This article is cross-posted from the Commonwealth Parliamentary Library’s FlagPost blog.

Rebecca de Boer writes:

Last week, the Government released the Productivity Commission’s (PC) report, Caring for Older Australians. Most stakeholders have broadly welcomed the recommendations, although concerns have been raised in relation to the capacity of the workforce. Concerns also persist among some pensioner groups about the prospect of having to sell their home in order to pay for aged care.

The main differences between this final report and the earlier draft report is the proposed arrangements for accommodation bonds and the accommodation subsidy for supported residents. Analysis on the recommendations on the draft report can be found here.

The PC has provided more detail on the implementation of many of the proposals canvassed in the draft such as the Australian Seniors Gateway Agency, the Australian Aged Pensioners Savings Account Scheme, the Australian Aged Care Home Credit scheme and the establishment of a new regulatory framework administered by the proposed Australian Aged Care Commission. This short list highlights the enormity of the Report and the breadth of the PC’s proposals.

The PC notes the need for ‘fundamental and wide-ranging reform’ (p. xxv) of the aged care sector. This need for reform was acknowledged by the Hogan Review in 2004 and subsequently echoed in numerous inquires and reports since.

If adopted, the recommendations of the Report would significantly change the operation and delivery of aged care in Australia.

Arrangements for the funding and payment options for aged care generally spark widespread community debate. However, there appears to be an emerging consensus among interest groups and providers about the proposed financing arrangements for aged care, such as increased contributions from those who have the capacity to pay.

The report contains a number of options for the financing of aged care. The underlying premise of its recommendations is that costs associated with accommodation and care should be separated. Accommodation and everyday living expenses should be the responsibility of individuals to meet (with a safety net available). The Government would provide some subsidy towards care and support costs but with a co-contribution from recipients. Another principle of the PC’s recommendations is that individuals with the capacity to pay should contribute to the cost of their care with a lifetime limit ($60 000) to protect against high costs.

Two options for financing aged care have been proposed. The first is the establishment of an Aged Pensioners Savings Account scheme (recommendation 7.3). Pensioners would be able to establish an account with the Government (or its agent) using the proceeds of the sale of their home. This account would be exempt from the pension assets and income test and indexed according to changes in the CPI. The account would be free of any charges and no additional money could be deposited. Account holders would access this account to pay for costs associated with aged care.

The second option is the establishment of a government backed Australian Aged Care Home Credit scheme (recommendation 8.1). This also would be indexed according to CPI and used to pay for their aged care costs. The Government would provide a line of credit based on the value of the family home up to a pre-determined minimum level. The outstanding balance would be repayable only when there is no one living in the residence. This provides protection for partners, dependent children or carers that might be living in the home.

The PC has recommended that residential aged care providers give residents three options when paying fees for residential aged care. Residential aged care providers could charge residents either: periodic accommodation charges, accommodation bonds, or a combination of both (recommendation 7.2). There is disagreement among the aged care sector as to whether this approach will inject more or less capital into the sector. The aged care sector as well State and Territory governments (for example WA) have long argued for additional capital investment in aged care to address existing shortages and growing demand.

Consistent with previous reports to government, the PC has recommended that restrictions on number of bed licenses and community care packages and the distinction between high and low care be removed (recommendation 7.1). However, safeguards would be introduced to ensure that older Australians with limited finances could access residential aged care. Aged care providers would be obliged to meet a ‘supported resident ratio’ determined on a regional basis with penalties for non-compliance (recommendation 7.5). Removal of the restriction of the number of bed licenses and the distinction between high and low care would provide greater flexibility to both aged care providers and residents as well as reduce the regulatory burden on the aged care sector. These proposals have the support of over 95 per cent of aged care providers.

The Prime Minister and the Minister for Mental Health and Ageing have announced the start of a national conversation to help inform the Government’s response, but have declined to give a timeframe for this. But they have declared that they are determined to begin the reform of aged care during this term of government. Notably, the 2011-12 Budget did not contain significant funding or policy reform for aged care as the Government acknowledged it was awaiting the PC’s report.

The Government has now articulated four principles to guide its response:

• Every older Australian has the right to access quality of care and support according to their needs and when it is required

• Older Australians should have greater choice and control over the care arrangements

• Funding for aged care needs to be sustainable and fair for both older Australians and the broader community

• Older Australians deserve quality care from an appropriately skilled workforce.

Two peak stakeholder groups, COTA and Catholic Health Australia have jointly authored an opinion piece in support of the reforms, the need for fair and equitable fees and prices for aged care with appropriate safety nets and increased contributions for those who have the capacity to pay. This is in contrast to their opposition to the 1996-97 reforms proposed by the Howard Government, which prompted concerns that there would be forced sales of family homes.

Although the Greens have urged action on reform of aged care and the Coalition has acknowledged that the aged care sector is in need of reform, concerns have been expressed that reform might be stymied by the hung Parliament.

It has been suggested, however, that while many in the aged care industry support the PC’s recommendations, community support may be harder to achieve.

However, in a sector which is long overdue for reform, patience for the Government’s response may be in short supply.


Previous Croakey posts on the report

Culturally appropriate care matters

… and a related post from Professor Hal Kendig to follow shortly