HECS-style plan for home care

For many, the term ‘aged care’ was tarnished before the pandemic. It has potentially become even more so since.

The government-run private aged care sector has been the focus of much scrutiny throughout the COVID-19 crisis, particularly in Victoria where mismanagement has cost hundreds of residents’ lives.

Unfortunately, public aged care facilities will likely be tarred with the same brush.

More and more these days, most people want to age in place.

A YourLifeChoices survey of 4117 older Australian revealed that 62.5 per cent of respondents want to stay at home for as long as possible.

They want to stay at home even after their partner has died (71 per cent) or if their partner was moved to an aged care facility (65.5 per cent).

However, more than 50 per cent know that they may not be able to afford to age in place.

Former prime minister Paul Keating has a plan to keep older Australians at home for longer.

It takes the form of a HECS-style loan that will cover home care costs for those who do not want to go into a nursing home.

Under Mr Keating’s plan, every Australian could be extended a loan to pay for their care and the costs would be recovered from their estate upon their death.

Speaking to the Royal Commission into Aged Care Quality and Safety, Mr Keating said his post-paid system would not only reduce wait times for home care packages, it would also ease the financial burden on families and preceding generations.

“The Commonwealth could then advance as loans to every aged Australian so much as to meet their needs in support services to stay at home or alternatively in care accommodation,” said Mr Keating.

“Everyone would have an account … the Commonwealth would advance money to the account to pay for your home care accommodation or aged accommodation.

“Then, upon your death – and no earlier – there would be a credit to that loan account from the estate of the deceased person.

“The Commonwealth account would then receive a credit … so we’re not forcing anyone out of their home.

“We’re not obliging aged persons to negatively mortgage their home, you’re not asking families to chip in and pay for their relatives in their accommodation or their care, and so I think such a system has a lot of advantages.”

Around 100,000 Australians are already waiting for a home care package. Mr Keating’s plan could accommodate them at the level to which they’ve already been assessed.

“We live in this wealthy country … why would somebody need to wait 36 months for a level four package, or 24 months?” he said.

“These are aged people; they’re likely to die in the period.”

Leading seniors groups have cautiously welcomed the idea, says an ABC report.

“I think at the theoretical level it’s certainly worth exploring … the devil will always be in the detail,” said Councils on the Ageing (COTA) Australia chief Ian Yates.

National Senior Australia chief John McCallum likes the idea but says it might be “hard to sell”, as many older Australians don’t just view their home as an asset but rather as something to leave their children.

“I think the sort of trouble we’ve had … from a consumer point of view [is] it’s a difficult one to get to understand,” said Professor McCallum.

The Combined Pensioners and Superannuants Association (CPSA) said the proposal may provide aged care security for older Australians but could pose financial risk for the government.

“Basically, it sounds like a universal unsecured loan and I’m not sure any government would be able to take that on,” said CPSA policy manager Paul Versteege.

Public finance expert Dr Marc Robinson says the model misses the point of aged care.

He claims the biggest problem facing aged care is the minority of elderly people who end up needing particularly long periods of expensive residential care because they suffer from dementia or another very severe disability.

“Everyone should be protected against this risk through social insurance, which would pay for aged care costs above a certain threshold. That way, those who end up being part of this unlucky minority would be protected from the huge financial burden of care. Everybody should pay a premium – in the form of a supplement to the Medicare levy – in order to pay for this insurance,” he said.

“Mr Keating’s proposal is, in effect, that everyone should pay the full cost of their aged care unless there are insufficient assets in their estates to do so. This would be like having health system in which government lends everybody money to pay for their healthcare during their lives, and then grabs the estates of anyone who had incurred very high healthcare expenses during their lives due to particularly poor health.”

Dr Robinson says we should adopt an insurance-type system, such as those in place in countries with the best aged care systems, such as Japan, Germany and the Netherlands.

“Even the British conservative government of prime minister Boris Johnson is moving now to implement an insurance-type system,” said Dr Robinson.

“In principle, aged care insurance could be provided either by the government or by private insurance companies. However, international experience shows that, for such insurance to work, it has to be compulsory for everyone. And if insurance was provided by private insurers, it would have to operate under a system with a standard policy and premiums regulated by the government.

“Overall, a government insurance system would be simpler and more efficient.”

As to the suggestion that the “post-funding model” might be viewed as a death tax?

“If there’s not assets there, then the Commonwealth pays, but it’s a very nice way of working out what the Commonwealth should really pay vis-a-vis the residual assets of an aged person in superannuation or bricks and mortar assets, etc,” said Mr Keating.

In the late 1980s, around 6.5 people between the ages of 15 and 65 supported every one person above 65. Nowadays, 3.7 people supports every person over the age of 65 and that number is predicted to fall to three by 2040.

“As you know, a lot of young people now who actually become that cohort, the tax paying cohort, many of them have low incomes, they’re renters, they start life with a HECS debt if they’ve been to university and, of course, they pay the GST 10 per cent cold, regardless of income,” said Mr Keating.

“So, to this cohort we are inviting them to carry the great body of retired aged people and, of course, now with the debts of the COVID budgetary interventions.”

What do you think of Mr Keating’s idea?

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