Who will pay for aged care?
In its latest consultation paper, Financing Aged Care, the Royal Commission into Aged Care Quality and Safety has invited submissions about the future financing of the aged care system. It is an important discussion and one that the sector has been waiting for since the Royal Commission commenced.
The paper begins with a quote from the first Adelaide hearing in February 2019 from COTA national CEO Ian Yates “We need to have a conversation with the Australian people about what we’re doing with aged care”.
It is a difficult topic. The Australian Government currently pays about 75% of the cost of providing aged care, with the remainder paid as co-contributions from residents and clients. This cost is forecast to significantly increase to meet the needs of a population with a higher proportion of older people. Preliminary analysis undertaken by the Royal Commission suggests that funding will need to increase by between 50% and 100% of current spending.
The Royal Commission’s paper examines a variety of options including a Medicare style levy, social insurance models, private insurance schemes or maintaining the current pay-as-you-go public funding which is sourced from the general taxation system. It does make sense to begin to save now for a future cost that is predicted to grow substantially over the next few decades. However, the timing couldn’t be worse, when the needs of those affected by either bushfires or COVID-19 are far more immediate.
According to the latest survey from aged care consulting firm StewartBrown, 60% of residential aged care providers are now operating at a loss. Even if the Government adopts one of the new funding models being explored, it does not resolve the immediate operating challenges. The situation in rural and remote communities is even more difficult.
New research from the Royal Commission has confirmed that Australians of all ages want to be assisted to live independently in their own homes during their retirement years rather than ever having to go to an aged care facility. No surprises there, as we don’t plan to use hospitals or the ambulance service either. However, we are thankful that they are there to support us at our time of need. Aged care providers deliver invaluable care and support to older people.
So, who pays for aged care? Are we willing as a society to set funds aside to provide care and support to those who need it in the future, or do we risk paying much more when the tax system can no longer cover the cost?
Opinion piece by Darren Birbeck, CEO Resthaven Incorporated