Paying for aged care - should the family home be counted?

Parliament house flag post

Paying for aged care - should the family home be counted?

Posted 2/05/2012 by Rebecca de Boer

The Government’s Living Longer. Living Better package represents a new way of paying for aged care in Australia. From 1 July 2014, means tested co-payments, annual and lifetime limits for care costs and accommodation bonds for all aged care residents will be introduced. For further detail of the package see here.

One of the long running debates in the financing of aged care in Australia is the treatment of the family home and whether is should be included in any asset or mean-testing calculations when individuals access publicly funded aged care. In its recent report to the Government, the Productivity Commission (PC) put forward two recommendations (7.3 and 8.1) that would draw on the value of the family home to finance the costs associated with aged care.

These were not accepted by the Government in its response to the PC Report. When announcing the aged care reforms, the Prime Minister and the Minister for Mental Health and Ageing argued that the package would ensure that ‘more people get to keep their family home’ and prevent ‘emergency fire sales’. The decision not to include the family home may reflect the Government’s commitment to improving the access to aged care services in the community through additional Home Care packages.

As part of the aged care reforms, aged care providers will be able to charge a bond to all residents and all aged care providers will be able to charge for ‘extra service’ (beyond what is subsidised by the Government). In both instances, the charges must be approved by the Aged Care Financing Authority to be established. These will serve as another source of income for residential aged care providers.

While the introduction of bonds has largely been welcomed by the aged care sector, concerns have been raised that the package will not improve the overall sustainability of the aged care system.

Changes to the financing arrangements for residential aged care

Accommodation bonds are effectively an interest free loan to the aged care provider and are negotiated as part of the entry into residential aged care facilities. They provide an income stream to aged care providers which, as stipulated by legislation, must be used for capital infrastructure and improving the quality and range of services. Aged care providers can also charge a monthly retention amount for five years. Under current arrangements, the bond amount is at the discretion of the provider but residents must be left with a minimum amount of $40 500 in their bank accounts. The average bond in 2010–11 was $248 850, with significant variation across the sector.

From 1 July 2014, all aged care residents will pay a bond. The amount will require approval from the Aged Care Financing Authority and must be publicly available to prospective residents. The monthly retention amount has been abolished. After entering residential aged care older Australians will have a set period (defined in the legislation) in which they can decide how they will pay their bond. As is the case now, there will be three options: lump sum amount, periodic payment or a combination of both. This is likely to improve the transparency and accountability of aged care bonds. Some advocates have been arguing for the introduction of bonds for all aged care residents for many years and this aspect of the announcement has been welcomed. However, support for bonds is not universal, and the Combined Pensioners and Superannuants Association (NSW) have commenced a campaign against bonds.

The Government will also raise the subsidy for residents who are unable to meet the costs of their accommodation. This will be increased from $32.58 to around $50 per day (in 2014). However, this supplement will only be paid to aged care facilities that built or significantly refurbished after the announcement of these reforms. Concerns have already been raised that the increased subsidy will be insufficient for new infrastructure or to address regional cost differences.

While the increase in aged care packages and additional funding has been welcomed by the sector, it remains to be seen whether this will be sufficient to meet the current shortfall in residential aged care. In the last Aged Care Approval Round, there was a lack of applications for residential aged care. Industry reports suggest that under the current arrangements the subsidy is well short of the cost of providing aged care services (the additional payment will apply from1 July 2014) and it is not clear whether the new arrangements will address this. Some providers argue that they will be worse off as a result.

The Government’s residential aged care package has been described as a ‘band-aid’, partly because of the pressure that the aged care sector is currently under and partly because the proposed reforms do not change the underlying structure of aged care financing. Like community care, limits remain on the number of residential aged care packages thus restricting future growth of the sector. In deciding not to pursue the family home as a source of finance for aged care, the Government has ignored a significant source of future funding. With some arguing that the proposed reforms may compromise equity and lead to higher copayments, aged care lobby groups have (again) renewed their call for the family home to be used as a way for individuals to pay for aged care.

Thank you for your comment. If it does not require moderation, it will appear shortly.
Facebook LinkedIn Twitter Add | Email Print


Flagpost is a blog on current issues of interest to members of the Australian Parliament

Parliamentary Library Logo showing Information Analysis & Advice




refugees asylum immigration Australian foreign policy Parliament elections climate change social security women welfare reform taxation Indigenous Australians Australian Defence Force welfare policy school education higher education private health insurance health financing emissions trading Middle East Senate Australian Bureau of Statistics employment people trafficking Asia statistics illicit drugs gambling health reform federal election 2010 Australian Public Service income management Medicare disability Sport United Nations environment industrial relations constitution transport politics criminal law Afghanistan health forced labour food public service reform aged care aid Australian Sports Anti-Doping Agency World Anti-Doping Agency United States federal budget Carbon Pricing Mechanism dental health international relations governance regulation Fair Work Act voting law enforcement electoral reform OECD Australian Electoral Commission WADA child protection poker machines Australia in the Asian Century steroids National Disability Insurance Scheme detention 43rd Parliament slavery health system leadership domestic violence parliamentary procedure International Women's Day accountability defence capability multiculturalism ASADA Australian Federal Police labour force people smuggling debt New Zealand Australian Crime Commission pharmaceutical benefits scheme political parties coal seam gas Human rights crime China Census election results UK Parliament Papua New Guinea banking corruption pensions children's health Aviation federal election 2013 foreign debt gross debt net debt Senators and Members ALP Newstart Parenting Payment Youth Allowance sea farers United Kingdom energy food labelling Australian economy violence against women vocational education and training military history by-election High Court skilled migration mental health Federal Court terrorist groups science social media Higher Education Loan Program HECS federal state relations youth paid parental leave same sex relationships customs planning doping health risks Gonski Review of Funding for Schooling sex slavery Special Rapporteur Northern Territory Emergency Response social policy ANZUS Rural and regional trade unions Foreign affairs election timetable Indigenous royal commission Productivity firearms public policy Population ADRV terrorism transparency research and development welfare ASIO intelligence community Australian Security Intelligence Organisation carbon tax mining employer employee renewable energy regional unemployment fishing European Union family assistance United Nations Security Council forestry Drugs welfare systems Indonesia children Constitutional reform local government codes of conduct terrorist financing homelessness Parliamentary remuneration money laundering Trafficking in Persons Report social inclusion paternalism environmental law US presidential election nutrition ODA Defence sitting days electoral divisions Southeast Asia administrative law universities TAFE Ireland citizenship asylum seekers early childhood education Canada Financial sector national security fuel disability employment Tasmania integrity standards NATO Australian Secret Intelligence Service sexual abuse World Trade Organization Australia public health housing affordability bulk billing water health policy Governor-General US economy export liquefied natural gas foreign bribery question time speaker superannuation public housing expertise climate Intergovernmental Panel on Climate Change Department of Agriculture Fisheries and Forestry Pacific Islands reserved seats new psychoactive substances synthetic drugs UNODC carbon markets animal health middle class welfare constitutional recognition of local government referendum consumer laws PISA competition policy US politics language education baby bonus Leaders of the Opposition citizen engagement policymaking Australia Greens servitude Trafficking Protocol forced marriage alcohol entitlements ministries Hung Parliament social citizenship maritime Iran regional students school chaplains federal budget 2011-12 salary Medicare Locals primary care Building the Education Revolution Turkey Syria marine pollution sustainability prisons police deaths in custody electoral margins electoral pendulum electoral redistribution redistribution NSW redistribution WA redistribution ACT electoral boundaries ASEAN Sustainable Development Goals Double dissolution Senators safety vehicles MYEFO Pathology tertiary education Taiwan Xi Ma meeting family violence government financial advisers financial planners Financial System Inquiry Murray Inquiry China; Economic policy; Southeast Asia; Africa housing Speaker; House of Representatives; Parliament High Court; Indigenous; Indigenous Australians; Native Title ACT Indigenous education Norfolk Island External Territories emissions reduction fund; climate change child care funding refugees immigration asylum procurement Indigenous health e-voting internet voting nsw state elections 44th Parliament 2015 ABS Age Pension Death penalty capital punishment execution Bali nine Bali bombings Trade EU China soft power education Fiji India Disability Support Pension Antarctica Diplomacy by-elections state and territories Bills anti-corruption fraud bribery corporate ownership whistleblower G20 economic reform innovation Members of Parliament Scottish referendum Middle East; national security; terrorism social services Criminal Code Amendment (Misrepresentation of Age to a Minor) Bill 2013 online grooming sexual assault of minors ACT Assembly smoking plain packaging tobacco cigarettes Asia; Japan; international relations Work Health and Safety Migration; asylum seekers; regional processing China; United States; international relations fiscal policy Racial Discrimination Act; social policy; human rights; indigenous Australians Foreign policy Israel Palestine asylum refugees immigration political finance donations foreign aid Economics efficiency human rights; Racial Discrimination Act employment law bullying Animal law; food copyright Australian Law Reform Commission industry peace keeping contracts workplace policies same-sex marriage disorderly conduct retirement Parliament House standing orders prime ministers First speech defence budget submarines workers Somalia GDP world heritage political engagement leave loading Trade; tariffs; safeguards; Anti-dumping public interest disclosure whistleblowing Productivity Commission limitation period cancer gene patents genetic testing suspension of standing and sessional orders live exports infant mortality honorary citizen railways disciplinary tribunals standard of proof World Health Organisation arts international students skilled graduate visas temporary employment visas apologies roads Italy national heritage NHMRC anti-dumping Rent Assistance obesity evidence law sacrament of confession international days DFAT UN General Assembly deregulation Regulation Impact Statements small business Breaker Morant regional engagement social determinants of health abortion Members suspension workplace health and safety marine reserves hearing Victoria astronomy resources sector YMCA youth parliament Korea rebate Australian Greens presidential nomination Racial Discrimination Act political parties preselection solar hot water Financial Action Taskforce Horn of Africa peacekeeping piracy Great Barrier Reef Stronger futures political financing political education Social Inclusion Board early childhood National Quality Framework for Early Childhood Education and Care Murray-Darling Basin sanctions Norway hospitals republic President Barack Obama Presidential visits qantas counselling Korean peninsula Work Choices biosecurity hendra federalism federation preselection therapeutic goods Therapeutic Goods Administration plebiscites computer games pests suicide nuclear COAG Ministerial Councils floods ADHD stimulant medication advertising electricity extradition conscience votes poverty preventative health rural health coastal erosion Parliamentary Budget Office work-life balance

Show all
Show less
Back to top