Aged care cost to rise under plan

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''.