Aged care taskforce: Looming changes ahead for aged care clients and financial advisers
The Government released the final report from the Aged Care Taskforce on Monday, 11 March.
Louise Biti, Director at Aged Care Steps, said, “This much-anticipated report recognises the demographic changes driving the increasing demand for quality aged care services.” Current and future generations have high expectations for quality aged care with greater choice and more control.
The Federal Government is the major funder of aged care. However, there is a limit to their ability to support the increase in costs needed in the future. Government spending on aged care as a proportion of gross domestic product (GDP) is projected to grow from 1.1% in 2021–22 to 2.5% by 2062–63.
A specific tax or levy to fund aged care was ruled out in the report in favour of increased user-pay contributions for people with financial capacity.
“The Taskforce realises that generally older people are wealthier than previous generations and should consider accessing their increasing superannuation and property assets to fund their aged care needs.” But this should continue to be underpinned by a strong safety net for low-means participants to meet aged care costs.
Biti added, “The taskforce recommendations could result in significant changes to the decisions for funding aged care services, creating increased confusion and concern for clients trying to navigate the impact on their personal circumstances”.
“A number of the recommendations encourage Australians and their families to plan ahead for aged care and consider their aged care needs earlier in retirement”, explained Biti. “Financial advisers have the opportunity to educate clients and encourage pre-planning for aged care as part of ongoing retirement advice”, added Biti.
“These developments reiterate the importance and value of personal aged care advice and highlight the need for all advisers to have an aged care advice solution in place for clients”. Biti concluded.
Key recommendations from the Taskforce include:
Immediately increasing the $550,000 cap that limits providers charging a higher RAD (Refundable Accommodation Deposit) without approval from the Independent Health and Aged Care Pricing Authority – an option was put forward as a first step to increase the cap to $750,000 in line with the Tune Report recommendation in 2017.
Allowing providers to deduct and retain 3% of the RAD for a limited number of years to create greater alignment between the lump-sum RAD and the rental-like equivalent DAP (Daily Accommodation Payment)
Phasing out RADs by 2035, moving to just a rental model.
Adding an additional supplement to the basic daily fee to cover the costs paid by providers for hotelling services (ie food, utilities, laundry etc). It is suggested this should be paid by Government for residents who receive an age pension, but in all other cases to be paid by the resident.
Allow providers and residents to negotiate a higher basic daily fee for higher quality services.
Charging varying fees for Home Care services based on the type of services accessed.
Expanding government funding to fully cover the cost of care while residents pay a greater contribution towards accommodation and daily living expenses. However, if the Government chooses not to fully fund the care component, the Taskforce indicated that annual caps on the means-tested fees could be removed and the lifetime cap be reviewed.
It is important to note, that these recommendations are just contained in the Taskforce’s report. The Government has not yet confirmed which recommendations (if any) they will accept, except to confirm ruling out a specific levy or increasing taxes to cover the cost of aged care. They have also indicated they do not plan to change the means-testing of the family home.
“All eyes will be on the May Federal Budget, when it is anticipated that the Government will formulate its response and proposed changes” concluded Louise Biti.