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Aged care: a sector long overdue for reform

The Productivity Commission’s draft recommendations for an overhaul of aged care were briefly summarised in this recent Croakey post.

The Commonwealth Parliamentary Library’s Rebecca de Boer has now done a more indepth analysis of the report, which you can read below (thanks to the Library for allowing this cross-posting).

Rebecca de Boer writes:

The draft report of the Productivity Commission’s (PC) Inquiry into Caring for Older Australians, released on 21 January 2011, provides a sobering assessment of the current state of the aged care system. It argues that the current system can not withstand future challenges without comprehensive reform. A staged implementation plan over five years of the Commission’s recommendations has been put forward to address this.

The PC’s report has been met with broad support from stakeholders with many welcoming the bold proposals for reform.

The PC is recommending dramatic changes to the aged care sector. These are designed to create an aged care system which provides consumers with greater choice and autonomy, ensure equity and access and is affordable for both consumers and government. Under the proposals, regional ‘gateways’ (known as Australian Seniors Gateway Agencies) would be established to provide a range of aged care services to consumers. These gateways would be responsible for information, assessment of care needs and capacity to pay as well as care coordination.

Consumers would be able to receive a flexible range of aged care services and choose where this care might be received as well as their approved provider. In a departure from current policy settings, consumers would contribute, in part, to their costs of care (known as care co-contribution) and meet their accommodation and living expenses. A safety net would be available for those with limited means and a maximum lifetime limit would apply to the care co-contribution.

Some of the recommendations made by the PC are not without controversy. Aged care in Australia has typically operated under principles of universal entitlement with the government funding a significant proportion of the costs associated with aged care, regardless of an individual’s capacity to pay. This is in contrast to many other social policy programs in Australia where co-payments are used as a ‘price signal’ for consumers or access is governed by means testing. As noted by the PC, there are many good reasons for the government to be involved in the provision and regulation of aged care, not the least equity of access to appropriate care and the correction of market failures.

The recommendations which are likely to attract the most commentary are those in relation to the financing of aged care. Already there have been media reports about pensioners having to sell their homes to secure a place in an aged care home as part of the proposed arrangements. This has been disputed by Martin Laverty of Catholic Health Australia who suggested that the equity release scheme proposed by the PC would alleviate the need to sell the family home.

The proposed recommendations for the financing of aged care are underpinned by principles of reasonable and affordable co-contributions and capacity to pay. The PC also recommended that the costs associated with aged care are separated with different funding arrangements. Individuals would now become responsible for the costs associated with accommodation and everyday living expenses (with safety nets). Like other health financing policies, health services would attract a universal subsidy and individuals would make a contribution to the cost of their personal care according to their capacity to pay. Individuals would be protected through a maximum lifetime limit.

Aged care bonds would be extended to all aged care residents. To counter some of the possible impacts of this recommendation, the PC has put forward a number of options for consumers to choose from when paying for aged care. Aged care residents would be able to choose from three options when paying for their accommodation costs: periodic payments for the duration of their stay, an accommodation bond or a combination of both. Individuals would be protected through government regulation which would prohibit bonds exceeding the value of the periodic accommodation charge.

The PC also proposed the establishment of an Australian Pensioners Bond Scheme to allow age care pensioners to purchase a bond from the Government after the sale of their home. The purpose of this bond is to fund living expenses and aged care costs. This bond would be exempt from the age pension assets test and income tests and would be indexed according to CPI. There would be no additional costs associated with this bond and pensioners could draw on this as required. Another scheme designed to give consumers greater choice in paying for aged care proposed by the PC is the establishment of the government-backed Aged Care Equity release scheme. This would enable individuals (presumably non-pensioners) to draw down on the equity of their home to contribute to the costs associated with aged care.

Consistent with the recommendations for individuals to make a contribution to their care costs, an independent Commission would recommend to government the prices for defined list of care services. The scale of these contributions would be set by Government and based on an assessment of capacity to pay. This means test would be conducted by the proposed Gateway Agency and would include the family home as well as any money held in accommodation bonds. Special arrangements would apply for pensioners and the means test would only apply if services received were in excess of $100 per week, on average, including home modifications. Care co-contributions would be regularly reviewed and individuals are protected by significant costs by the maximum limit. Consumers would have the flexibility to choose their service provider and where their care is received.

Stakeholder commentary and media attention has largely focused on the proposed introduction of aged care bonds. Peak lobby groups such as Catholic Health Australia and Council of the Ageing Australia have publicly supported bonds. Industry groups such Aged Care Association Australia (media release not yet online) have also welcomed the PC’s report. The proposed introduction of bonds has not been without criticism with suggestions that it was not a fair way to fund aged care. This mixed response is in contrast to when bonds were first proposed by the Howard Government in 1997 and were met with universal (and staunch) opposition.

The demographic challenge facing Australia would appear to be dictating that a solution is required for a sector long overdue for reform.

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Cultural Solutions - Healing Foundation forum 2014
Lowitja Institute Continuous Quality Improvement conference 2014
National Suicide Prevention Conference 2014
Racism and children/youth health symposium 2014
Rural & Remote Health Scientific Symposium 2014
2015 conferences
#CPHCEforum
#CRANAplus15
#HSR15
#NRHC15
#OTCC15
Population Health Congress 2015
2016 conferences
#AHHAsim16
#AHMRC16
#ANROWS2016
#ATSISPEP
#AusCanIndigenousWellness
#cphce2016
#CPHCEforum16
#CRANAplus2016
#IAMRA2016
#LowitjaConf2016
#PreventObesity16
#TowardsRecovery
#VMIAC16
#WearablesCEH
#WICC2016
2017 conferences
#17APCC
#ACEM17
#AIDAconf2017
#BTH20
#CATSINaM17
#ClimateHealthStrategy
#IAHAConf17
#IDS17
#LBQWHC17
#LivingOurWay