A taskforce reviewing funding arrangements for aged care has rejected the call for a levy to cover the sector’s growing costs, instead suggesting older people pay according to their means.

The Aged Care Taskforce Report, released on Tuesday, notes older people are generally wealthier than in previous generations, largely due to the maturing superannuation system and home ownership.

The taskforce rejected the idea of a 1% aged care levy imposed on taxpayers, recommended by the Aged Care Royal Commission.

It also dismissed a suggested increase to the Goods and Services Tax to fund aged care.

Instead, it recommended income from superannuation should be drawn down to cover accommodation, living expenses, and some at-home services, with the government covering “care costs”.

The government would still be a major funder of aged care, as well as providing a strong safety net to cover aged care for low-means Australians and in what the report called “thin”, or underserviced, markets.

Under current models, the federal government funds around 75% of residential aged care and 95% of home care, which the taskforce said was “not an optimal or fair mix”.

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Intergenerational gap concerns

The report noted home ownership rates among people aged over 65 was around 82% in 2021 and had been relatively stable at that rate since the mid-1980s, while home ownership for younger people has been trending downwards over the same period.

As older people become wealthier, the report said the tax burden is being carried by an increasingly smaller group of people as the working age population declines and the proportion of older people, who mostly don’t pay tax, increases.

The report said asking a shrinking working-age population to fund aged care services created intergenerational equity issues.

It said superannuation had been designed to support people to grow their wealth and the funds associated with retirement, including aged care.

The report suggested “home ownership status” could be a factor when determining aged care co-contributions, although Prime Minister Anthony Albanese had earlier ruled out any change to the exclusion of the family home in aged care asset testing.

Aged care costs surging

In the last financial year, the federal government spent more than $27 billion on aged care, with expenditure forecast to blow out to $42 billion by 2026-27.

Despite increasing government investment, the report found seven in 10 aged care providers made an operating loss in the 2021-22 financial year.

That figure was up from just over half in the previous financial year.

The department of Health and Age care estimates another $37 billion (in today’s dollars) would be required to build the additional care rooms needed by older people in 2050.

Home care more viable                                        

The report noted the home care model, where services are delivered in a person’s home, is more viable, with seven in 10 providers reporting a net profit in 2020-21, but this figure too had declined from the previous year.

The report said the aged care system should support older people to live at home for as long as they wished and could do safely.

It said the current at-home care system needed overhauling to ensure quicker access, greater choice and flexibility, and provided better value for money by controlling unreasonable administration fees.

However, it outlined a list of exclusions to at-home care including accommodation costs, co-contribution fees, and other goods and services a person would be expected to cover themselves, regardless of age or wealth.

Another of the report’s recommendations was to make aged care fees “fairer, simpler and more transparent so people can understand the costs they will incur if they access aged care”.

Workforce issues

The report gave no recommendations on how to address the quality issues surrounding aged care which the royal commission had partly attributed to staffing problems, an unskilled workforce, and workplace retention.

While the report made numerous mentions of workforce concerns, it said the issue was beyond the scope of the funding review.

Following the report’s release, seniors lobby group COTA, formerly known as Council on the Ageing, noted older people have said for many years they would be prepared to pay more for aged care if the quality was improved.

It said any new arrangements needed to make sure there were strong protections in place so people knew their money was being spent where it was needed – not lining the pockets of providers.

The federal government is now considering its response to the report.

Image by Danie Franco on Unsplash

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