Federal Budget 2024-25
Despite the Aged Care Taskforce delivering its final report (on aged care financial viability and reform) in December 2023, the Government has delivered another Budget that has avoided making decisions around funding aged care for long-term viability.
With increasing pressure on aged care providers, and another pending wage increase for aged care workers, the funding issues cannot be ignored for long. Over the next four years, the expenditure on aged care is expected to total $190b, an increase of 35% over the four years. Changes are likely to be announced when the new Aged Care Act (which has been deferred until 1 July 2025) is introduced into Parliament later this year.
Aged care measures announced in this year’s Budget continue to focus on increasing access to home care, improving the quality and regulation of aged care services and addressing workforce issues.
The aged care proposals come at a cost of $2.2 billion to be paid from consolidated revenue. The Government will also reprioritise unspent funds from the Commonwealth Home Support Programme over five years from 2023–24 to other sub-programs within aged care services.
Warning: The measures outlined below are still proposals and may be subject to change. Legislation will need to be passed to implement these measures.
More Home Care Packages
The waiting times for Home Care Packages have started to lengthen again, especially for the Level 3 and 4 packages, with waiting times (as at 30 April 2024) shown below:
Level 1 Package - less than 1 month
Level 2 Package - 3 to 6 months
Level 3 Package - 12 to 15 months
Level 4 Package - 6 to 9 months
Source: https://www.myagedcare.gov.au/assessment-outcome-home-care-packages,
Since 2014, the number of Home Care Packages have significantly increased in an attempt to meet demand, and this year continues the trend. As at 31 December 2023 there were 269,573 people receiving a Home Care Package and the Government has proposed to release another 24,100 packages over 2024-25 (at a cost of $531.4m).
The increased number of packages may shorten waiting times, but even after a package has been allocated, the challenge is to find a home care provider that has capacity to provide the required services.
The Government continues plans to implement a new Single Assessment System to replace ACAT/ACAS and RAS assessments from 1 July 2024. Funding is proposed to be allocated to improving the infrastructure to facilitate this transition (as well as the eventual single at-home care system)
Improving aged care regulation
The Royal Commission highlighted the need to improve the quality and safety of aged care. Since 2021, Governments have been implementing measures to effect the Royal Commission’s recommendations for better regulation of aged care.
This Budget allocates another $110.9m over the next four years to increase the Aged Care Quality and Safety Commissioner’s regulatory capabilities.
Investment into IT systems and service delivery
Financial advisers, aged care providers and people accessing aged care services are increasingly frustrated by the inefficiencies in MyAgedCare and Services Australia.
Additional funding has been proposed for:
MyAgedCare call centres to reduce waiting times
Additional frontline staff to help stabilise Services Australia claims backlogs and service standards and improve the cyber security environment.
We can only hope that we will see real improvements in the Services Australia standards and outputs.
Pay increases for aged care workers
In last year’s Budget the Government committed $11.3 billion over a four-year period to fund the 15% award wage increase awarded by the Fair Work Commission to aged care workers.
In March this year, Fair Work made a further decision to increase award wages for aged care workers. In this Budget, the Government committed to fund the wage increases once the final determination is made (expected to be confirmed around the middle of this year). How this will be funded has not been confirmed.
The Government is providing $87.2 million for workforce initiatives to attract nurses and other workers into aged care
A new Aged Care Act
Commencement of the new Aged Care Act has been deferred until 1 July 2025. Consultation on the draft Act ended on 8 March 2024 and we expect to see the proposed legislation introduced into Parliament in September or October of this year.
The new Aged Care Act will take a person-centred and rights-based approach, with a focus on aged care recipients rather than service providers. It will set out the obligations of care providers and legislate requirements that protect an older person’s rights to safe, quality care, with a statement of rights.
It is likely that the new Act will include reforms for the funding of aged care and may direct a greater share of the costs to users of care services.
Centrelink - deeming rates
Deeming rates have been frozen since the middle of 2022 at 0.25% and 2.25%. These rates were due to be increased from 1 July 2024, but to help with cost of living pressures, the Government proposes to extend the freeze a further year until 30 June 2025.
This will be a welcome reprieve for clients who are impacted by the income test for age pension entitlements and means-test amount calculations.
Centrelink - Carer Payment
Recipients of the Carer Payment may have greater flexibility to undertake part-time work without impacting their entitlements.
From 20 March 2025, the existing 25 hour per week participation limit for Carer Payment recipients will be amended to 100 hours over a four-week period. The participation limit will no longer capture study, volunteering activities and travel time and will only apply to employment.
If the participation limit (or the allowable temporary cessation of care days) is exceeded, payments will be suspended for up to six months rather than cancelled.
Implications for financial advice
We have had another year’s reprieve from higher aged care costs but it is likely that changes are still coming.
Aged care an issue that can no longer be ignored when providing retirement advice – it is now a core issue that needs to be considered in retirement planning. Advisers need to start the hard conversations with clients to ensure clients keep a focus on the third phase of retirement – the frailty years – throughout their whole retirement and in financial planning for funding retirement.
If clients are not prepared for their frailty years, on average, you will leave them exposed for around 15-25% of their retirement years. This is a major gap. Clients need to start planning for how to contribute towards their cost of care. Even today, with money and financial resources, the range of choices are wider and may provide better quality of life.
Resources will be added to the Business Toolkit over the next few days that can be used by our members to educate clients on the Budget announcements and Aged Care Taskforce proposals.
For more details, join Danni Dixon in our 2024-25 Budget update webinar on 16 May 2024 at 11.00am (Sydney time). Click here to register.