As the boomers move to the next stage of their lives, the issue of who pays for residential care is back in the spotlight.
The federal government needs to have a conversation with Australian voters about who should pay for a person’s residential aged care if they can afford it.
Not in the future. Now.
Our population is ageing, our taxpayer base is shrinking rapidly, our residential aged care sector is in a death spiral (facing a fifth successive year of significant aggregate operating losses) and national debt is at a historic high post-COVID.
Yet taxpayers are still funding residential aged care for those who can otherwise afford it.
Presently, the family home is only means tested to a maximum amount of $186,331.20 in the assessment of the aged care subsidies for residential aged care.
This is despite a median house price of $855,000 in Western Australia (and $1,000,000 nationally).
In addition to this, every aged care resident is entitled to access both an annual and a lifetime cap on fees.
At the moment, the maximum a person will pay in means-tested care fees is $30,574.33 per year and $73,378.49 in a lifetime.
There are safety nets for those who can’t afford these amounts.
So, with limited mean testing and caps on means-tested fees, most people moving into care homes are paying well below what they can afford.
As a result, taxpayers subsidise approximately 75 per cent of the costs of these people’s care.
This is the same whether the person has a $2 million family home or a $200,000 family home.
This has been the case for decades across successive governments: a strange outcome in a country like Australia, which holds largely negative views of those receiving welfare.
Why does this issue rarely rate a mention in the media and why are politicians always reluctant to discuss it?
Some posit that the ‘family home’ occupies a special place in the Australian psyche.
That the ‘family home’ is akin to a ‘right’ that should never be touched.
My view is that politicians understand they are asking Australian voters to hold a mirror up to themselves.
Decisions to go into residential aged care are made at the very end of a person’s life and just before the transfer of family wealth from one generation to the next.
Having to pay the actual cost of aged care would significantly reduce the size of the estate passed down to the children (who also happen to be the voters).
That’s a controversial statement, I know, but would we find this conversation so difficult to have if the people going into care were not at the end of their lives?
Is it so outrageous to ask people to pay for their care if they can afford it? (Something they have been doing all of their lives.)
As Peter van Onselen noted in The Australian recently: “The selfish gene in voters is the biggest barrier to government action” when discussing a similar issue in relation to superannuation.
Government has been prepared to turn a blind eye to date because, in a sense, we have been able to afford it.
However, given we have been talking about population ageing and its impact since the 1980s, the rubber is hitting the road in 2023.
The baby boomers are leaving the taxpayer pool and the first of them are now moving into residential aged care.
They leave a smaller taxpayer base and escalating costs of aged care.
There are two obvious choices.
Firstly, the government increases taxes or takes on more debt (both of which will ultimately be borne by the taxpayer) or secondly, we ask those who can afford to do so to pay for more of their care even at the expense the family home and the children’s inheritance.
There is another alternative, of course.
That would be to leave things as they are and ask providers to continue providing a level of care that is not properly funded.
There is only one outcome in this scenario: substandard care and a failed aged care system.
A sad indictment for Australians and, frankly, a dire future for those of us that will follow on the heels of the boomers.
- Amber Crosthwaite is a commercial lawyer specialising in seniors living, aged care and disability
