More tax or spend the kids' inheritance? Taskforce to look at future aged care funding

Aged Care Minister Anika Wells has announced a new taskforce which will begin work next month on funding reforms to be included in the New Aged Care Act due to be published in mid 2024.

The taskforce will also look at introducing additional taxes to fund aged care as well as putting people using aged care at the centre of funding arrangements. It is expected to report by the end of the year.

While the aged care sector struggles financially with the introduction of much needed reforms, the federal government's 2020 Retirement Income Review Report found that "most people die with the bulk of the wealth they had at retirement intact".

According to the Productivity Commission, almost $1.4 trillion has been gifted by Australians in inheritances over the past 20 years, or about $67 billion a year. The average recipient receives about $125,000, is about 50 years old, close to peak earning capacity and established in a house.

Speaking at the National Press Club on Wednesday, June 7, Ms Wells warned the Baby Boomers are coming.

"Boomers who, with their numbers and determination to solve problems, have shaken every single system they've come across. They rightfully believe aged care can offer much more than it has," she said.

Ms Wells said within a decade, Australia would have, for the first time in history, more people aged over 65 than under 18. "And our workforce will be ageing, with people aged 15 to 64 years predicted to decline as a proportion of total population."

"We know that those people choosing residential care is trending down as the desire to stay and age at home trends upwards. It is why we must re-evaluate the funding going into a system asking for more funding."

The next generation of people entering aged care are going to want a different model and standard of care than those before them. There will be greater pressures on the entire community," said Ms Wells.

"We must be innovative to address this challenge and we need a funding model that is sustainable.

"We are doing this in an open and transparent way. We must modernise a Byzantine system to be future-facing."

Ms Wells's concerns were echoed at a summit of aged care providers organised by national body Aged and Community Care Providers Association which plans to submit a white paper "to advise the Albanese Government on the optimal aged care funding model for the next 20-30 years".

The white paper will include the views of stakeholders including older Australians, unions, academics and providers of finance.

ACCPA chief executive Tom Symondson, said Summit attendees agreed in-principle the aged care system needed to provide more balance between what taxpayers and aged care recipients themselves paid, if standards were to be raised.

"It is time to have an honest conversation about how Australia bridges the gap between our current system and those of comparable countries," he said.

"Australia currently spends around $34 billion per annum on aged care, or 1.2 per cent of GDP, which is only half of the OECD average.

"How should Australia bridge the gap to ensure older Australians receive the quality care they need and deserve now and into the future? The majority of aged care funding in Australia is currently provided by taxpayers, rather than individuals, which is placing an increasing burden on the federal government budget.

"Alternatively, do we need to lower our expectations and accept that Australia will have an aged care system with standards well below comparable countries?" said Mr Symondson.

Summit participants agreed in-principle that co-contributions need to be part of the solution to aged care sustainability, provided it supports increased quality and adds value.

More than 4.1 million Australians, or almost 16 per cent of the population, are currently over the age of 65 but by 2057, that will rise to 8.8 million, or 22 per cent of the population, and by 2097 it will reach 12.8 million people, or one in four Australians.

The Royal Commission into Aged Care Quality and Safety found there are currently 4.2 working age (15-64 years) people for every Australian aged 65 years or over. By 2058, this will fall to only 3.1.

Aged care has emerged as one of the top five spending areas of the federal budget along with the health system, National Disability Insurance Scheme (NDIS), defence and the interest bill on government debt.

Ms Wells has also announced the government's aged care reform roadmap which outlines the next two years of planned aged care reforms including the introduction of the new Aged Care Act, underpinned by relevant international convention, and delivery of 24 royal commission recommendations.

The cornerstone of the new Act would be a Statement of Rights, she said.

Announcing the drafting of Australia's new ten-year National Dementia Action Plan, Ms Wells said it will provide a nationally coordinated approach to improve outcomes for people living with dementia, their families, and carers across all stages from prevention to care.

Peak body National Seniors Australia has welcomed the terms of reference and membership of the aged care taskforce.

"National Seniors Australia called for an independent body to examine funding in past budget submissions, so we hope this taskforce goes some way towards achieving this goal," said Chief Advocate Ian Henschke.

"Whatever funding model is put forward must be fair, transparent, and efficient. Critically, no older person will be willing to contribute more unless they can be assured, they will receive better and higher quality care.

"There are rightly great expectations from today's announcement but also trepidation, and it will be up to government to put forward a credible and fair plan and be willing to engage in a conversation with the community."

Welcoming the Aged Care Reform Roadmap, Older Persons Advocacy Network chief executive Craig Gear said, "Older people need to know what changes are coming, when those changes are coming, and how those changes will affect them.

"This roadmap provides the necessary coordinates and by identifying a clear timeline, Minister Wells has enabled the sector to better prepare, plan for, and deliver, the ambitious reforms that will roll out over the coming years."

Mr Gear said OPAN particularly supported the "ambitious timeline" for the Taskforce.

"This will provide us with the funding model for the future of aged care," he said.

OPAN also welcomed the commitment to a new Aged Care Act underpinned by international human rights conventions and a Statement of Rights.

"For too long, aged care has been centred around the funding of providers and their role as corporations," Mr Gear said.

"Now that we have this Roadmap, it's time to roll up our sleeves and fix this broken system.