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The Federal Budget Due Out Next Month is the Moment to Avoid Dreaming and Start Fixing Aged Care

The Federal Budget Due Out Next Month is the Moment to Avoid Dreaming and Start Fixing Aged Care

Published By Newly , 2 years ago

The Australian aged-care scheme is in shambles. The final report of the aged care royal commission, published last month, is only the latest in a long line of depressing findings and investigations detailing horrific violence, negligence, and institutional shortcomings.

The elderly care system needs a full redesign. The piecemeal restructuring would not suffice. While the two commissioners could not agree on anything, they did agree on the structural changes needed to dismantle the old system of rationed treatment, which has left many too many older Australians with insufficient — or no — care.

We navigate the commissioners' differences in a recent Grattan Institute paper, identifying four main conditions for transformational reform.

Of necessity, repairing aged care would not be easy. We have proposed several proposals about how the government could raise the billions of dollars required per year to finance a stronger aged-care system. In this respect, the federal budget due out next month provides a critical chance for the government to step up.

Creating a straightforward direction to change: four stages

First, the government would draft a revised Aged Care Act that enshrines older Australians' privileges and provides a compulsory entitlement to needs-based care. Reforms that will result in a single new national aged-care package that covers all home care and residential care categories would render care more accessible. This will also contribute to ensuring high-quality coverage for all elderly Australians who need it, with no waiting lists or co-payments.

Second, the government must establish new autonomous governance mechanisms, such as independent pricing, independent quality requirements, independent regulation, and regional governance structures. This will help fix the new market-based system's inadequate control and shortcomings, which have resulted in many older Australians not receiving the level of standard of treatment they need. Better governance and more accountability will aid in the development of a well-functioning aged-care sector committed to delivering high-quality care.

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Third, the government would announce significant changes to the aged-care population. It must establish and maintain minimum care hours per resident in residential aged care, establish a nationwide registry scheme for all personal care staff, and require all aged-care workers to undergo Certificate III qualifications at the very least.

Finally, the government must declare a significant increase in aged-care spending — and explain how it would be paid for.

Obtaining the funds

People seeking treatment should contribute to their basic living expenses, such as housing. However, the government can provide for their medical expenses, much as it would for patients in public hospitals (through Medicare).

This approach would include universal insurance for those with high medical requirements and still reducing the need for precautionary savings in old age so people would not have to think about how they would cover their potential care needs.

The royal commission found a A$9.8 billion annual budget gap in aged care, which would only grow as Australia's population ages.

This financing shortfall may be filled by a Medicare-style fee on taxable profits, reforms to the pension assets measure, increases in tax cuts for superannuation, or other mechanisms.

As a means to spread payments around the population, the royal commission proposed a 1% aged-care fee on personal income tax, similar to the Medicare levy. This will earn approximately A$8 billion per year thus costing the average taxpayer approximately A$610 per year.

Other revenue measures aimed at wealthy elderly Australians will also contribute to greater stability in funding a stronger aged-care scheme.

The typical 65-74-year-old household currently has more than A$1.3 million in net assets. In the last two decades, the number has more than doubled. More of the worth of the family home should be included in the pension assets test (a means test that decides the qualifications for the pension) above a certain threshold, such as A$500,000, to render the pension more equitable. That will also save the government up to A$2 billion per year, which will be used for aged care.

The government could even repeal too lucrative tax breaks for older Australians in superannuation, which results in just one in every six individuals over the age of 65 paying any income tax.

Superannuation gains in retirement, which are actually tax-free for those with superannuation accounts worth fewer than A$1.6 million, should be taxable at the same rate as superannuation earnings before retirement. This will boost fiscal deficits by about A$6 billion per year now, and significantly more in the future.

According to polls, Australians are able to spend extra tax to improve aged care.

Money must be invested prudently

Pre-budget leaks indicate that the government is willing to spend billions more in aged care, but the sum foreshadowed in a newspaper story over the weekend — A$10 billion over four years — is less than what analysts believe is needed to address the issues uncovered by the royal commission.

Equally significant, if the extra investment is not matched by system restructuring, an incentive would be lost, and the money will be spent on system inefficiencies and surplus administration fees rather than on increased customer facilities.

The time has come

Extra money, if well managed, has the potential to change the aged-care sector. It has the potential to eliminate the 100,000-person waiting list for adequate home treatment, provide higher-level care at home over longer periods of time, hire at least 70,000 additional aged-care nurses, increase the amount of care per patient, and guarantee that a registered nurse is on-site 24/7 in all residential nursing homes. However, implementing these necessary improvements would necessitate more than what seems to be on display in the pre-budget leak.

This is an opportunity that the government must take. It must sharpen its pencil and seize this unprecedented moment, where there is widespread popular enthusiasm for fundamental change, to completely finance the requisite reform. The budget for next month should include initiatives — as well as funds — to provide an aged-care environment of which all Australians will be proud.


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