The government has a up-to-date plan for care homes for the elderly. Here’s what’s changing

After months of negotiations between the main parties, the government has made a decision announced will implement Senior Care Team Recommendations.

The government already reported in March that it will not impose a up-to-date tax or levy on aged care.

Today’s announcement focuses on how wealthier people will contribute to the overall costs of residential aged care and home care services in the future.

While some people will not welcome having to pay more, these changes are necessary to ensure the long-term sustainability of the aged care system.

What is changing in inpatient care?

In December Task Force made 23 recommendations aimed at supporting:

a senior care system that is sustainable, fair and conducive to greater innovation in the sector.

By adopting these recommendations, the Government has committed to maintaining financial support for clinical care for all residents and providing a financial safety net for residents with low financial means.

The three most significant proposals for residential care are:

1. Examination of funds to cover the “hotel allowance”.

Currently, taxpayers contribute to the costs everyday life for all residents, regardless of their means. Daily services include catering, cleaning and laundry.

People with high means (assets worth more than A$238,000, income of more than A$95,400 or a combination of both) will no longer receive this subsidy and will have to pay an additional amount to cover these costs.

2. Introducing deferred rent payment.

This is a rental fee for people who pay for their accommodation using a refundable lump sum. This fee would be taken from their refund rather than becoming an additional fee.

This would assist overcome a long-standing problem that has seen many providers lose money on accommodation costs.

3. Abolition of income-related care fees.

Instead, a new means-tested contribution to non-clinical care will be introduced. It will cover the costs of non-clinical care such as bathing, mobility assistance and the provision of lifestyle activities.

What impact will these changes have on older people?

Many people will not be affected by the changes. Under the ‘no worse off’ principle, those already living in residential aged care will continue to pay as they do under their current arrangements.

Similarly, people with low means, typically retirees without significant assets, will not be affected. The government will continue to fully cover the costs of their clinical care, non-clinical care and accommodation, as well as supplementing their daily living costs through a hotel allowance.

Pensioners will continue to employ their Age Pension to meet day-to-day expenses, up to 85% of their Age Pension (equivalent to $445 a week).

At the other end of the scale, those with significant means, such as self-funded retirees, will pay an additional means-tested hotel fee to cover the full cost of food, laundry, cleaning and utilities. This fee (up to $88 per week or an additional $4,581 per year) would augment their total contribution to daily living services to $533 per week.

In addition, while the government will cover the cost of clinical care for self-funded retirees, they are expected to contribute to the cost of non-clinical care services through a means-tested non-clinical care contribution. This contribution is capped at $101.16 per day (or $708 per week), which the resident will stop paying once they reach the $130,000 limit or four years (whichever comes first).

There will be no change to the treatment of the family home under the up-to-date means testing arrangements. The value of the family home included in the means test will remain capped at $206,039 (indexed), even though the arrangements ignore the assets of people with homes above that limit.

Finally, part-time pensioners and self-sufficient pensioners who pay for their accommodation with a refundable lump sum deposit will pay a up-to-date annual deferred contribution rental fee equal to 2% of their deposit per year.

The $550,000 room will incur a rental fee of $212 per week ($11,000 per year), which will be deducted from the $550,000 security deposit when the room is returned to the tenant or his or her heirs at the end of the stay.

By comparison, if someone wanted to pay for the same room using a daily payment method, it would currently cost them $882 per week.

Currently, each resident’s daily payments are set at the price when they begin residential care. However, in the future, resident payments will be indexed twice a year.

The focus is on improving equality and sustainability

It will take some time to analyse the full implications of today’s announcement, which also included significant changes to the Home Support Scheme and the up-to-date Aged Care Act.

However, the proposed changes are likely to improve the sustainability and equity of Australia’s aged care system.

More than half of all care homes for the elderly are operating at a loss, and over the past four years these homes have cumulative losses of $5.6 billion. This is not sustainable, and every home that closes means fewer opportunities for older people to receive the residential care and support they need.

The proposed changes, particularly those relating to accommodation, will assist ensure that service providers have sufficient revenue to cover the costs of the services they provide.

The introduction of more means-tested arrangements for everyday living costs and non-clinical care will allow taxpayer support to be better targeted to those with low financial means.

Perhaps most importantly, increasing contributions from older people who can afford it will improve intergenerational equity by relieving taxpayers of the rising costs of providing subsidised care for older people.