Would you be willing to pay aged care insurance?

Article published 28 August 2023

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Would you be willing to pay aged care insurance?

More and better aged care is going to cost more. A lot more. A Taskforce is looking at where the money will come from. Tax levies? Insurance?

THE federal government is in a hurry. The plan is that on 1 July 2024, twenty months away, the new Aged Care Act will start.

The current Aged Care Act

The current Act starts out by identifying the provision of funding for aged care as its most important objective. The Act also mentions supply, safety and quality, but only as things which need to be considered as part of funding provision. Not as important as money, in other words. The Act then stresses that governments must consider carefully “the limited resources available to support services and programs under the Act”.

The money concern has led to an aged care system which still does not provide everyone with safe and quality care, even though significant improvements have been made in that regard since the Aged Care Royal Commission.

The new Aged Care Act

The new Aged Care Act will be different and have as its primary objective to provide anyone who needs it safe care of an adequate quality.

The Aged Care Taskforce appointed by the federal government is looking at the funding. Because even though funding may not be the new Act’s primary concern, good care to all who need it does come with a price tag. The amount on that tag will be much higher than when policy makers still had the option of putting people on waiting lists until they died.

One of the things that the government wants in aged care is that people stay in their own home for as long as they wish and can do so.

Government is and will continue to be the major funder of aged care, and when it comes to personal contributions, these will continue, and this is where the rub is. While government funding will continue to flow, it is looking for ways to raise personal contributions.


Where will the money come from?

The two Royal Commissioners had different views on how this could be done. It also wasn’t clear whether their recommended actions would actually increase the total amount of personal contributions.

And that seems to be the problem. No one, including the Aged Care Taskforce has any idea how to increase the overall personal contributions significantly.

Aged care means-testing is probably already squeezing what can be squeezed out of aged care recipients. Expect tightening of means-testing for home care when the Commonwealth Home Support Program and the Home Care Package Program are merged.

However, this alone will not cover the additional cost of moving from an aged care system based on waiting lists to a system based on right of access to aged care.

It is clear that Australia’s aged care planning has always relied on waiting lists and the suffering of people needing but not getting aged care.

If that suffering is to be discontinued, taxes will need to be increased. There are prettier ways of saying it, but this is the upshot.

Both Royal Commissioners wanted the introduction of a tax levy, not unlike the Medicare Levy.

Unfair, some have said, because older people generally don’t pay income tax, only younger people do.

Other commentators have suggested raising the rate of GST, which older people do pay.

Is insurance the way?

What appears to be off-limits, so far, is a social insurance scheme for aged care, which is how many developed-world countries fund their aged care. These schemes require everyone to pay premiums in the event that they need care.

While the Royal Commissioners noted that starting up a social insurance scheme at a time when baby boomers are reaching the age at which they need aged care would be pointless, CPSA thinks that it isn’t pointless at all.

Maybe a social insurance scheme for aged care is still feasible. True, premiums wouldn’t cover the cost of aged care, but any alternative option would also require huge government top-ups. By levying premiums under a social insurance scheme, money for aged care can be raised now and a much fairer system of financing and funding aged care for the future can be started up.

Such a social insurance scheme will, like compulsory superannuation, take decades to mature, but Australia will reap immediate and future benefits. Superannuation is only now, after forty years, starting to take the pressure off government having to fund the Age Pension.

Aged care insurance is, like superannuation forty years ago, the visionary thing to do.

Also read:

Royal Commission wants NDIS approach to aged care

Turning nursing homes into tourist traps


For more information please email our media contact at media@cpsa.org.au

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