Striving for a sustainable and robust aged care sector – The waste and unfairness of lost super in means testing

One of the core impetuses behind the New Aged Care Act is the Government manoeuvring the industry for a sustainable future. Countless providers have long voiced the concern regarding the financial instability of the sector at large, and the critical nature to get funding models right. While all acknowledge the complexity of the funding models, the need of meeting these dynamic funding needs for the future is only becoming more absolute. Core to sustainability is the deeply Australia concept that those that should pay for care should, and those that need support will receive it. Lost super may hold more answers than its being credited for.

From the potential RAD versus supplement payment model that has been raised as an issue by multiple sources within the industry, and the numbers reflecting Government expenditure on aged care, the foreseeable future is concerning. As Australia’s population continues to rapidly age, with boomers soon to enter RAC in the exponential thousands, it is paramount that the right balance of those who can pay for care should, and those that need support are supported.

A source of income that has long been chuckled at between professionals at the water-cooler is how much lost super they must have floating around. With a future where the sector is set to undergo further strain with inflating numbers, having a robust funding model must be entrenched. It is worthwhile for all professionals to take the time to comprehensively search for lost super, and facilitate this as the norm for colleagues and co-workers as the years progress. A true reflection of means is critical to a fair and functional means testing process.

Clearly indicative of a worsening tax-payer situation, the most recent Financial Report released by the Department of Health and Aged Care shows the situation through plainly put data. The numbers show not only the trend of numbers of residents increasing but how that burden is being placed on the Australian taxpayer and hard-working providers who wish to provide care but are not financially covering costs.

“Over the last 5 years, the Australian Government expenditure on home care has increased from $2.5 billion in 2018-19 to $5.6 billion in 2022-23.” Drawing a direct correlation, “This has meant the number of people accessing home care has increased, up from 106,697 recipients at 30 June 2019 to 258,374 recipients at 30 June 2023.”

The report also indicates, “Overall home care sector profitability has decreased since 2021-22, with more providers operating at a loss and a reduction in NPBT for all provider types.”

The report asserts that care costs have risen, and that profits in consequence has dropped, “Approximately 68% of home care providers achieved a profit in 2022-23 (defined as NPBT), compared with 69% in 2021-22. In 2022-23, overall sector profitability was impacted because expenses increased at a higher rate in comparison to revenue on the prior year. Expenses increased by $2.31 per recipient per day and revenue increased by $1.71 per recipient per day.”

As both Government and peak bodies, on behalf of their members, continue in talks regarding the funding models of aged care, two stark realities are growing ever clear. The numbers entering RAC over the coming decades is going to be extraordinarily large, in the past increased numbers has meant higher costs for the tax-payer, and potential financial difficulties for providers. For the coming situation, there is the need for brilliant co-operation between the best of both public and private actors in aged care, to ensure that potential residents are best positioned to help contribute to their care.

Last year the ATO publicly acknowledged that it had $166 million Australian dollars, across 23,000 unclaimed superannuation accounts, from deceased Australians. Critically the trend the ATO shared must be noted, that it took only three years for that money to double to the $166 million. It is predicted that this number will only exponentially increase as the nation’s boomer cohort continues to age.

The ATO states that the legislation that is likely facilitating this significantly swelling number is, “Superannuation (super) is generally not considered to be part of a deceased person’s estate and must be handled separately.”

“It is not automatically covered by a Will, which typically includes assets such as property, savings, vehicles, and personal belongings. Instead, super is managed by super funds and doesn’t fall under the same laws as Wills and Estates.”

It is critical that potential residential aged care applicants, when means tested ahead of residential aged care, have their true superannuation amount reflected in their acknowledged super account. This is critical for the future sustainability of the aged care sector. As increasing numbers of Australians enter residential aged care, the need for a fair and robust funding model, with a core component being the means testing upon entering RAC is reflective of the true means that potential residents may have.

There may be significant measures that ATO and Government can embark on to ensure that lost super is not the increasing problem and million dollar void it is a current.

Lost super impacts not just the resident, but compounded upon thousands and thousands, the sector at large, and the viability to provide quality aged care in a resilient aged care setting for resident, provider and nation.