Industry to draft white paper on optimum funding models

Aged care industry leaders have announced plans to develop a detailed white paper, incorporating the views of older Australians, unions, providers of finance and academics, to advise the federal government on the optimal aged care funding model for the next 20–30 years.

The announcement follows the Aged and Community Care Providers Association’s Financial Sustainability Summit in Canberra. The summit brought together 50 experts from aged care providers, unions, consumer groups and public policy specialists to debate ways of modernising aged care funding for the next generation.

Bridging the gap

ACCPA CEO 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% of GDP, which is only half of the OECD average¹.

“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?”

Co-contributions, part of the solution

The Australian Government is currently reviewing “funding arrangements for aged care”, including greater co-contributions by older Australians themselves², with recommendations by an Aged Care Taskforce to be released later this year.

The Royal Commission into Aged Care Quality and Safety acknowledged that current financing arrangements for aged care are not “well designed”.

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. What that looks like, however, including care versus daily services and accommodation, is up for debate and will be explored further in the white paper.

Some of the key challenges, according to the ACCPA, include:

• More than 4.1 million Australians, or almost 16% of the population, are currently over the age of 65³.
• By 2057, that will rise to 8.8 million, or 22% 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 over⁴. 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.

About co-contributions

• 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”⁵.
• According to the Productivity Commission, almost $1.4 trillion has been gifted by Australians in inheritances⁶ over the past 20 years, or about $67 billion a year⁷.
• The average recipient receives about $125,000, is about 50 years old, close to peak earning capacity and established in a house⁸.
• In April 2023, Aged Care services provider, CompliSpace, released a report that found that almost three-quarters (73%) of Australians are willing to forego some of their inheritance so their older family members can have the retirement they deserve⁹.
• The Aged Care Financing Authority (ACFA) has found that a sustainable aged care system can be achieved with more co-contributions from older Australians who can afford to make them.¹⁰

^{1 Royal Commission into Aged Care Quality and Safety (March 2021)
2 https://www.health.gov.au/our-work/aged-care-reforms/what-were-doing/sustainable-care
3 Australian Institute of Health and Welfare, https://www.aihw.gov.au/reports/older-people/older-australians/contents/demographic-
profile
4 Final report calls for fundamental and systemic aged care reform, March 2021, https://agedcare.royalcommission.gov.au/news-and-
media/final-report-calls-fundamental-and-systemic-aged-care-reform
5 Australian Federal Treasury, https://treasury.gov.au/sites/default/files/2021-02/p2020-100554-udcomplete-report.pdf
6 Productivity Commission report – Wealth Transfers and their Economic Effects (November 2021), https://www.pc.gov.au/research/completed/wealth-transfers
7 Productivity Commission report – Wealth Transfers and their Economic Effects (November 2021), https://www.pc.gov.au/research/completed/wealth-transfers
8 Productivity Commission report – Wealth Transfers and their Economic Effects (November 2021), https://www.pc.gov.au/research/completed/wealth-transfers}

Image credit: iStockphoto.com/sommart