Government promises Budget 'fix' for aged care but funding unclear

The federal government promised that a ‘fix’ for aged care would be at the heart of the May Federal Budget and the Prime Minister revealed on the weekend that $10 billion would be allocated to the sector over four years.

However, critics are challenging the adequacy of that amount and seeking more information about how the funds will be raised.

A key recommendation from the aged care royal commission – to allow people to remain in their homes for as long as possible – would be a focus of the budget announcement.

“It [home care] is clearly what people want,” a source told The Age, adding that the exact allocation “isn’t finalised yet”, but would exceed $10 billion.

“It will be a comprehensive response to the royal commission and it’s a major feature of the Budget,” the source said. “It has been discussed by the expenditure review committee at every meeting for a long time now.”

Read more: Older Australians want to build or renovate, not go into aged care

However, a Grattan Institute report released on Sunday said an additional $10 billion a year was required to “help fix Australia’s broken aged care system” given that the royal commission estimated in its final report that successive governments had slashed the annual aged-care budget by $9.8 billion.

“So, $10 billion over four years, depending on how it is phased, might only be a quarter of enough,” Grattan Institute health program director Stephen Duckett told The New Daily.

Report authors Dr Duckett, Anika Stobart and Hal Swerissen described the aged care system as “a stain on Australians’ conscience”. Fixing aged care is more than a political problem, it is a moral imperative, they said.

They propose that the extra spending could be funded by some combination of a new Medicare-style levy on taxable income, changes to the Age Pension assets test and/or the residential aged care means test, and/or reductions in excessively generous tax breaks on superannuation.

“Australia needs a streamlined and integrated aged care system under a new, rights-based Aged Care Act that guarantees care and support to all who need it,” they say.

“Funding of care costs should be universal, just as there is universal funding through Medicare of patients’ costs in public hospitals.

“This would provide universal insurance for people who have high care needs, and would mean people would not need to worry about how they are going to fund their possible care needs in older age.”

Read more: Economic adviser wants Aussies to fund their own aged care

The Grattan authors emphasise that the cost of a reformed, universal aged care system will only grow as the population continues to age and there are fewer people of working age paying taxes to fund care.”

They say the government could consider a 1 per cent aged care levy on taxable income and reduce the excessively generous tax breaks for wealthy older Australians.

“More of the value of the family home should be included in the Age Pension assets test. And superannuation earnings in retirement – currently untaxed for people with superannuation balances of less than $1.6 million – should be taxed at 15 per cent, the same as superannuation earnings before retirement,” the report says.

It said five criteria must be met to improve the funding and financing of aged care:

1. Government funding for aged care should no longer be rationed, but instead based on need and underpinned by a secure funding source equitably raised.
2. Government should fund universal entitlement to independently assessed, reasonable, and necessary care that is personalised to the individual’s needs, with no user charges for care.
3. Users should pay for ordinary costs of living, such as accommodation and meals, with contribution requirements made simple and easy to understand.
4. User contributions should be means tested, so no-one misses out on necessary care because they don’t have enough money.
5. Providers should report their finances in a transparent way, demonstrating the link between the funding they get and the care they provide

Last year’s budget allocated $1.6 billion for 23,000 new home care packages and the total number of people receiving home care will, by the end of the current financial year, reach about 195,000.

The government says the extra money in this year’s budget will help to clear the 100,000-long waiting list for home care, providing higher-level care at home for longer, employing at least 70,000 more aged care workers, lifting the amount of care per person and ensuring a qualified nurse is on site 24/7 in all residential care homes.

Health Services Union (HSU) national president and NSW secretary Gerard Hayes told The New Daily that if the federal budget lacked a clear funding plan it would be deemed a failure.

Read more: Is the government considering a new tax to fund aged care?

“If the government can’t explain how they’re going to find this $10 billion or $20 billion in the first instance, I think we’re just kidding ourselves continuing on with this talkfest,” he said, adding that the HSU’s Medicare proposal – lifting the levy to 2.65 per cent – would deliver the necessary funding. If there was a better idea out there, he would “love to hear it”.

The extra levy would cost someone on $80,000 about $400 a year, would provide enough funding to create 59,000 skilled aged-care jobs and lift industry wages above the current award rates of $20.73 to $25.18 an hour.

The union’s modelling was conducted by Equity Economics, which found that only 42.5 per cent of aged-care homes in Australia would be considered satisfactory under the star rating system used in the US.

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Written by Janelle Ward