What happened to aged care in the 2022 Federal Budget?
You may have looked at the 2022 Federal Budget and thought it was light on aged care reforms, and it was.
But you need to remember that the 2021 Budget focussed on aged care with a five-year reform plan. This year the government reinforced its commitment to that plan, with an additional $20.1 million funding to bring the total additional spend to $18.8 billion over five years. And remember, this is on top of the $21.5+ billion per year we already spend on aged care.
Whether enough is spent or not, or whether it is the right spend or not, are certainly contentious issues. And you can be sure that this year’s Federal election is gearing up to be a debate on aged care:
The current Government is promoting its current program of reform – ie the five-year plan that is already one year into reform
The opposition is promising improvements in services and care
Unions are pushing for wage rises
The aged care industry is pushing for more funding to help stem the operational losses arising from increasing costs of care and wage pressures, and
The general public, who are your clients, are confused.
What the Government announced
In this year’s Budget the Government reconfirmed its commitment to the five-year plan announced in the 2021 Budget. This included a five-year five-pillar package of reforms.
Demand for home care continues to increase, and the next tranche of 40,000 new home care packages (to be released over 2022-23) will continue to increase availability and reduce waiting times. While waiting times have reduced by approximately 25%, the reality is that waiting time for a Level 3 or 4 package is still estimated to be 6-9 months.
Navigating home care should be easier when the current Commonwealth Home Support Program (CHSP) and Home Care Packages are combined into one new Support at Home Program from 1 July 2023. Details are yet to be developed, with advisory committees and older Australians providing input into the development.
A new funding model to reset the cost of care for residents is currently being trialled (called AN-ACC), with implementation set for later this year. In this year’s Budget, an extra $20.1 million in funding was announced over the next three years.
The 2021 Budget also committed to a minimum of 200 minutes per day of care on average for every aged care resident.
Across the 2021 and 2022 Budgets, the government has committed to reforms costing $18.8 billion over a five year period and these reforms picked up on 126 of the 148 Royal Commission recommendations, with 12 more under consultation.
Labor’s Budget reply
The Budget reply from Labor outlined an intention to improve aged care, based on recommendations made by the Royal Commission:
A mandatory requirement to have a registered nurse on site at all times
A minimum of 215 minutes of care per day for every aged care resident
Support for the 25% pay case lodged by aged care workers with the Fair Work Commission, and a commitment to fund the outcome
Better food for aged care residents
Increased powers for the Aged Care Quality and Safety Commission and increased reporting requirements for aged care providers.
Labor has costed this reform package at an additional $2.5 billion over four years. BUT, this does not include funding pay increases for aged care workers. Given that wages represent around 70% of the costs for residential care, any wage increase will require significant amounts of extra funding and well over the $2.5 billion quoted.
Who is going to pay?
Neither party has addressed the issue of consumer contributions, mainly because this would be an election killer.
The government (which means we as taxpayers) currently pay 96% of all care costs – across the combined areas of home care and residential care. So whether consumers can afford to pay more and whether they should pay more are big questions still looming on the horizon.
The options any government has to increase aged care funding are:
Increase tax revenue
Reduce spending on other areas to redirect to aged care
Raise an aged care levy (like Medicare levy) to fund aged care as suggested by the Royal Commission
Dive further into debt
Shift some of the cost to consumers, or
Create efficiencies within the aged care system to reduce cost pressures.
The costs of aged care will only continue to increase as the Baby Boomer generation moves into their frailty years, increasing not only the demand for services, but also higher consumer expectations around qualify and service. Add to this an increasing level in the care needs of those who make the move into care.
Whichever party comes to power, there is a chance that in the new mini-Budget or MYEFO statements we might expect to see some reforms to consumer contributions.
What financial advisers can do?
We need to start the hard conversations with our clients. Aged care is no longer an issue that can be ignored when providing retirement advice to clients and their families – it is now a core issue that needs to be considered.
If clients are not prepared for their frailty years you 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 provide better quality of life.
The Financial Planners and Advisers Code of Ethics (developed by FASEA) and the Retirement Income Covenant are two pieces of legislative reform in recent years that have explicitly stated the need to include aged care considerations into client conversations and planning decisions.
And we are here to help you – ask us how!
We have declared 2022 to be the Year of the Aged Care Adviser.
You do not all need to become an expert in aged care advice but you do need to have an advice solution to help clients navigate and plan for aged care. Depending on your business model and your skills, to create your own business solution we can:
Connect you
Do it for you
Do it with you, or
Enable you to do it.
To help with your thinking, we also have a range of resources on our website. So take some time to have a look. In particular take a look at:
Resources – for podcasts and white papers on a range of business topics including Planning for the Three Phases of Retirement
Get started – for tips and discussion on business models you could implement
Training – to register for our leading Accredited Aged Care Professional TM workshop
Membership – to see what value we offer in our membership packages. A small investment in your business can pay value with better client relationships, increased business revenue and the ability to attract new clients, including relationships with the children of existing retiree clients.
You can also find out more about our full range of services.
For our members
Our Business Toolkit™ is your one-stop shop for everything aged care related.
As part of our Budget updates, we are saving you time with client communications with a range of pre-prepared client communications. All you need to do is log-in, download and add to your website, newsletter or social media communications. We have started you off with some client articles, social media posts and presentation slides. Log-in now.
For details on the full five year plan, click on the link below to download the Aged Care Steps analysis of aged care announcements from the 2021 Federal Budget.