Australia’s Aged Care Sector ‘Needs Financial Redesign’

Australia’s Aged Care Sector ‘Needs Financial Redesign’
Then Chief Medical Officer Professor Brendan Murphy during the Senate select committee on COVID-19 public hearing at Parliament House on May 13, 2020 in Canberra, Australia. (Sam Mooy/Getty Images)

Federal Health Department secretary Brendan Murphy has told a royal commission the aged care sector is under financial pressure and needs a funding redesign.

The aged care royal commission is examining how to best fund the sector into the future as Australia’s population gets older and demand for services rises.

“We do not dispute that overall the financial performance of the sector has deteriorated in recent years,” Murphy told the inquiry on Sept. 25.

“Many of the $1.5 billion of COVID measures put in this year in fact have gone to supporting the viability of the sector.

“We clearly accept that the system does need significant redesign and including in the costing and funding and transparency of that system.”

Intergenerational reports have identified aged care as the fastest growing component of federal expenditure.

There is expected to be a significant rise in people needing care from 2030 when the baby boomer cohort enter their 80s, the commission previously heard.

Former prime minister Paul Keating has advocated for a HECS-style loan scheme where money for aged care is taken out of people’s assets after they die.

Treasury secretary Steven Kennedy told the commission the idea was worth examining but the question of private contributions needed to be sorted out first.

“We see people holding substantial superannuation assets at death,” he said.

“I would be more inclined to say; how do we get the superannuation system and aged care system working to allow people with the means to make a reasonable contribution to their aged care?

“The community has an expectation that those of us who are in a position to contribute more should contribute more to a full range of services.”

Treasury deputy secretary Jenny Wilkinson said baby boomers’ broadly would retire with more superannuation behind them than people who had entered aged care in recent decades.

“The superannuation system is about 20 years in to having more than nine percent compulsory contributions being made by individuals,” she said.

“Superannuation balances have been increasing in recent years. They are likely to increase substantially over the next 20.”

People entering aged care must fill out income and asset tests to determine how much they pay.

The commission also has examined the merits of a hypothecated levy model, similar to Medicare, where people would be taxed specifically to fund aged care.

Kennedy said he was not sure such a model would be helpful in funding something as wide and complex as the health system.