Paul Keating proposes HECS-style home care funding model

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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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Written by Leon Della Bosca

Leon Della Bosca is a voracious reader who loves words. You'll often find him spending time in galleries, writing, designing, painting, drawing, or photographing and documenting street art. He has a publishing and graphic design background and loves movies and music, but then, who doesn’t?

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77 Comments

Total Comments: 77
  1. 0
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    What Private insurers involved, gawd help us the nightmare is beginning

  2. 0
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    FORMER PM Keating should stay that way – he forgets he was voted OUT – why is it when you get older every damned b****er wants to get their hands on your super, your savings, your home – what IS the point in paying taxes

  3. 0
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    Anything that comes out of the mouth of Paul Keating should be dealt with contempt.

    • 0
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      Definitely agree

    • 0
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      Like universal superannuation for every worker…
      Thanks Paul. Because of your idea, myself and my wife can retire with sufficient funds without drawing a pension.

    • 0
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      Not because of Keating, On the Ball. Because you were fortunate enough to have employment that enabled you to save. Low income earners end up with virtually no super. During Keating”s time in power, many low income earners were actually getting BILLS from their super fund, because the outrageous fees were higher than the employer contributions. And now tax on super is costing the nation mega-billions and benefiting the richest 20% excessively, while giving the lower income earners little or nothing. But then those who have modest savings that don’t generate a living income can’t get a pension until they run most of their savings out. That was also Labor’s brain-child! Means test the pension so savers are punished. And now Keating is at it again. If you save, you lose. If you don’t, your age care is free. Brilliant! Let’s make sure nobody gets to keep anything, and only the rich or those fortunate enough to die without suffering ill-health get to leave anything for their kids. Bring on the Communist state, Mr Keating.

      I agree with mogo51 and Joy Anne.

    • 0
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      G’day mogo51,
      I agree with you; the nation listened to him and his banana republic speeches. It cost me and thousands of others most of their life savings

  4. 0
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    What’s the difference between that and a reverse mortgage? They want to fleece us of everything we have before we fall off the perch!

  5. 0
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    One problem with the current system is that it is essentially privatised with a “middle man” getting a fair sized chunk out of the taxpayer funded finances. In some cases 30% to 40% goes on “management fees”.
    Surely there is a more efficient way of doing it. Of course perhaps it is like aged care where there is no government oversight on how the money provided is being spent.

    • 0
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      Yes Tanker, not unlike huge fees gouged by job networks, labour hire firms, security firms, aged care providers, childcare providers. It’s called privatisation.

      The solution is a properly funded and run public service.

      Only public service is accountable and transparent. The private system is commercial in confidence and we have no idea how much profit they skim off the top of funds paid to them by taxpayers.

  6. 0
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    Might not suit everyone but I would agree with Keating. Saw him explaining it on TV and he did make sense. Of course, Panos, there should be no private insurers involved, only Govt. And we would then also invite the Government to give us the universal pension. It could work unless the Aussie belief holds sway: Everything should go to my family when I die. Well, guys, we do have to be realistic – spend what you have accumulated in your time and let the young ones look after themselves in their 40s, 50s. I’d be in it.

    • 0
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      I agree, the time has come where the government cannot keep on paying for everything.

      If we don’t want the younger generations to have huge Government debts to cover via taxation we have to contribute ourselves if possible.

    • 0
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      I agree. we shouldn’t be worrying about our descendants but looking after ourselves. We didn’t have employer-paid super like they do now. And when we were creating a family we had second hand furniture and scrimped and scraped to get by. I remember paying 27% interest for our house for a time. What are the younger ones paying now and what furniture/cars are they buying now?

    • 0
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      I agree that no private insurers or providers should be involved, or costs will rise so much that one house will not cover the duration of your old age to the time of your death! Based on Australians’ experience with private health insurance, the devil is certainly in the detail for this proposal.

    • 0
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      The way it’s going buying a house seems like a dumb idea. Probably better to rent someone else’s and live the high life and then be guaranteed of public spending when you are older.

    • 0
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      Yes, Rae. Saving is a punishable offence now, it seems. Everyone is being encouraged to live it up while they can and bludge on the state when the going gets tough. No wonder young folk won’t settle for second-hand furniture and don’t scrimp and scrape to get by. There’s simply no point to doing that anymore.

    • 0
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      Youngagain – spot on. But we grew up with the old ways. I did change my way of thinking when the Govt of the day made the age pension into welfare. Having not been out of the country for 15 years we started going overseas every year, stopped saving money, retired at 58 and used super till age 65 and then qualified for part pension.
      You are right – the young ones will not be that dumb any more, they are learning about the way their parents are treated and will make sure they are not in the same trap. Govts should rethink their strategies I think.

    • 0
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      Mariner, if the aged care model had not been turned into a scam to rob old people of their money and pay it to wealthy investors, I might have some agreement. But Private Health Insurance and Aged Care are just two areas where our governments have created and presided over systems that make a lot of money for a select few at the expense of those they should be there for. Anytime you add a level of expense to something that should be a government service there will be extra costs to pay those who are involved. When I die, it should be my choice to leave my money to family, charity or anything else I choose, which could include the government coffers, although this is unlikely as they just give it away to the big end of town or foreign countries (see Lima Agreement).
      Sam, the government does not pay for anything: past and present taxpayers do, which is why we need to get people back to work. If I look at the taxes I’ve paid, it covers way more than the miniscule pension and health costs I’ve consumed.
      Tzuki, I totally agree. We have gone through tough times in the past, which has made us the resilient nation we are.
      I worked multiple jobs to put myself through school and university, started out with a cheap house and renovated and traded up, drove an old car (didn’t own a new car till I was in my forties), made do with old (non-matching) furniture (including covered boxes) and worked multiple jobs and saved to get ahead.
      I paid taxes since I was 15 and now at 67 have retired, not because I want to, but because no-one will hire a 67 year old and there is nothing to protect older worker’s jobs in businesses that hire younger cheaper workers as a business model.
      As a pensioner, I own my own home and do some maintenance myself, but pay others to do a lot. I pay utility bills, buy food, clothes, goods and fuel and contribute to the economy. I spend money in the economy.
      Yes I have some medical treatments that come with age, but less than your average footballer and unlike politicians, any money I am able to earn, gets deducted at $1 for every $3 I earn.
      Over my lifetime I have paid over $4M in earning related tax (and I have not earned excessive wages or incomes) and have paid even more in GST, Fuel Tax, Stamp Duty, Capital Gains and Land Tax (when I had an investment property) and have contributed in other ways to the community I am living in, through Community and Service Groups.
      I get despondent when I hear politicians and ex-politicians who are living at our expense, saying we older people should now be prepared to move away from homes we feel comfortable in, to places where the various governments have not invested in healthcare or other services. I get annoyed when I see the OAP I paid taxes for, which was supposed to be for a livable income based on a percentage of the current male wage cut and tweaked by incompetent politicians (who at the same time index their pensions), many of whom have never held a real job outside of government, politics or some other ‘snout in the trough’, protected organisation.
      Telling me my costs have not significantly increased just shows how out of touch our politicians are. And then for a current generation of thought leaders to say we elders should sacrifice ourselves, try and guess how long we’ll live and sell down an asset we’ve worked our whole life for, live off it, paying for medical and other services we have already paid for, and give whatever is left when we die to the government is a joke. These politicians are too young to recall various States were forced to abandon death duties by the public.
      Let’s cancel our politician’s super scheme and put the politicians on the same deal as every other Australian and see what they think. Block family trusts for the politicians, the rich, footballers and actors and see if they are still so outspoken about real workers.
      I don’t begrudge JobSeeker being a realistic amount, but make people work for it. We can’t get workers in hospitality or farms, but maybe if people were encouraged to do this as part of their ‘obligation’ things would improve. I have been assisting an organisation as a volunteer and can’t believe the number of people we’ve interviewed who advise they would need a very high wage to come off JobSeeker and all its associated benefits, including the free time they get. At $40K, the job pays well, but can’t afford what the applicants want. It is a new job, so not covered by JobKeeper, so applicants on JobKeeper (even though they have been in a lower paid role) have advised against the role
      Generally JobKeeper should only be a top-up where people’s hours have been cut and should top it up to what they were earning, but not where they are choosing to work less hours and top their wage up with JobKeeper. or give them more for the same job with less hours.
      Where people are ‘earning’ more on JobKeeper or JobSeeker than they can in a job, it tells us there is something wrong. As long as we are not paying workers too little, it should not just be a subsidy on the wage bill to increase profits. This requires gutless politicians to look at the obscene profits being made or money repatriated oversees and fix the real employment problem. JobKeeper was meant to keep people employed, not be a tool for companies to declare a drop in income and make more profits or to keep wages down by paying staff a better rate by including JobKeeper.
      It’s not about handing everything out on a plate, but what happened to fair-go?.

  7. 0
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    then family carers are going to need to be recognized as workers and given the same rights and support as non related support workers etc

  8. 0
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    Here we go again. Another chardonnay socialist telling those of us who slaved our guts out for a home can pay for our age care while those who bludged their way through life get it for free! Paul Keating, you utter creep, also known as the Undertaker, you gave us the recession we had to have, you gave us 17% home loan interest rates, so you can bugger off, do as you please with your own money but quit telling the rest of us what to do with ours.
    Considering only 5% of the population ends up in a nursing home, why not introduce an optional insurance scheme for qualityage care, for those who want to take it up. Ageing at home can become highly problematic when people are bed-ridden, need catheter maintenance, and a myriad of horribly debilitating health impediments. It would be far better imo to bloody-well end the private nursing home industry as we all know, without any shadow of doubt it’s a money-making machine leeching off the misery of helpless old Australians.

    • 0
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      Hear hear, Brissie girl. You nailed it.

    • 0
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      Brissiegirl, our ‘poor’ neighbour across the pond still controls aged care and limits the amounts people in aged care pay. Just like our system was before Keating and co messed around with it to help their buddies turn aged care into a lucrative business, rather than a government service.
      By the way, their is very little if any ‘care’ in aged care!

  9. 0
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    Are they going to add childcare rebates, grants, and everything else into this plan of Keating’s?

    He’s on huge publicly funded income stream and his estate will be clear when he goes. Rotten neo-liberal menace!

  10. 0
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    This might be naive, but with a universal pension (if we ever got to that point) would this work?

    • 0
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      The “universal pension” comes up quite a bit in these pages. It is not that simple. In my place of origin it works OK, but from age 18 to 65 you are contributing a certain percentage of your taxable earnings into it, say 10%, your employer a bit more. Any year missed you will get less at age 65 (women at 64). Company directors and street sweepers are paying in the same percentage but only get the maximum back (a full pension with all years completed today is $A3600 per month). I have contributed only 2 years before coming here and I am getting $A120 a month for that. Living abroad the rates will remain fixed. Centrelink helped me getting it and they send me an itemised balance sheet every year because exchange rates vary every month. Without putting in one becomes a social case.
      The Australian system is good and much more generous for people who do not feel like working all their lives. I think the UK system works like that as well, I had to buy subscription stamps with every payday in the 70s towards the old age pension.
      You can have private super on top of that and there is no means test, only tax on the lot so for ambitious workers it works out well. You are not punished for getting ahead like it is the case here.

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