AUSTRALIANS will pay more for residential aged care under a proposed radical shake-up that includes the family home in a new means test but "selling the house" will not be necessary.
The Productivity Commission's final report on aged care, presented to the government yesterday, gives elderly Australians other options for contributing towards the cost of care and accommodation in a user-pay system.
People would be able to borrow against the value of their house through a government-backed Australian Aged Care Home Credit scheme to pay care and accommodation costs.
But unlike some reverse equity schemes, this plan would protect people against going into negative equity owing more than their house is worth by imposing a credit limit. In addition, the loan would not have to be repaid when the nursing home resident dies while a spouse or disabled child is still in the family home.
Under the plan, individuals would contribute up to 25 per cent of their aged care costs, based on a comprehensive means test, but there would be a lifetime limit on their contributions, which the commission suggests would be $60,000.
Care costs would be separated from accommodation costs, which the commission says people should be responsible for throughout their lifetime. Accommodation costs in nursing homes could be paid through a bond, or by daily, weekly or monthly charges, like rent.
The total price paid to providers including the co-contribution and government subsidy would be set by the Commonwealth on advice from a new independent regulator called the Australian Aged Care Commission.
For those who wanted to sell their house and still retain their pension, there would be an Age Pensioners Savings Account, into which the money would go. This would not affect the pension assets test and could be used for any purpose.
The report, Caring for Older Australians, presents a blueprint for a future aged care system designed to overcome the inequities, rationing, over-regulation, and variable quality of current arrangements, as well as to provide a sustainable funding basis.
The report's underpinning philosophy is that Australians should be responsible for accommodation costs whether they live in their own home, a retirement village, or in residential aged care unless they have low incomes. Currently most people in nursing homes pay a low, capped accommodation charge that does not approximate the cost.
Prime Minister Julia Gillard has promised to start to reform the system during this parliamentary term but refused to rule anything in or out from the report.
Ms Gillard said the government wanted "to see a system that offers more options than the past has, a system that is financially sustainable and is fair for those being cared for as well as for the rest of society, and a system which meets the highest standards of quality".
Frequently Asked Questions about this Article…
How will the proposed means test change how my family home is treated in aged care costs?
The Productivity Commission’s plan would include the family home in a more comprehensive means test for residential aged care. That doesn’t mean you must sell the house — the report proposes options such as a government-backed Australian Aged Care Home Credit that lets people borrow against their home to pay care and accommodation costs.
What is the Australian Aged Care Home Credit and how does it work for paying aged care costs?
The Australian Aged Care Home Credit is a proposed government-backed scheme that would let residents borrow against the value of their home to meet care and accommodation costs. Unlike some reverse-equity products, it would include a credit limit to protect against owing more than the house is worth, and repayment wouldn’t be required while a spouse or disabled child still lives in the family home.
How much would individuals be expected to contribute to aged care under the new plan?
Under the proposal individuals would contribute up to 25% of their aged care costs based on a comprehensive means test. The Productivity Commission also suggests a lifetime limit on those contributions, proposed at around $60,000.
How are care costs and accommodation costs treated differently under the proposed reforms?
The report recommends separating care costs from accommodation costs. Care costs would be subject to the means-tested co-contribution, while accommodation costs would be the individual’s responsibility throughout their lifetime and could be paid via a bond or regular daily, weekly or monthly charges similar to rent.
What protections does the plan include to prevent negative equity if I borrow against my home?
The proposed Australian Aged Care Home Credit would impose a credit limit to prevent people from owing more than their house is worth, protecting borrowers from negative equity — a key difference from some reverse-equity schemes.
Who would set prices and regulate aged care under the proposed system?
The total price paid to providers (including individual co-contributions and government subsidies) would be set by the Commonwealth on advice from a new independent regulator called the Australian Aged Care Commission, according to the report.
What is an Age Pensioners Savings Account and how would it affect my pension if I sell my house?
The Age Pensioners Savings Account is a proposed option for people who want to sell their house and keep receiving the pension. Proceeds could go into this account without affecting the pension assets test, and the funds could be used for any purpose.
Will the government implement these aged care reforms soon?
Prime Minister Julia Gillard has promised to begin reforming the aged care system during this parliamentary term, but the government has not committed to adopting specific recommendations from the Productivity Commission’s final report, 'Caring for Older Australians.'
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