Medicare-style aged care an issue for taxpayers

Distilled to its essence, the final report of the Royal Commission into Aged Care Quality and Safety says decades of ambivalence and mismanagement by government will require billions of dollars and an ongoing 1 per cent taxation surcharge to fix. There is disagreement between the two commissioners about whether the funds should be ring-fenced as a hypothecated levy or be part of general revenue. Also in dispute is whether the government and existing agencies can be trusted to oversee an expanded aged-care budget.

But agreement is universal on the points that matter. These include that current funding is insufficient and insecure; the system is understaffed and the workforce underpaid and undertrained; too often regulators have been asleep at the wheel; and the complex capital financing arrangements, including the widely used refundable accommodation system, are not working.

In response to the traumatic stories of abuse and neglect given as evidence to the inquiry, commissioners Tony Pagone QC and Lynette Briggs say the aged-care sector is pervaded by substandard care and abuse that in the extreme reaches into the realm of criminal behaviour. They say a new act is required to achieve the fundamental reforms that put older people’s needs and wellbeing first.

The inability of the commissioners to reach consensus is unfortunate and will give some room for government to delay. Scott Morrison’s first response, to boost aged-care funding by $452.2m, can be seen only as a down payment on what the royal commission’s final report says is required. The division also has disappointed witnesses to the royal commission, who say the report is derelict in its failure to provide a clear and authoritative road map for recalcitrant government. What is clear from the report, and the many who have come before the royal commission, is that the problems have not arisen overnight — and that as the population continues to age, the issue will become only more important.

The inquiry report sets out the numbers. It is projected the number of Australians aged 85 and older will increase from 515,700 in 2018-19 (2 per cent of the population) to more than 1.5 million by 2058 (3.7 per cent of the population). In 2019, there were 4.2 working-age people (aged 15 to 64) for every Australian aged 65 or older. By 2058, this will have decreased to 3.1. While most of the aged-care budget is spent on residential aged care, more than two-thirds of people using aged-care services do so from home. The federal government is the main funder of aged care, and across the next decade spending on aged care will increase by 4 per cent a year, significantly faster than the rate of all federal government spending. Also across the next decade, aged care will account for 5 per cent of all federal government expenditure, compared with 4.2 per cent in 2018-19.

While aged care is a growth sector, it is not always profitable for those who deliver the service, with 31 per cent of home-care providers and 42 per cent of residential aged-care providers reporting an operating loss in 2018-19. The remedy put forward in the royal commission report is for a system of universal entitlement similar to Medicare, the Pharmaceutical Benefits Scheme, and the Age Pension. All basic aged-care services will be available to citizens free of charge, whether at home or in an aged-care facility. The commissioners say there should be no requirement to pay a co-contribution towards care in any community setting or residential aged care, including respite.

Because all Australians should have an entitlement to aged care, the costs of care should be distributed equitably across the community. To get things moving, the commissioners say the federal government should clear the home-care package waiting list by immediately increasing the packages available. The government should keep the waiting list clear by allocating a home-care package to any new entrants to the waiting list within one month of the date of their assessment. The government also should provide capital for new aged-care residential facilities in which residents should not be responsible for their care costs but should be required to contribute to their ordinary costs of living and accommodation at a rate set as a percentage of the Age Pension. Where the commissioners differ, it is that Mr Pagone thinks the aged-care sector should have greater independence from government. Ms Briggs believes reforming existing institutions will deliver aged-care reform more quickly and effectively. She says it would not be acceptable to taxpayers for more than $30bn of taxpayer funds to be handed over every year to non-elected individuals operating outside the direct control of ministers to be spent as they saw fit. In opting for universal coverage to be funded through the tax system, the royal commission’s findings avoid the debate over selling the family home and inheritance planning that has plagued discussions in the past. But nothing comes for free, just as taxpayer funds are not a magic pudding that can keep on giving.