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HECS for aged care: seniors groups cautiously welcome Keating's plan
By Harriet Alexander
Former prime minister Paul Keating says the ballooning cost of aged care should be met by a HECS-style funding model, where every Australian is extended a loan to pay for their care and the costs are recovered from their estate.
The model, which has been cautiously welcomed by peak seniors groups, would reduce the fiscal burden on a younger generation already carrying the costs of the coronavirus pandemic.
Each person's assets would help to maintain them in later life and it would be more difficult for family members to call on those assets.
"We're not forcing anyone out of their home, we're not obliging aged persons to negatively mortgage their home, you're not asking families to chip in and pay for their relatives in their accommodation or their care, and so I think such a system has a lot of advantages," Mr Keating said.
The scheme, which Mr Keating put to the Royal Commission into Aged Care Quality and Assurance on Monday morning, departs from his previous advocacy for a national insurance model funded by an employer directed levy, similar to the superannuation scheme that he designed as treasurer.
He now believed it would be politically difficult to impose a new levy, given that there was already resistance to an extra half a percentage point going to the superannuation levy.
Former prime minister Paul Keating has proposed a HECS-style scheme for aged care funding.
Combined Pensioners and Superannuants Association policy manager Paul Versteege said the proposal would safeguard the housing security of older Australians, though it would pose financial risk for the government.
"Basically it sounds like a universal unsecured loan and I'm not sure any government would be able to take that on," Mr Versteege said.
Council on the Ageing Australia chief executive Ian Yates said it was worth exploring.
But National Seniors Australia chief executive John McCallum said it would be a difficult sell to consumers, particularly because people did not view their homes as assets and wanted something to pass onto their children.
Professor McCallum also said the decision not to include the full value of a home in the assets test for aged care was made at a time that people did not help their children purchase their first homes to the extent that they currently did, and the conversation should be re-opened.
Only the first $170,000 of the value of a family home is included in the assets test for residential aged care and there is debate over whether the full value should be taken into account.
“I think one of the big factors here … is that there will be a growing inequity across Australian society because of the really unusual growth in the value of houses in certain areas of Australia,” Professor McCallum said.
As Treasurer, Paul Keating established Australia's superannuation scheme. Credit: Peter Morris
Mr Keating brushed away the suggestion that his "post-funding model", as he described it, might be viewed as a death tax.
"If there's not assets there, then the Commonwealth pays, but it's a very nice way of working out what the Commonwealth should really pay vis-a-vis the residual assets of an aged person in superannuation or bricks and mortar assets etc."
When superannuation was first conceived in the late 1980s, there were 6.5 people between the ages of 15 and 65 supporting every one person above 65. There are now 3.7 people supporting every person over the age of 65 and the figure is predicted to fall to three by 2040.
"As you know, a lot of young people now who actually become that cohort, the tax paying cohort, many of them have low incomes, they're renters, they start life with a HECS debt if they've been to university and of course they pay the GST 10 per cent cold, regardless of income," Mr Keating said.
"So to this cohort we are inviting them to carry the great body of retired aged people and of course now with the debts of the COVID budgetary interventions."
He conceded that the issue of people trying to divest their assets before they got into the system would need to be addressed in policy.
The royal commission is examining the funding, financing and prudential regulation of the sector.
It also heard on Monday that there has never existed in Australia a mechanism to ensure that the funding of high-quality aged care matches the cost of providing it.
Counsel assisting Peter Gray QC is proposing an Aged Care Pricing Authority to ascertain the cost of providing services, decide on appropriate benchmarks for the costs of providing care to a sufficiently high quality and ensure that providers are able to make a return on their investments.