Care of the aged
Towards user payments
When the Hawke-Keating government introduced compulsory superannuation in the 1980s, men aged 65 were expected, on average, to live another 13 years, and women another 17 years. Those expectancies are now around 20 years for men and 23 years for women, and an ever-larger proportion of people are living to their 90s and past 100.[1]
Those simple demographics form part of the background to the policy issues considered by the Aged Care Taskforce, established by the Commonwealth government last year. Their brief was to provide “advice on funding arrangements for aged care to ensure that the aged care system is fair and equitable for all Australians”, with an emphasis on supporting “high quality” care. That point on quality may seem to be obvious, but it does rule out an alternative idea that government responsibility and public funding should be restricted to a basic “charity” model.
The task force’s final report sets out the principles guiding its recommendations:
The system should enable those who wish to age in place to do so. Rules will continue to ensure equitable access for people with low means, with co-contributions from those who have the means. Government funding will focus on ensuring all older people can access the care they need, while co-contributions will be required for the things people have typically paid for their whole lives, such as daily living expenses and, for those in residential care, accommodation costs.
Within those principles it makes 23 recommendations, all in terms of setting standards and rules, without specific budgets.
Its most significant recommendation (#2) is a rejection of the suggestion from the Commission on Aged Care Quality and Safety that there be a Medicare-style levy to fund aged care services. That would be inequitable in view of the age distribution of taxpayers (and of non-taxpayers), a distribution that already incorporates significant inequity. Many older people have accumulated substantial financial wealth, partly through superannuation (which will become more significant as time passes as more people benefit from the higher contribution rates of recent years). This means that more people will have more means to contribute to their care and accommodation. Several of the recommendations establish principles for fair, efficient and clear means testing.
The taskforce proposes that means testing should apply to what may be called normal living expenses incurred by people whose needs are not specific to their being aged. It states:
Government is and will continue to be the major funder of aged care. Government funding should be focused on care costs as well as delivering services in thin markets. Personal co-contributions should be focused on accommodation and everyday living costs with a sufficient safety net.
Another significant recommendation is to move to a 100 percent rental model for residential aged care, abolishing the model under which people pay a lump sum upfront, the nominal value of which is refunded, usually to beneficiaries specified in wills, when people die. The reasoning seems to be that the lump sum model imposes too much longevity risk on the provider.
These proposals have generated a fair amount of commentary.
Goodwin Homes ACT
Michelle Grattan provides a summary of the report in The Conversation, without any analysis. Mike Baird, who was one of the taskforce members and is now CEO of a care company, summarizes the financial issues in a 10-minute interview on ABC Breakfast as do two other taskforce members, Tom Symondson and Grant Corderoy on an ABC AM interview: Older Australians could be asked to pay more for aged care. (3 minutes)
The ABC’s Anne Connolly has an article on the ABC site – Why new controversial aged care reforms could be the biggest shake-up for the sector in the decades – providing background and analysis. She mentions the high profits reported by publicly-listed aged care companies, noting that that is hard to reconcile with the claim by providers, mentioned in the report, that they are losing $4 per resident on daily living activities. Her two main concerns relate to accountability, and to the vulnerable position of residents who will be paying rent. When the provider raises rent, tenants in aged care do not have the capacity to shop around that other renters may have, and the costs of moving can be very high.
She also notes that a new Aged Care Act is due to be passed by July 1. That short timeline will put considerable political pressure on the government.
Another commentator, interviewed on ABC Breakfast, is Beverly Baker of the New South Wales Older Women's Network: Who should pay for aged care?. (9 minutes) She is sceptical about the providers’ claims of hardship. She points out there are many ways to extract a surplus from funders (the government and residents) while reporting a poor financial outcome. High provisions for depreciation, rents and fees paid to associated entities, and high executive salaries, are all ways to achieve a book loss.
Some commentators, including spokespeople for the Opposition, have noted that while the taskforce acknowledges problems of workforce identified by the Commission on Aged Care Quality and Safety, it has no recommendations on workforce. Because workforce problems relate, in large part, to low pay, if pay is brought up to the level that will attract and hold staff, for both residential and in-home care, there could be significant funding requirements in this labour-intensive industry.
The substantial pay rise for workers in aged care, announced yesterday, was probably in line with most parties’ expectations. It will inevitably fall mainly on the Commonwealth, who have presumably factored it into their fiscal projections, but some will be pasaed through to residents, and it raises the stakes in negotiations between the Commonwealth and providers.
On the ABC’s 730 program there is an 8-minute interview wth Anne Connolly, who has dedicated much of her career to investigating the aged care industry and exposing its shortfalls, including serious cases of neglect and exploitation subsequently revealed in the Commission on Aged Care Quality and Safety. She fears that in this short inquiry the taskforce has not been able to conduct adequate research and consultation that should support such a major reform, and that it has been too much influenced by the aged care industry lobby.
The general issue, outside the taskforce’s terms of reference, is whether housing and care for the aged should be operated as for-profit services. It’s a public debate we haven’t had, even while health care has become dominated by corporations, as the finance sector through private insurance has sucked a surplus from hospitals, and as housing has become a financial instrument for speculators.
Of course businesses providing these services should be able to make a reasonable profit and generate a positive cash flow, because these are means towards the aim of providing services, now and in the future. When profit and cash flow become ends in themselves, however, the interests of users become secondary to those of shareholders and corporate executives. We should ask if we really want a for-profit corporate model to be delivering important human services.
1. There is no simple series on longevity. These figures are rough interpolations and projections from ABS Life expectancy trends, and Deaths, Data Cube 2. ↩