Australians will pay more for residential aged care under a proposed radical shake-up that includes the family home in a new means test.
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…
What did the Productivity Commission recommend in its final report on aged care reform?
The Productivity Commission's final report, Caring for Older Australians, recommends a radical shake-up to create a user-pay aged care system: include the family home in a new means test, separate care costs from accommodation costs, allow people to borrow against their home through a government-backed scheme, cap lifetime contributions, and establish a new independent regulator to set prices.
How would including the family home in a new means test affect aged care costs for homeowners?
Under the proposed means test the family home would be included when assessing contributions, which means many homeowners could pay more towards residential aged care. The report makes clear selling the house wouldn’t be necessary because alternatives — such as borrowing against the property — would be available.
What is the Australian Aged Care Home Credit scheme and how would it work?
The Australian Aged Care Home Credit scheme is a proposed government-backed way for people to borrow against the value of their home to pay care and accommodation costs. Unlike some reverse mortgage products, the scheme would impose a credit limit to prevent negative equity and would not automatically require repayment while a spouse or disabled child still lives in the family home.
Will the proposed plan protect aged care residents from going into negative equity?
Yes. The report proposes a credit limit within the Home Credit scheme so borrowers cannot owe more than their house is worth, providing protection against negative equity that can occur with some reverse-equity products.
How much would individuals be expected to contribute to aged care costs under the new plan?
Individuals would contribute up to 25% of their aged care costs based on a comprehensive means test, with the Productivity Commission suggesting a lifetime cap on contributions of about $60,000.
What’s the difference between care costs and accommodation costs under the proposed reforms?
The reforms separate care costs (for personal and clinical care) from accommodation costs. Accommodation would be a lifelong responsibility and could be paid via a bond or daily, weekly or monthly charges similar to rent, while the total price paid to providers would be set by the Commonwealth on advice from the new regulator.
What role would the Australian Aged Care Commission play in the new system?
The proposed Australian Aged Care Commission would be an independent regulator advising the Commonwealth and setting the total price paid to providers — including government subsidies and resident co-contributions — to help ensure consistent pricing and quality standards.
If someone sells their house to pay for aged care, how would that affect their Age Pension?
The report proposes an Age Pensioners Savings Account for people who want to sell their home and keep receiving the pension. Money placed into this account would not affect the pension assets test and could be used for any purpose, helping people retain pension entitlements while accessing housing equity.
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