Higher aged care costs for wealthier boomers until deal struck between Labor and Coalition

Self-funded retirees and part-pensioners will pay more for their aged care at home or in a residential facility under an overhaul of the system following a deal between Labor and the Coalition.

Self-funded retirees and part-pensioners will pay more for their aged care at home or in a residential facility under an overhaul of the system following a deal between Labor and the Coalition.

The sweeping reforms will only apply to new entrants from July 1 next year, while a “no worse off” principle means older Australians already in residential facilities or on waiting lists will not be impacted.

Wealthier retirees who want to stay home for longer will be required to make greater contributions for costs like cleaning, gardening and food, while clinical care will remain fully funded by the government.

Under the changes, the maximum amount people will contribute to their care at home or in a residential facility will increase from the current lifetime cap of $79,900 to $130,000.

Additional funds would be provided to support retirees staying at home who require wheelchairs or walkers, and up to $15,000 will be granted to eligible recipients for house modifications like ramps.

Treasurer, Jim Chalmers, Aged Care Minister Anika Wells and Prime Minister Anthony Albanese unveil aged care funding changes. Picture: NewsWire / Martin Ollman

The government will spend $5.6 billion on upfront costs, including a $4.3bn boost for extra home care places, while the reforms are ultimately estimated to save the budget $12.6 billion over the next 11 years.

Aged Care Minister Anika Wells said the government would continue to pay the “majority” of costs, but without the changes it would not be possible to “sustain the level of care older Australians deserve”.

“Our reforms will create better and safer care, help reduce the fear of a system that has been neglected for far too long,” she said.

Shifting to a new home care system with eight tiers where older Australians are individually assessed to ensure they’re only getting the supports they need is expected to free up thousands more packages and dramatically reduce wait times.

From July 1, new residents with more than $238,000 in assets, more than $95,400 in income or a combination of the two, will make additional contributions towards the “Basic Daily Fee” for residential aged care.

A separate Hotelling Supplement will also be means-tested, costing $12.55 per day at most.

Aged care residents who have “sufficient means” will also be expected to pay more for services like showering, haircuts and lifestyle activities, paying a maximum of $101.16 a day.

But clinical services like seeing the doctor or rehabilitation, will now be fully funded by the government for everyone.

Aged care providers say the changes will also allow them to invest in more beds and upgraded facilities. Picture: Rohan Kelly

Council on the Ageing (COTA) chief executive Patricia Sparrow welcomed the new Aged Care Act and home care investment, saying it would give Australians greater choice to age at home and reduce the “unacceptable” wait times.

Ms Sparrow urged the parliament not to rush through the legislation saying Australians needed “adequate time” to scrutinise the 550 pages and give feedback.

“For too long older Australians, whether due to systemic ageism or other factors, have not been given ownership of their lives when the time comes for them to access aged care,” she said.

“It’s time that changed and this Aged Care Act will go a long way to ensuring that.”

UnitingCare Australia national director Claerwen Little said under the right funding model, providers would be able to offer more home care services, build new homes, refurbish existing ones, and offer more beds.

“The government must ensure that no one is left behind, and provide adequate funding for services to remain viable in all communities, especially in rural and regional locations,” she said.

The economic impact on each retiree will be different depending on their circumstances, with full pensioners who rented before entering aged care largely unaffected.

A pensioner who had about $40,000 in income, owned a home worth about $1.1m and other assets worth $350,000 would go from contributing $31,300 to $36,000 annually for residential aged care.

Australians already in residential aged care are not impacted by the changes. Picture: Supplied.

Meanwhile a self-funded retiree entering an aged care facility with $70,000 in income, a home valued at $1.6m and other assets worth $500,000 would go from contributing to $49,400 to $62,800 annually.

CEDA chief executive Melinda Cilento said the changes were the first step to secure the financial sustainability of the sector.

“The principle of means testing for aged care should not be controversial as long as the system is underpinned by a robust safety net to support those who can’t afford care, such as those on a full aged pension,” she said.

“While it has ruled out increasing the means-test threshold for the family home, the Government should consider lifting the threshold to around $500,000, reflecting the significant rise in home values over the last decade.”

Prime Minister Anthony Albanese said the new Aged Care Act would also include protections for older Australians in aged care with stronger powers to investigate bad behaviour with civil penalties for breaching standards.

“Reforms like this don’t happen every day,” he said.

“They are once in a generation and this is very significant.”