Wealthier consumer contributions should be paired with relaxed means-tested caps, aged care leaders say

It appears likely that consumers will soon pay more for aged care services after The Sydney Morning Herald first reported that the Aged Care Taskforce recommended increased consumer contributions by wealthier Australians.

While the official Taskforce recommendations have not been released – the report was initially expected in December but is slated to be released this month – increased consumer contributions have long been a talking point.

Key points

• Long-term projections suggest the aged care sector will cost $63.6 billion to fund in 2033-34
• Taxpayers are heavily relied upon for funding aged care services, contributing 96% to care costs, even for wealthier Australians who could pay more for their aged care
• Providers are also struggling as current caps on accommodation fees and daily fees mean service prices cannot be expanded to better cover rising expenses

Jason Kara, Chief Executive Officer (CEO) of Catholic Health Australia (CHA) told hello leaders that including housing/asset wealth for means testing and allowing providers to set their daily fees would ease much of the financial burden. 

“The aged care sector is under severe financial pressure, with the majority of residential homes running at a loss. Wealthier Australians should contribute more for their aged care to make sure providers can remain open and the sector can survive to provide for those who can least afford it,” said Mr Kara.

“According to modelling commissioned by CHA the aged care sector needs a capital investment of $48 billion by 2030 to provide enough places for our ageing population – but not all of this should come from taxpayers when wealthy Australians who receive care can afford to contribute more.”

Currently, means-tested payments are capped at $78,500 over a person’s lifetime while the home exemption cap limits the assessable value of a home at just under $197,000.

“This figure must be increased while the cap on the maximum basic daily fee that aged care homes are allowed to charge should be removed. A resident’s basic daily fee is currently set at 85% of the single person rate of the basic age pension and is not reflective of actual expenses. Deregulating this fee for self-funded retirees will meet actual costs,” added Mr Kara. 

“Asking users to contribute more not only makes logical sense and has support from the aged care sector. If we are to continue to care for our older Australians, then it is fair that we have to dig deep into our accumulated wealth now and not sheet the bill home to future generations.”

Russell Egan, CEO of Superior Care Group, told hello leaders that a review into aged care pricing was long overdue. He cited the rising costs of delivering aged care as a necessary reason for lifting caps and deregulating current pricing mandates.

“There are several aspects that Government policy will need to address [including the] deregulation of the accommodation pricing element which currently restricts the maximum Refundable Accommodation Deposit price to $550,000, requiring Government approval to exceed,” he explained.

“This doesn’t make any sense given the enormous increase in both real estate and construction costs. Providers need to be free to set accommodation prices which can sustain the construction of new homes.”

Like Mr Kara, he called for the deregulation of the basic daily payment so providers can set their fees that incorporate the true cost of delivering hotel services such as hospitality and cleaning.

With both leaders acknowledging that current means testing caps are outdated in several areas, a fairer and more equitable system for consumers is a top priority. 

A position statement released by the Older Persons Advocacy Network (OPAN) highlighted that the current systems of individual income and asset testing do not result in a fair system for people with income from different sources. 

Additionally, providers would benefit from a fairer system where they can better adjust to inflation and increased expenses. Otherwise, Mr Egan believes the sector will continue to stand on the precipice of loss with no meaningful change to long-term funding. 

“Whilst the Minister for Aged Care considers a sector financial performance losing $13.81 per day as a “positive outlook” this is a strong disincentive to attracting new capital and new providers to the sector,” he said.

“Considering the risks of imprisonment for directors, greater enforcement power to administer sanctions to providers and banning orders for providers, these risks must be reflected in the return on capital allocated to the sector. There needs to be at least a $30/day turnaround in financial performance for providers to have their risk adequately reflected.”