Home equity critical to paying for Australia’s aged care system, ACH Group chief says

Australians will have to dip into home equity to help a cash-strapped post-COVID government fund the aged care system, industry leaders warn.

ACH boss Frank Weits with resident Kapara Mews resident Claire East at the Glenelg South age care home. Picture: Tom Huntley

Many Australians will need to use the equity in their homes to help fund their aged care because a cash-strapped Commonwealth will be unable to cope with demand, the head of one of South Australia’s biggest aged-care providers says.

ACH Group chief executive Frank Weits said while there must be more government cash for aged care, as was likely to be recommended by the royal commission, “there needs to be more funding coming from individuals in aged care – they need to pay more”.

Another SA aged-care executive, Jane Pickering of Eldercare, said research by the Royal Commission into Aged Care Quality and Safety had shown people who could afford it were prepared to co-pay for high-quality care. “We often see that the older person is prepared to pay, but the resistance comes from their adult children who are reluctant to see their inheritance diminished,” she said.

She said as well as increased payments from individuals, the Federal Government needed to introduce a levy or additional tax to make the system sustainable. Work done for the royal commission also showed Australians were prepared to pay extra taxes to ensure top-level care for the elderly, she said.

Mr Weits said a co-payment by older Australians with substantial assets would “have to happen”, because, otherwise, the system could not cope with the steep rise in people aged over 80 in the next three decades.

Estimates by Deloitte Access Economics show proposed reforms before the royal commission would drive the aged-care bill from about $21.5bn to $45bn by 2030 and much more beyond that.

“At the moment, the family home is not being considered … and the reality is: why wouldn’t it be?” Mr Weits said. “You can’t take the money to your grave.”

ACH boss Frank Weits with resident Kapara Mews. Picture: Tom Huntley

He said many older people wanted to give their assets to the next generation, but that meant taxpayers had to fund their care.

Reverse mortgages including the Pension Loans Scheme allows people to borrow against their home. The loan can be repaid, or reclaimed from the estate after death. Relatively few people use the scheme.

“Why are you not actually dipping into that model, that sort of reverse equity model where you eat into your home?” he said. “And if there’s a little bit of equity left, then happy days for the kids. That model is very well known in other parts of the world, yet I think in Australia’s psyche the family home is this iconic thing that clearly you can’t touch.”

His concern was backed by National Seniors chief executive John McCallum, who said older people with large assets should not expect younger taxpayers to fund their care so they could bequest their wealth.

Professor McCallum said while it was crucial to clear the 100,000-long waiting list to ensure older Australians could receive care at home, some of those homes should be part of the equation.

He urged the royal commission, which reports on Friday, to include an aged-care loans scheme that would allow the large majority of 80-year-olds who owned their home to use the equity to stay out of nursing homes.

“This is a massive intergenerational issue,” Prof McCallum said. “We can’t have people sitting on assets, passing on their super to their kids, while somebody else is paying for their care.”

It is unclear whether the royal commission will recommend boosting private contributions to ease the burden on taxpayers of rising aged-care budgets. It considered the issue, but counsel assisting did not propose any major new funding measures.

Scott Morrison had already ruled out tax increases.