Pensioners to pay more under aged care reforms
Many recipients of the Age Pension will pay more for aged care under proposed reforms to how the sector is funded, with wealthier Australians to cover more of the costs they incur from July 2025.
With the nation's annual aged care expenses predicted to hit $42 billion by 2026-27, the federal government is looking to prop up the industry, with Minister for Aged Care Anika Wells introducing the Aged Care Bill 2024 to parliament yesterday.
It said the reforms will deliver about $930 million into the sector over the next four years, while saving close to $13 billion over the next 11 years. The government said there is a "no worse off" guarantee for those already in aged care, with arrangements for those who enter or are already in care before June 30, 2025 to remain in place.
At the heart of the bill is a plan to have wealthier Australians pay more for aged care to help financially sustain accommodation and service providers. While those already in aged care won't have to, new entrants to the system will be assessed under a new means-testing formula.
This was a key recommendation in the Aged Care Taskforce's final report, which said the amount paid by Australians accessing care should be determined by personal wealth, noting that the older people of the future will be wealthier, primarily due to the compulsory superannuation system.
According to the government, all "fully supported" residents will not contribute more. However, 30% of full pensioners will pay more under the changes, as will 75% of part-pensioners. A full pensioner will pay up to 17.5% of their daily expenses, while a person receiving no Age Pension payments will pay up to 80%. The government will pay 100% of clinical care costs, regardless of individual means.
Other measures to be introduced include allowing providers to charge higher maximum rates for rooms, allowing them to keep a portion of refundable accommodation deposits, and daily accommodation fees will now be indexed.
For every $1 an individual contributes to their residential aged care, the government will pay $3.30, Wells said.
At the same time, new funding will be made available to help elderly people stay at home longer, rather than enter residential care. This will come in the form of a new home care assistance program called Support at Home, which the government plans to launch in mid-2025, providing $4.3 billion to help an estimated 300,000 people.
Support at Home recipients will also have access to up to $25,000 for at-home end of life care, with close to 70% of Australians wishing to spend their final months at home but fewer than 10% actually doing so, according to the Productivity Commission.
For every $1 a Support at Home recipient pays, the government will pay $7.80.
A lifetime contribution cap of $130,000 will also apply across the aged care system, no matter a person's means or duration of care, Wells explained. There will also be no change to how a person's home is assessed under the means test.
Access to aged care will also be limited, with the bill seeking to legislate that aged care is for people aged 65 years or older. For First Nations people, those who are homeless or at risk of homelessness, it will be accessible from age 50 provided they have exhausted other alternatives and actively choose to enter aged care.
A Senate inquiry is to review the proposed legislation over a six-week period, but the government expects to pass the reforms by the end of the year and to have them effective July 1, 2025.
Currently, the government covers 76% of residential aged care costs and 95% of home care costs. Under the changes, the government will pay 73% of residential care costs and 89% of Support at Home costs, in addition to 100% of clinical care costs.
The Aged Care and Community Providers Association welcomed the new bill.
"We will need at least 10,000 new beds to be opened per year for the next two decades to keep up with demand, and today we are closing more than we're opening. We need investment to turn the situation around, and this legislation will enable that," says chief executive Tom Symondson.
"Australia can build an aged care system that's the envy of the world, but we need help to do it. Older Australians deserve this future, alongside the confidence of knowing that the nation is fully committed to achieving it."
Similarly, UnitingCare Australia says the reforms mark a major step forward in aged care reform.
"The detail is yet to be unpacked, but if we get this new funding model right, and we must, it will allow providers to offer more homecare services, build new homes and refurbish existing ones, offering more beds," says UnitingCare Australia national director Claerwen Little.
"Every Australian deserves to age with dignity regardless of their financial circumstances and we hope that the legislation introduced today paves the way forward to achieve this.
"The government must ensure that no one is left behind and provide adequate funding for services to remain viable in all communities, especially in rural and regional locations."
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