Australia’s aged care overhaul: what are the changes, and will you have to pay more?
Many pensioners will be required to pay more for their aged care and providers will be allowed to keep small portions of a “refundable” accommodation deposit, under sweeping changes to prop up the sector.
The federal Labor government says reforms will deliver $930m into aged care over the next four years but save $12.6bn over the next decade by asking wealthier people to contribute extra money to their care. People already in aged care won’t have to pay more but those entering the system in future will be assessed under a new means-testing formula to better support accommodation costs and providers.
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Additionally, new funding will be available to help older people remain at home for longer, instead of entering residential care.
“We’ve heard the message from older Australians: they want support to stay in the homes and communities they love,” said the aged care minister, Anika Wells.
The proposal has been welcomed by aged care providers on the basis it will financially sustain the sector into the future and support older people – but questions remain over exactly how much those people will be required to shell out.
What are the changes?
There are two sections of Thursday’s announcement: implementing recommendations of the Aged Care Taskforce for some older people to pay more for their own care, and a new program of home care assistance called Support At Home, to launch from mid-2025.
The first tranche includes measures such as larger, means-tested contributions to care from new people entering the system, providers being allowed to charge higher maximum prices for rooms, and providers being allowed to keep “a small portion” of what is known as the “refundable accommodation deposit” – the fee paid when someone enters residential aged care.
The federal government will continue paying for all expenses related to clinical care. Some residents will be expected to pay more toward everyday living costs such as cleaning, shopping or meal preparation. Wells said the extra payments were a “reasonable contribution” to one’s care.
There are no changes to how a person’s home is assessed as part of the means test.
The government says the reforms come with a “no worse off” guarantee for people already in aged care, with the new contributions to come into force from 1 July 2025.
Home care, the program which supports people who want to remain in their own house rather than enter residential care, will transition to Support At Home from 1 July 2025. The government said amid “changing preferences” of older Australians, home care participants have quadrupled in the last decade; with an expected 1.4 million people by 2035, changes are required to that system.
Support At Home will get $4.3bn from the federal government to support another 300,000 people, with promises of shorter waiting times, better support, and access to funds for home modifications, walkers, wheelchairs, and a new equipment loan system.
People who wish to die at home, rather than in hospital, will also be eligible for $25,000 in additional support “to spend their final three months at home”.
How much will people pay?
The government hasn’t provided exact dollar amounts for how much a specific person pays. Sources say a complex set of factors are taken into account with the means test – including pension amounts, assets and property, and income from work or investments – in setting expected contributions.
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But broad figures in government documents, released with the plan, state that:
all “fully supported” residents will not contribute more
seven in 10 full pensioners will not contribute more
one in four part-pensioners will not contribute more
That indicates that three in 10 full pensioners, and three in four part-pensioners, will contribute more.
A full pensioner will be expected to pay up to 17.5% of their everyday living expenses, while a self-funded retiree will pay 80%; part-pensioners will pay somewhere in between those percentages.
There will be a lifetime cap on how much a person is expected to make to their Support At Home or residential expenses, set at $130,000.
Government documents set out numerous case studies of fictional Australians as indications of how much people might expect to pay:
One case study, Bill, is expected to pay only 6% of his total costs for Support At Home, because he has an income of $35,000, doesn’t own a home and has a low amount of assets.
Another, Sally, is expected to pay 42% of her costs, as she has an income of $99,000, owns a $750,000 home and has other assets of $500,000.
Why is it needed?
“Current funding arrangements are not sufficient” to keep the aged care sector afloat, the government said, pointing to Australia’s ageing population with statistics indicating a doubling in the number of people aged over 65 and a tripling in those over 85 within the next 40 years.
Nearly half of aged care providers made a loss from accommodation last year. It is hoped higher contributions, and allowing providers to keep up to 10% of the refundable accommodation deposit (up to 2% of the deposit each year for five years), will shore up the residential sector and give providers the ability to upgrade facilities or build new ones.
What has been the reaction?
The long-awaited changes had been stuck in parliamentary limbo due to protracted negotiations between the government and opposition. The Coalition had called for the details to be publicly released to aid in discussions. The shadow aged care minister, Anne Ruston, was critical that the changes had “not been a co-designed process”, and said she awaited “an open conversation” now the legislation was public.
The changes have been broadly welcomed by the aged care sector. Paul Sadler, an aged care consultant and chair of Meals On Wheels Australia, said it was necessary to require some residents to pay a “reasonable” extra amount for their care.
“It’s really good news the government and opposition have reached consensus on what reforms need to happen,” he told Guardian Australia.
“We simply weren’t covering the full costs of accommodation from within the current system.”
The Aged and Community Care Providers Association called the changes “historic reforms that will be vital to all Australians now and in the future”. St Vincent’s Care described the reforms as “the most impactful changes to aged care in a long time”.
“It will raise standards and ensure the system can be adequately funded to deliver the aged care our parents and grandparents deserve and need,” said the organisation’s CEO, Lincoln Hopper.
Cota Australia, a leading advocacy group for older people, said it would continue scrutinising the details of the announcement but welcomed the “long-awaited introduction” of the changes – which it said had taken “too long”.
“There’s no question that when it comes to aged care in Australia business as usual is unacceptable,” said Cota’s CEO, Patricia Sparrow, calling for “ambitious reform” to the sector.
What happens now?
The legislation will head to a Senate inquiry, which will run for six weeks.
The government expects to pass the package through parliament toward the end of 2024.
