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Living longer, living better:

We're living longer and the Government wants us to live better also. What does it mean?
By Bonita Mersiades
Date: April 25 2012
Editor Rating:

Last week, Prime Minister Julia Gillard and the Minister for Ageing, Mark Butler, announced a series of reforms to Australia’s aged care services following a 2011 Productivity Commission inquiry.  They are the most significant reforms to aged care in 30 years.

Aged care is a complex policy area.  It relies almost entirely on the services being provided outside of government, mainly by for-profit companies or not-for-profit religious and charitable organisations, but is substantially government funded and heavily government regulated. 

The ‘perfect storm’ of demographic and budgetary pressures and the demands of the ‘new’ generation of ageing people – ie. the baby boomers – has led to this much-needed overhaul.  The reform package has been widely welcomed by consumer groups, unions, providers and appears to have bipartisan support.  

Here are 8 key questions answered what the reforms mean.

1.       What are the aged care reforms about?

The package of reforms will tackle a number of different issues related to services for care of older people, but the three ‘big’ ones relevant to most consumers are:

1.       Making sure aged care is more accessible for everyone who needs it into the future

2.       Offering people who need aged care more choice of services and who provides them

3.       Making sure there is sufficient funding available to support high quality services.

2.       Why was reform necessary?

With the number of Australians over 85 expected to increase to 1.8 million by 2050 (more than five times the current number), government needed to look at the aged care system now to ensure that it was able to meet peoples’ needs and be affordable.  On top of this, there will be the additional health and age pension costs due to the ageing of the population.  As the number of older people is increasing at a more rapid rate than the number of younger people entering the workforce, it was necessary to find a way of sharing the cost of aged care on a fair and equitable way.

The other aspect is to try to get aged care services right.  As the leading edge ‘baby boomers’ get older and need aged care services, they will be much more selective and want to exercise more choice and control than their own parents and grandparents. 

The number one priority for most people is to stay in their own home as long as possible; but if and when that is not possible, more choice is also needed in residential aged care services.

3.       What are the key features?

The package has many elements so it is difficult to summarise but here’s an attempt!

A key element of the package is that it distinguishes between the cost of care and the cost of accommodation.  It is based around the principle that most of us throughout our adult life are responsible for the cost, quality and choice of our accommodation.  Why should this be different as we become older and, perhaps, more frail? 

In brief:

  • services will still be rationed but it will gradually be increased from the current ratio of 113 places for every 1,000 people over 70 years of age to 125 by 2020.  Within this ratio, the proportion who will be able to receive care at home will gradually increase from 22% to 38%;
  • subject to a safety net for those who cannot afford to contribute, people will be expected to pay accommodation and living expenses and contribute a modest amount to the cost of personal care needs according to capacity to pay;
  • the concept of ‘consumer directed care’ will apply for all home care services, and this concept will also be trialled in residential care;
  • there will be a choice of whether to pay a fully refundable lump sum payment or rent if we need residential care;
  • more money has also been provided to improve care for people with dementia, to increase support for carers and to improve palliative care
  • a new one-stop information ‘Gateway’ will be introduced to simplify access to aged care services.

4.       Does it mean that some people will pay more?

Yes it does – and that’s the point.  For those who can afford to pay more, they will.  At the moment, someone who lives in a $2 million home can pay less than someone who lives in a $350,000 home. 

Paying for what you can afford is no different from any other point in our life and the fact is, if individuals do not make a contribution, then aged care will simply become unaffordable for society and quality will suffer.  People of similar financial means with similar aged care needs will pay the same.

5.       What do we pay for?

Subject to the means test, you will have to contribute to:

  • your accommodation component. If you are receiving care in your own home, this is not relevant; but if you need to move to some form of residential aged care, then you will be required to make a contribution.  Currently, if you need to go to a nursing home or hostel with low care needs, you may have to pay a bond which is sometimes very large.  Under the new system, you may have to pay a fully refundable bond whether your care needs are low or high, or you can choose to pay rent.  The accommodation fees charged will be approved by the Government.
  • your care component.  Regardless of where you receive care – in your own home or in residential aged care – you will make a modest contribution to the cost of the care you receive based on your income.

As well as changing what we pay, the Government is also placing a lifetime cap on the total aged care costs that an individual can incur.  The cap is $60,000 and covers care costs incurred in your own home or in residential aged care.  As well, there is an annual cap on care costs of $25,000 in residential care and $5,000 and $10,000 respectively for part pensioners and self-funded retirees receiving care in their own homes.

6.       Will you have full choice of where you receive care?

Because the Government will continue to ration services and determine the proportion of residential and home care services, people will not have full choice of where they receive their care or which organisation provides it.  But as the Government gradually lifts the supply of services from 113 to 125 places per 1,000 people over 70, choice should improve.

However, the reforms do fall short of the Productivity Commission’s recommendation – which was widely supported by the aged care sector – that aged care should be an entitlement based on assessed need and each individual should be free to use that entitlement in their own home, retirement village or residential aged care.  In this respect, the reforms are disappointing.

7.       It’s always difficult to find information about aged care. Is this being fixed?

Hopefully, it will be easier.  The new ‘Gateway’ that is being established will give information about what aged care services are available in a local area, but eventually it will include comparable data on aged care services (both in your own home and residential care) along the lines of the ‘My School’ website, so you will be able to make informed decisions on the type of care, the location of care and the provider of those care services.  This site will also publish performance against quality indicators and include a ratings system.

8.       When will this happen?

This is a substantial ‘re-engineering’ of the current aged care system, and hopefully the Government has learned some lessons about the need for proper implementation of such a major new package of reforms. 

The changes will be phased-in over ten years starting from 1 July this year. The major changes to user contributions do not occur until 1 July 2014.

The fees paid by people currently receiving some form of aged care will not change.

Further information

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Recent Comments
5 Total Comments
Liz says: 2012 04 25

This is the easiest to understand explanation I have seen yet. I have just been through this with my mother and it’s not only complex in policy but also in practice. I really hope this works.

Mel says: 2012 04 26

This is a good, meaty article about a real issue. Should be more of it rather than personal experiences.

Jane says: 2012 04 26

Agree Mel - great article!

Liz says: 2012 04 27

Thank you.

Kate Roberts says: 2012 04 30

Great article, Bonita.  Thanks for summing it up so well.

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