Elderly should pay up for aged care, says Treasury

The family home should be included­ in any means test regarding contributions for aged care, federal Treasury says.

Treasury calls for older Australians to contribute more of their own funds to their aged care, whether in-home or in a nursing home.

The family home should be included­ in any means test to determine­ how much an individual contributes to the cost of their residential aged care, federal Treasury says.

In a submission to the aged-care royal commission, Treasury also calls for older Australians to contribute more of their own funds to their aged care, whether in-home or in a nursing home.

The commission asked Treasury for its views on how the nation­’s fast-growing aged-care bill should be paid, including whether the full value of a home should be included in the current means test (presently it is limited to $170,000) to determine governmen­t-funded costs in nursing homes.

“Including a higher value of the family home in the means test (potentially the full value) would provide more equitable treatment of different types of wealth between home owners and non-home owners, and ensure that recipient­s of aged care contribute to the cost of their care based on their means,” the August 31 submission said.

“It would also be a more efficient­ and less distortionary means of funding consumer contributions to aged care than raising this funding through general taxation.”

Including the family home in means-testing for aged care has long been favoured by policy analysts­, but remains a heated political issue. Many older Australians have an emotional connection to their home and don’t see it as simply an asset similar to shares and superannuation.

In its 2011 Caring for Older Australians report, the Produc­t­ivity Commission proposed dropping the family home exemption from the means test for residential aged-care funding.

The Labor government responded in 2012 by introducing the $170,000 cap, but the family home remains exempt for determining eligibility for in-home care services.

In 2017 the Tune review of aged care recommended the inclusion of the full-value family home, but this was quickly shut down by the Coalition government.

“Unfortunately this recom­mendation was immediately rejected by government without consultation or serious consideration other than as to its political palatability at that point in the electoral cycle,” the Council on The Ageing wrote in its August 20 submission to the commission.

Josh Frydenberg said the Tune review made 38 recommendations on aged care and “in its response at the time the govern­ment ruled out including the full value of the owner’s home in the means test for residential care”.

“Rather than pre-empt the findings of the royal commission into aged care, the government will await the final report and carefully consider all its recommendations,” the Treasurer said.

The Treasury submission also called for greater levels of individual contribution to aged care.

In 2018-19, the federal government provided $18.1bn in residential and in-home aged-care services, with aged-care recipients spending $5.1bn. “Individuals who have the capacity to contribute more to the cost of their aged care already make some contrib­utions, and consideration should be given to ways to further ­enhance these arrangements,” the submission says.

“Additional consumer contributions would add to the total funds available for aged care, allow for consumer-driven ­system improvements, better manage demand for care (and) improve equity … overall …”