needs is suggested to be a personal expense which would need to be fully funded by the person living in care. This includes the cost of food, electricity, laundry etc. Most of this cost is already paid by the person living in care, with some Government subsidy. However, providers are not recovering the cost of providing these services – they are making a loss on this area.

The report suggests increasing the fees for daily living to ensure providers are adequately reimbursed (with a margin). If this becomes a fully personal expense, it could see people paying an additional $15-20 per day. it is likely that pensioners and other vulnerable groups could still be partly subsidised for some of this increase.

Providers and residents would also be able to negotiate additional services for higher standards of living and additional services. Hopefully this moves us away from the current system of compulsory additional services packages that have no connection to resident choice or values.

Getting financial help

Overall, we hope to see changes working to ensure financial sustainability for providers, with a large and fair share of the costs continuing to be paid by Government but older people may need to fund more of the costs.

While we are still waiting to see the Government response and get a clear direction on what will change and what it means for us planning our future care needs, it is clear that advice is important, and a greater understanding of the care system is needed.

Good regulation will be important, but so is a better understanding by us all. This includes a better understanding of the costs and a better understanding of how we can arrange our own finances to meet our needs and expectations, including better using our homes and superannuation savings to meet all of our retirement needs, including care.

The report flags the need for people to start this financial planning journey early in their retirement, not just when the crisis hits. From our experience it is important to get this advice from a financial planner who is licensed by ASIC (you can check your planner’s details at https://moneysmart.gov.au/financial-advice/financial-advisers-register) and is also experienced in aged care advice.

 

Louise Biti is a Director of Aged Care Steps, supporting advice professionals to give advice on aged care. Support is provided to older people through Aged Care Personal Advice. The information in this article is general and does not take into account your particular circumstances. We recommend specific financial tax or legal advice be sought before any action is taken to apply the rules to your specific circumstances. Refer to the relevant Product Disclosure Statement before investing in any product. Aged Care Steps ABN 42 156 656 843 is holder of AFSL 486723. Current as at 13 March 2024.

 

33 Comments
Rennie
March 20, 2024

I’m single with no family. I’m it. Solely responsible for myself. There are probably a lot of other people in the same situation as me out there.
Whilst I hear about the assistance of packages that people can get to help them remain to live in their own home as they get older. I’m assuming that these packages are available for pensioners only.
What assistance is available for self funded retirees to remain in their own home. I’m not talking about financial assistance. I’m talking about any organisations that offer organised services that make it easier for non- pensioners to obtain the care they need as a single point of contact, to assist with care.
I’m worried that there is nothing to make life easier and to help self funded retirees manage the care they need to be able to continue living in their own home? Would it be a matter of self sourcing help privately from say a cleaner, who would you get to help shower you ? Everything I read only seems to be geared up to help pensioners. If you have no family to assist it makes it very hard, especially if you don’t want to live in a nursing home. I’d appreciate any suggestions that you might have on this matter.

Warren Bird
March 20, 2024

Aspire4life is one such provider. (My sister is a practice lead there.)

Frustrated
March 17, 2024

Some of the Home Care package recipients could be filled by "work for the dole" recipients. However, the requirements to be an aged care worker are ridiculous. Even if you're just doing their floors, minor maintenance, or a trip to the shops. Surely we don't need certificates to do this aged care work! It would free up those with certificates to do more challenging, needy work.
Even in residential care, some of the roles could be filled by volunteers or our work for the dole. Sitting with, talking with, walking, playing cards, serving residents , clearing tables. I'm sure there's more that would take some pressure of the staff.

lyn
March 18, 2024

Disagree, re home care. Having observed on visits 2 different people in 80's, 1 package, 1 not, who can no longer do heavy clean eg floors/corners or change sheets but able personal care and meals, standard of homecare workers outstanding and whilst menial chores are indeed basic there is a standard of safety and hygiene that is taught and more importantly, how to deal with seniors which is not always natural and more often learned on short specialist courses and to me that training was evident. They're not 'just cleaners' but security checked and approved workers under supervision of an agency, they observe; demeanour of client, is something unsafe to be fixed, trip & slip hazards, unsafe use of electricity, is fridge working properly, what to do in emergency if enter and find client on floor or in a depressed state. In 1 case it's the only person going in once/wk., the other the shop trip only outing & money entrusted to worker to shop as client can't but sits in cafe and buys coffee for both when sorting the change/everything off list. It is sadly a much under- respected job. When my time comes, hope same standard no matter how much per hour I pay for approved, safe person in my home. Cheers for their pay rise last week. Grasscutters earn more/hr, is grass more important than care of people?

Peter
March 16, 2024

I think Public Trustee is very unkind to call people "ignorant and selfish" for seeking the best value for their money. I think most people would call it commonsense.

SMSF Trustee
March 15, 2024

Ever since I started contributing to my super in the 1980s I've known that one reason for it was that the population was going to get older and that it would be unfair if I hadn't saved towards the costs of my later years. I'm flabbergasted at the number of folk who think that those of us who've saved via super for our old age ought not pay for it once we get old! Honestly, all those tax concessions that we got and keep getting on our super we're never intended to be a free gift. They have always been there to encourage us to put money away for the day when we needed the expense of aged care. To expect my grandchildren to have to pay for something I've saved for over the last 5 decades is nonsense. I'm happy to pay for it (when the time comes - not quite there yet ??). Some of the comments here are just ignorant and very selfish.

Rob
March 16, 2024

Agree entirely SMSF Trustee. I too am self funded and don't expect others to pay when I can afford it (having built up the next egg over decades). There is too much of a sense of entitlement that "having paid my taxes for blah, blah years, I am now entitled to receive govt stuff tax free". That's not how it works folks - the taxes (& Medicare) you pay during your life are to pay for those govt services AT THAT TIME, not some future point.

Dudley
March 16, 2024

"self funded and don't expect others to pay when I can afford it (having built up the next egg over decades)":

What of those who could have 'built up the next egg over decades' and could have afforded to pay and did not?

Mark
March 15, 2024

Of all the comments made here, I wonder how many voted for Labor? Perhaps they need to think twice prior to the next election! We would definitely have a far better outcome on Aged Care, under a Coalition Government.

Mark
March 15, 2024

P.S.
I forgot to mention under Labor's Aged Care proposal's, they have silently introduced by stealth an alternate way of milking a self-funded retiree's lifetime superannuation savings. Be prepared for more.

Peter
March 15, 2024

The system is unfair. I think the best plan for people who have saved some money is to spend it or give it to your beneficiaries before you reach the stage where you need aged care. My father who died 13 years ago was a self funded retiree. When he was in aged care he was paying three times the amount compared to a pensioner. At the time the nursing home would do nothing extra for my father without an additional charge. Our family felt annoyed that he was subsiding another person who may have made no effort in life to save. SO, SPEND OR GIVE YOUR MONEY AWAY NOW!!! Enjoy it and don't let others get the benefit of it.

Johns
March 15, 2024

Even the people that have significant amounts of super will find their super largely gone by the time they need aged care. Lots of holidays, new cars, mobile homes, etc all consume your super. There will be the house, but not much else. And the house will only ever become available for aged care AFTER the first of a couple have died (the partner will need somewhere to live).

I read a few years ago I read that the average length of stay (from admission to death) in a Nursing home is about 6 to 12 months. All this heartache to the oldies for only six months, and the six months of their lives that should be their most carefree, just being taken care of.

What has the country come to? Not looking after their most vunerable

George B
March 16, 2024

“What has the country come to? Not looking after their most vulnerable”
Our country can’t afford to look after their most vulnerable because in the words of Kerry Packer "governments don’t spend our money that well" .. frittering it away on poorly planned and executed projects eg.NDIS rorts, sports rorts, COVID subsidies that went directly to inflate company profits, politically motivated GST subsidies to states, cancelled road projects, cancelled commonwealth games, dubious submarine projects,etc, etc, all at a time when the country is aging and the taxpayer base is shrinking, demanding even greater discipline and efficiency from our governments – the predictable response instead is more taxes.

Disgruntled
March 16, 2024

The average tenancy of an aged care home is 2.5 years.

Jack
March 14, 2024

When I’m flying I find that if I pay more, I get a better seat. With age care, I’m concerned that if I pay more I still end up in economy and the person beside me pays nothing.
That seems a poor return on a lifetime invested in hard work, diligent saving and frugal living.

Kathy
March 15, 2024

Exactly.

And the family home needs to be put into the assessment initially - if not, the cost of care has to be taken taken out of the estate after death, like in several other counties. Currently pensioners who have million dollar homes do not have the homes counted in the assessment - but those who live in retirement villages have their homes counted as it is deemed to be a lease. This is not fair.
It has to be an even playing field.

Boris Dodgy
March 19, 2024

The home is assessed at a value of $197,xxx for the sake of calculating aged care fees but can be exempt for up to two years for Age Pension purposes.
Not really fair when the average home value is around $1,000,000.

Angela Jansz
April 03, 2024

In reply to Boris, it’s only Centrelink that’s uses $197,735k as an asset for 2 years. Where by the nursing home does not take that. My Mum recently went into care and she has to pay $272.00 daily care fee because she has a home that is valued at $950k. Her son who is 54yrs and is not a well person and who lives in the home and have been since 1999 is not classed as a protected person cause he works and earns a small income. So they are forcing Mum to sell the home to pay the $750k that is required by the nursing home . Disappointed by the government handling this.

George B
March 15, 2024

It sounds like Australia may be ready for a two tiered aged care system where those that want a higher standard of care pay a premium (similar to the private school system) and those that can’t get the basic standard on the public purse.

Pedro
March 14, 2024

Government inquiries are so confusing! The retirement income review saying we are not spending enough in retirement, as we are worried about health costs as we age, and subsequently leaving too much of an estate when we die, so spend more, and now the aged care review indicating that you better save for aged care later in life because it is going to cost you more.

Max
March 14, 2024

Where is voluntary assisted dying in all this? Prior to a dementia diagnosis many would not like think they would be living in Residential Aged Care in a complete state of dependency; becoming incontinent, unable to converse, recognise family, bathe or feed themselves and in need of serious mobility aids.
Considering a persons rights, the distress on family and the expense, should government be revisiting the laws around Voluntary Assisted Dying?

Trevor
March 17, 2024

I totally agree with you, Max. I have a friend who is 97 years old. She is almost blind and profoundly deaf but is not in any pain so wouldn't qualify for VAD. She has told me many times that she hates being a burden to other people, gets no enjoyment out of life and wishes that there was a way that she could have a pain-free death at a time of her own choosing. I suspect that many other residents of nursing homes etc. feel the same way.

Sue
March 14, 2024

Something that concerns me, and I have yet to work through how to manage this well, is that for Home Care packages, recipients need some kind of help to manage the money. Some recipients also need help to manage the services.
This is an area where those in society with management and financial skills are increasingly finding roles and charging for them. The charge is part of the package. How does society work out what is a reasonable fee? Because I can already see the managers and financial people milking the system, as with NDIS.
There needs to be some mechanism for capping charges that managers and others can make.
I wonder if this was an area addressed by the Taskforce?

john
March 14, 2024

Terrific comment by Sue.
Separately, in regard to the system of many people not spending all of their available package (unspent funds).
This system should not have been set up in the first place and is nonsensical.

Dinah
March 15, 2024

Agree Sue.
It is not only the managers and financial people milking the system, it is the tradies and suppliers. Their hourly rates seem to be inflated when work is done for a home care package and retail goods are usually sold at the very top price. I think the system, as it stands, is wide open for rorting.

Bob
March 15, 2024

Absolutely Dinah. The system is being rorted by many/most overcharging providers and suppliers. A friend with a Home Care Package recently wanted to update his clunker of a Walker to a lighter version. Guess what? He had to have a visit from an OT (circa $260) who then wrote a report (circa $125) and then along came the walker funded from his package. Bill Shorten could have a field day on this and NDIS rorting.

John
March 17, 2024

Excellent points Sue, John and Dinah.
I know from personal experiencing when buying mobility equipment and services for a home care recipient that if I buy it myself I will be charge 10-25% less than if the home care provider buys it. I believe they either add on a handling levy or the supplier adds on the cost of a commission (which is still charged even when I organise everything myself). There is a lot of financial siphoning off of govt money which is resulting in less and less for actual care. This of course is on top of the 35%+ all HC Providers cream off the top of funding for so called “management” and “care” fees which are non existent apart from a monthly invoice. It really is a ripoff.

David Williams
March 14, 2024

An excellent article thanks Louise. Effective longevity planning includes Aged Care as one of the seven important longer term steps to prepare for well in advance, so it’s important to get these changes implemented clearly and urgently.
Longevity planning also raises the impact of staying in paid work longer on healthy ageing, on funding our potential longevity and on engaging with the potential cost and service changes in Aged Care. Each person is different, so a personal analysis and plan is a fundamental first step to informed decisions about Aged Care and many other issues.
As changes occur, decisions can be reviewed. Longevity planning ensures a personal time and goals framework for health, financial and estate planning decisions, providing focus, potential savings and positive approach to longevity – the rest of our life.
Aged Care is just one of the five key elements of government engagement with increasing longevity. More than ever, we need a national longevity strategy that co-ordinates the Aged Care changes with super and tax, pensions and equity release, ageism in employment and preventive health. The potential savings are immense. They would easily fund a national longevity education program and improve the economic and social bottom line of governments.
It's time to think and act outside the square!

More nanny state
March 14, 2024

Why shouldn't the user pay if they have financial means? Fundamentally, the concept of fully funded public health needs revisiting. It should be Medicare for those on low means (government concession card) and co-paid thereafter until it is self-funded for income/wealth above a certain level. We hang on to the universality of services such as healthcare and education but that is the opposite of the way the budget ensures wealth re-distribution. If these very expensive public infrastructure services were managed with more user pay principles, the constant wrangle in the Budget with its social division causing effects will be potentially tempered.
COVID has left us with an entitlement mentality, a seeming inability to solve our own problems and an increase in the nanny state approaches from the government.
Shouldn't the government only step in to correct market failure rather than be another part of the market?

JohnS
March 14, 2024

Yeah, that would be right and fair (not). I pay an insurance premium (and mind you, because of the way medicare levy is charged, the more I earn, the more I pay) for hospital cover all my working life (thru Medicare) and now when I need medical care you suggest that it should be "user pays"

Bernie S
March 15, 2024

I believe it's called making sure those that don't have the same means/ability that you have can also be cared for to a certain level in a equitable society... 

JohnS
March 14, 2024

Consider two old people

Person A - has several heart attacks, and spends several one to two week periods in hospital, sometimes in high dependency units. Over the years of having these heart attacks, the cost of hospitalisation totals around $100,000. Then they have a "massive" heart attack and die

Person B - gets dementia. Can't live at home because they "wander". They spend the last few years of their life in a nursing home - cost (of accommodation, excluding food, laundry, electricity, etc) over those years amount to $100,000

When it comes to working out who pays for each of these there is no question about person A - medicare will cover it all (in a public hospital). The proposal says that person B has to contribute to their care costs (which is over and above their food, laundry, electricity, which effectively can be paid for by equating it to the pension).

Can I simply ask, "why should the estate of person A be left with all of the estate, whereas the estate of person B is diminished?" This doesn't sound equitable to me. There has to be a way where we don't have "user pays" but instead have some method where we pay for the privilege of knowing that if ever we needed residential aged care it will be paid for

Dr David Arelette
March 16, 2024

Anton Chekhov wrote a play where a cunning old man declared where ever he died, the owner would get 100% of his fortune, he was lavished by the usual suspects (family members who never worked too hard learning stuff to make their own wealth) took him in and fought over him. Lesson there me thinks.

 

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