‘Complex’ aged care fees go under the media microscope

The complex aged care picture continues to take shape ahead of 1 July, and public conversation suggests providers will face a hard sell when talking about increased consumer contributions.

Sky News’ Business Editor Ross Greenwood explored some of the foundational changes that lie ahead for aged care consumers on Monday night, leaving a lot to be desired in terms of how older people will benefit.

He started by claiming that aged care residents will pay between $20,000 and $50,000 more per year, with self-funded retirees to take ‘the biggest whack’ from 1 July.

His guest, Michael Horin, a Principal at Clarity Aged Care Advisors, went on to explain how the new Aged Care Act received bipartisan support and will change the way aged care is funded – all so the sector can become more profitable.

“It’s predominantly self-funded retirees who will be paying more for their care. Part pensioners and some full pensioners will be paying more under the new July 1 system,” Mr Horin said.

“It’s an Act that passed with bipartisan support, and it comes into effect from the first of July. The premise is that aged care in Australia is not a profitable industry.

“We need more aged care beds to be built, and so the government wants aged care to become more profitable to encourage more investment in the sector to match the growing demand of the ageing population we have.”

The additional revenue is a much-needed boost, with roughly half of residential providers struggling to make a profit. Unfortunately, delivering these insights to the broader public is intertwined with the harsh reality that many older people will be paying more for their aged care services.

According to StewartBrown, there was an improvement in operating results for residential aged care homes across the second half of 2024. This is primarily due to an increase in AN-ACC funding, with accommodation and everyday living expenses resulting in ongoing losses.

Limited movement in revenue could therefore prevent the sector from rising to meet the challenge of increased demand.

“We have about 200,000 aged care beds across the country, and in the next 25 years, that number needs to grow to about 800,000. Aged care facilities are not very profitable; about 50% are running at a loss. They need to become profitable to incentivise more beds and facilities to be built,” Mr Horin added.

“The government is still funding anywhere from 70% to 100% of an aged care bed. Self-funded retirees are being asked to chip in more, those who can afford it, but the government is also paying more to pump more money into the sector to get the extra beds.”

As the pair talked, Mr Greenwood stated that he knew a bit about finance, but that aged care ‘is the most confusing part of finance that I know. This is really complicated for people’.

Mr Horin then discussed how aged care residents will see a major change to their refundable accommodation deposit (RAD) as up to 10% of the RAD can be retained by the provider over five years. Currently, the amount is fully refundable.

“It’s a really complex industry. It’s necessary to get advice before entering the industry because there are so many moving parts and so many pros and cons to the different choices you have,” he added.

Conversations like this one will make aged care a harder sell, with providers likely to face public pushback over co-contributions. The comments in the Sky News article highlight some of the challenges.

“So once again the people who do the right thing through their working life/career & pay their own way, who miss out on government handouts, never qualified for anything offered by rebates & for saving their money & making it work for them only to be thwarted of it at the end of their lives. There’s no incentive, is there? We may as well pi$$ our savings away & go on the pension. Get back some of the taxes we’ve paid over the years,” one commentor said.

“The aged care system is a joke. I know because I have my mum in it, and it’s just a money pit. And as for the quality of the food and the staff numbers…” added another.

“On the one hand, Labor penalise you if you have too much money in superannuation (30% tax) and then penalise you again with further $50k in aged care facility costs. There is no incentive to save hard to be a self-funded retiree who is not a burden on taxpayers. The country would go broke if everyone over 67 went on the pension,” KB stated.

These comments and concerns may be from a small snapshot of Australia, yet they indicate that more challenging conversations and negotiations between providers and older people are on the horizon.