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Financial reforms under the new Aged Care Act

The new Aged Care Act 2024 is expected to commence from 1 July 2025. This article attempts to explain the changes that are likely to happen in relation to residential care focusing on consumer contributions and means testing. 

The intention of this major revision of the existing Aged Care Act is to:

  • improve the lives of older people accessing aged care services in their homes, community settings and residential aged care homes;
  • encourage aged care providers to deliver high-quality care.

The proposed rights-based law:

  • addresses approximately 60 Royal Commission into Aged Care Quality and Safety recommendations;
  • incorporates feedback from several public consultations about proposed aged care reforms;
  • responds to the Aged Care Taskforce about sustainably funding aged care into the future.

However, for most people, the most important, and not finalised, changes will relate to the expected cost of receiving care – whether that is at home or when resident in an aged care facility.  The proposed changes appear to focus on the resident’s financial disclosure responsibilities and an onerous assessment process that are likely to result in a very large increase in the cost of receiving aged care services.  At this stage (February 2025) the details have not yet been finalised and it is likely that more changes will be made.

Means testing reforms

The reforms consist of:

  • means testing the hotelling supplement which is currently paid in full by government;
  • abolishing the current means tested care fee and associated annual and lifetime caps;
  • introducing a new means tested contribution to non-clinical care, including a new daily cap on payments and a new lifetime cap;
  • mandatory reporting to keep residents’ means assessments current.

The no worse-off principle

  • A no worse-off principle will apply to everyone in residential aged care on 30 June 2025.
  • Existing residents retain their existing contribution arrangements for the entirety of their stay in residential care.

What will stay the same

The government will continue to fund the majority of aged care. All residents will continue to pay a Basic Daily Fee. The way different types of income and assets are assessed in the residential aged care means assessment will not change. Current financial hardship assistance arrangements will continue.

What will change

Means testing – Current means tested care fee will be abolished • Introduction of Hotelling Contribution • introduction of Non-Clinical Care Contribution • Mandatory reporting • accommodation costs • Grandparenting of fee arrangements.

Changes to means testing – A resident’s means tested amount is based on their assessable income and assets.  It will continue to be the sum of their income tested amount and asset tested amount.  Income and asset taper rates are changing.

Hotelling Supplement contribution – Starting 1 July 2025, the Hotelling Supplement will be means tested for new residents. Residents who can afford to pay their full accommodation costs will contribute to daily living costs such as food, cleaning, laundry and utilities.

The means test will require a contribution from residents with:

  1. assets over $238,000, or
  2. income over $95,400, or a combination of both.

The contribution will be up to the maximum Hotelling Supplement of $12.55 per day (20 September 2024 rates).  The government will pay providers the difference.

Non-Clinical Care Contribution – The Government will fully fund all clinical care costs in residential aged care.  For new residents from 1 July 2025, the new means-tested Non-Clinical Care Contribution (NCCC) will replace the Means Tested Care Fee.  This contribution will be for non-clinical care costs such as bathing, mobility assistance and lifestyle activities.  It will only apply to residents who can afford to pay the full Hotelling Supplement contribution.

The non-clinical care means test will require a contribution of 7.8% of assets over $502,981 or 50% of income over $131,279 or a combination of the two up to a daily limit of $101.16.  It is paid until the resident has contributed $130,000 or been in residential aged care for 4 years, whichever occurs first. The government will pay the difference.

Mandatory reporting – Providers will regularly report individual refundable deposit balances. Residents will be required to report changes to their personal and financial circumstances.  Residents can elect to be classified ‘means not disclosed’ and consequently won’t be asked to report financial circumstances, will not be eligible for government support with accommodation costs or Non-Clinical Care Contribution.  They can later elect to complete a means assessment but this cannot be back-dated to their entry to care.

Grandparenting for current residents -The current fee arrangements will continue for residents already in care before 1 July 2025. This includes the: pre 1 July 2014 cohort and the post 1 July 2014 cohort.  Individuals will be able to ‘opt out’ of their grandparented fee arrangements at any time.

 

Dying to know day was a lively event

Panel members at the DYing to know dayCOTA organised Dying to Know Day (August 8th) COTA under the auspices of North Sydney MP, Kylea Tink. NSW member and dying well advocate Jill Nash co-organised a fantastic line up of speakers to discuss Death, Dying and Grief.
Jill spoke poignantly about the loss of her baby daughter and then her husband when she was just 41. Informed by these traumatic experiences, Jill is taking control of her future by gathering information and documents and starting personal conversations now, so that her family are prepared for her death and dying when the time comes.

Alice Mantel, another COTA NSW member, also shared her specialist legal expertise on how to go about getting your affairs in order many years before you may think you will need to.

Alice is also the featured expert in the Planning for the Unexpected series produced by OWN NSW.

Over half a million older people experienced abuse in the last year

Latest data released by the Australian Institute of Health & Welfarehttps://www.aihw.gov.au/family-domestic-and-sexual-violence/population-groups/older-people#:~:text=In%20institutional%20settings%2C%20Yon%20et,and%20sexual%20abuse%20(1.9%25). (AIHW) has made some key findings that show people in Australia are at increased risk of abuse in their later years. This abuse can take many forms, including psychological or emotional abuse, financial abuse, physical abuse, sexual abuse, and neglect.

Key findings of the most recent data:

  • 1 in 6 (15% or 598,000) people in Australia experienced elder abuse in the past year.
  • psychological abuse is the most common form of elder abuse.
  • 1 in 2 people who perpetrate elder abuse are a family member.
  • 1 in 3 people who experienced elder abuse sought help from a third party.

As Australia’s population ages, the number of older people in Australia experiencing abuse is likely to increase over time.  A key aspect of the definition is that elder abuse occurs in relationships where there is “an expectation of trust”. Such relationships include those with family members, friends, neighbours, and some professionals such as paid carers.

Prevalence estimates are likely to underestimate the true extent of elder abuse. This is because victim-survivors can be reluctant to disclose ill-treatment by a family member, or because they are dependent on the abuser for care. Older people with cognitive impairment (for example, dementia) or other forms of disability may also be unable to report abuse.

Evidence from international studies show that abuse estimates are higher for older people in institutional settings than in the community.  A 2017 review found that there is a greater likelihood for women being abused (17%) than men (11%) with sons also more likely to perpetrate abuse than daughters.

What kind of abuse is perpetrated?

The AIFS National Elder Abuse Prevalence Studyhttps://aifs.gov.au/research/research-reports/national-elder-abuse-prevalence-study-final-report estimated that, in 2020:

  • around 1 in 6 (598,000 or 15%) older people living in the community had experienced elder abuse in the past year
  • 471,300 (12%) had experienced psychological abuse in the past year
  • 115,500 (2.9%) had experienced neglect in the past year
  • 83,800 (2.1%) had experienced financial abuse in the past year
  • 71,900 (1.8%) had experienced physical abuse in the past year
  • 39,500 (1.0%) had experienced sexual abuse in the past year
  • a slightly higher percentage of women than men had experienced any form of elder abuse in the past year. This pattern was also evident for psychological abuse and neglect.

Who are the perpetrators?

Around 1 in 2 (53%) perpetrators of elder abuse were family members (includes ex-partner/spouses). Perpetration by family members was highest for financial abuse (64%) then neglect (60%), psychological abuse (55%), physical abuse (50%) and sexual abuse (15%). Sexual abuse of older people was primarily perpetrated by friends (42%), acquaintances (13%) and neighbours (9%).

Support for abused persons

The AIFS study estimated that:

  • 1 in 3 (36%) older people in Australia who experienced abuse sought help or advice from a third party such as a family member, friend or professional;
  • help seeking was most common after physical abuse, followed by psychological abuse, financial abuse, sexual abuse and then neglect;
  • of those seeking help, the most common sources of help were family members (41%) and friends (41%), followed by a GP or nurse (29%), a professional carer (24%), the police (17%) and lawyers (15%). Around 1 in 20 (5.3%) contacted a helpline.

Around 8 in 10 (82%) older people who experienced abuse had taken action to stop the abuse from happening again. These actions included informal actions (such as speaking to the person) and formal actions (such as seeking legal advice). The most common actions were speaking to the person or breaking contact with them.

If you, or someone you know has been abused, you can call 1800 ELDERHelp.

 

 

Tune in to this series of podcasts – Planning for the Unexpected

Join me and my co-host Amanda Armstrong as we take you through this series of six podcasts which can help you to be better prepared for those unexpected life events.  Podcasts can be found on YouTube.  This series is presented by the Older Women’s Network.

Preparing for the unexpected – Wills, Power of Attorney, Enduring Guardianships and more – Episode 1.

https://www.youtube.com/watch?v=GLEIZfZyEN0&t=5s&pp=ygUacGxhbm5pbmcgZm9yIHRoZSB1bmV4cGVjdGU%3Dhttps://www.youtube.com/watch?

The gentle art of decluttering – Episode  2 https://www.youtube.com/watch?v=C9TkNtu2WMA&pp=ygUacGxhbm5pbmcgZm9yIHRoZSB1bmV4cGVjdGU%3D

 

Ageing Australians increase demand for aged care services

As Australians are living longer than ever before, they are likely to experience greater frailty and more complex care needs requiring more aged care services.

Following the Royal Commission into Aged Care Quality and Safety report in 2021, it advised there was a need to significantly improve the quality of both residential and home care, exacerbated by chronic workforce shortages leading to substandard care. In 2023 the Aged Care Taskforce (the Taskforce) was established to advise on funding arrangements, including:

  • a fair and equitable approach to assessing the means of older people;
  • participant contributions for home care;
  • reforms to arrangements for funding of hotel and accommodation costs in residential aged care, including the phasing out of Refundable Accommodation Deposits (RADs);
  • services for inclusion and exclusion in the new home aged care program;
  • funding and contribution approaches to support innovation in the delivery of care.

Issues affecting the aged care sector

The Taskforce identified the following issues affecting the aged care sector:

  • demographic change means demand for aged care services will continue to grow;
  • current and future generations of aged care participants have high expectations of what quality aged care looks like;
  • generally older people are wealthier than previous generations and the taxpayer base is declining as a proportion of the population.

Demographic changes
The size of the population aged 65 and over is growing faster than the working age population. Over the next 40 years, the number of people over 80 years of age is expected to triple to more than 3.5 million. These demographic shifts have two critical implications:
• the taxation burden for funding aged care services grows for a segment of the population that is becoming proportionally smaller;
• gaps in the aged care workforce increase, creating significant ongoing challenges to delivering quality care.

Additional funding is needed to meet future demand and deliver quality improvements, but structural issues mean the sector’s financial viability is poor.

Superannuation shortfall
Income from superannuation should be drawn down in retirement to cover health, lifestyle, other living expenses and aged care costs. Superannuation, combined with high asset wealth through the family home and other investments, mean more people have accumulated wealth and income streams when they need to access aged care services. As a result, there is more scope for older people to contribute to their aged care costs by using their accumulated wealth than in previous generations.

It is important to note that, while the asset wealth of many older people has increased, there will be a group of people with less means. Even with the maturing superannuation system, over half of older people will continue to receive some Age Pension either at retirement or as they draw down on their superannuation. Past workforce participation rates also mean women are more likely to have less means in retirement, as are those who do not own their home.

Increase in demand for home care services
It is estimated that there will be almost 2 million older people using home care by 2042, compared with around 1 million currently. Consequently, the demand for home care has been rising sharply and is projected to continue growing well into the future. As a result, government spending on aged care as a proportion of gross domestic product (GDP) is projected to grow from 1.1% in 2021–22 to 2.5% in 2062–63.
More broadly, society is demanding higher quality aged care services for all, including participants supported by government. For example, research on public understanding and perception of co-contributions in aged care showed people are willing to pay more for home care services that are essential and increase quality of life and dignity.
Additional funding is needed to meet future demand and deliver quality improvements, but structural issues mean the sector’s financial viability is poor.

Aged care funding principles
Principle 1: The aged care system should support older people to live at home for as long as they wish and can do so safely.
Principle 2: Aged care funding should be equitable, easy to understand and sustainable.
Principle 3: Government is and will continue to be the major funder of aged care. Government funding should be focused on care costs as well as delivering services in thin markets. Personal co-contributions should be focused on accommodation and everyday living costs with a sufficient safety net.
Principle 4: The residential sector should have access to sufficient capital to develop and upgrade accommodation, including in rural and remote areas and First Nations communities.
Principle 5: Aged care funding should be sufficient to deliver person-centred, quality care by a skilled workforce.
Principle 6: Aged care funding should support innovation to improve aged care services and their relationship with the health and hospital systems.
Principle 7: There should be transparency and accountability for how aged care funding is received and spent while minimising regulatory burden.


Proposed changes

Home care funding
The new Support at Home Program will be implemented in 2 stages, replacing the current Home Care Packages Program from 1 July 2025 and then rolling in the Commonwealth Home Support Programme from no sooner than 1 July 2027.

Capital funding
Over the next decade to 2030, additional investment of approximately $5.5 billion would be required to refurbish and upgrade existing aged care rooms, increasing to $19 billion by 2050.7 Current funding arrangements will not deliver the required amount of capital funding.

Funding arrangements – reforming co-contributions
While the Taskforce supports government maintaining its central role in funding aged care, it does not support a specific increase to tax rates to fund future rises to aged care funding. There are substantial intergenerational equity issues in asking the working age population, which is becoming proportionally smaller to pay for these services. Moreover, superannuation has been designed to support people to grow their wealth and fund the costs associated with retirement including aged care.

There is a strong case to increase participant co‑contributions for those with the means to contribute, noting that there will always be a group of participants who need more government support.

Reforming co-contributions would also provide an opportunity to create a simpler and fairer system by addressing current inequities. The Taskforce suggests the Age Pension status of the participant, with some additional tiers for part-pensioners and non-pensioners, would be a fair and simple way to determine participant co-contributions for aged care services.

Phasing out Refundable Accommodation Deposits (RAD)
The Royal Commission (Commissioner Briggs) recommended phasing out of RADs over time and replacing them with income through a ‘rental model’, where everyone pays with non-refundable periodic payments, from July 2025.

The Royal Commission identified several issues with the RAD system that led to this recommendation:
• RADs and DAPs are not economically equivalent, which creates incentives for providers and older people to prefer one over the other.
• Use of RADs creates liquidity risks for providers, as the RAD must be refunded within 14 days of the resident leaving care. There is no guarantee the resident will be replaced by another RAD payer and, with falling occupancy rates, there is a risk they will not be replaced at all.
• The presence of RADs distorts access to finance towards providers better able to attract RADs.
• RADs are not a reliable capital financing mechanism for particular segments, such as providers in rural and remote areas.
Paying more towards accommodation will improve sustainability. This will attract increased investment into the sector to upgrade existing homes and build new homes with high quality, modern facilities.

Protections for low-income residents
Older people with limited means need to be protected. While the residential care proposals outlined above would improve the viability of the sector through improved co-contributions, they may make it more attractive for providers to seek out prospective non-supported residents in favour of government-supported residents.

For more details, see chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.health.gov.au/sites/default/files/2024-03/final-report-of-the-aged-care-taskforce_0.pdf

A fairer go for young people to reduce the generation gap

It’s a myth that young people’s spending habits and lifestyles are to blame for their stagnating wealth. This is not a problem caused by avocado brunches or too many lattes.

Today’s young Australians are in danger of being the first generation in memory to have lower living standards than their parents’ generation according to a 2019 report by the Grattan Institute., titled, Generation gap: ensuring a fair go for younger Australians .

According to the report, older Australians today spend more and have higher incomes and greater wealth than older Australians three decades ago.

But living standards have improved far less for younger Australians. The wealth of households headed by someone under 35 has barely moved since 2004.

Poorer young Australians have less wealth than their predecessors and are far less likely to own a home. In contrast, older households’ wealth has grown by more than 50 per cent over the same period because of the housing boom and growth in superannuation assets.

In fact, younger people are spending less on non-essential items such as alcohol, clothing, and personal care, and more on necessities such as housing, than three decades ago.

Economic pressures on the young have been exacerbated by recent wage stagnation and rising under-employment. Older households are better cushioned from low wage growth because they are more likely to have other sources of income.

If low wage growth and fewer working hours is the new normal in Australia, then we could have a generation emerge from young adulthood with lower incomes than the one before it at the same age. This has already happened in the US and the UK.

Young Australians will also bear the brunt of growing pressures on government budgets.

Because the population is ageing, governments will have to spend more on health, aged care, and pensions. But there will be fewer working-age people for every retired person to pay for it. The number of 15-64 year-old Australians for every person aged 65 or older fell from 7.4 in the mid-1970s to 4.4 in 2014-15 and is projected to fall further to 3.2 in 2054-55.

Governments have supercharged these demographic pressures by introducing generous tax concessions for older people. A subsequent Grattan report, Super savings: Practical policies for fairer superannuation and a stronger budget has suggested that tax breaks on superannuation are excessively generous and should be wound back to help fix the budget.

Super tax breaks cost the budget $45 billion a year – or about 2 per cent of GDP – and will soon exceed the cost of the age pension.

These tax breaks are not well targeted. Two-thirds of their value benefit the top 20 per cent of income earners, who are already saving enough for their retirement. Retirees with big superannuation accounts pay much less tax per dollar of super earnings than younger workers do on their wages.

The share of households over 65 paying tax has halved over the past two decades. And older households pay substantially less tax on the same income as younger households.

Working-age Australians are underwriting the living standards of older Australians to a much greater extent than the Baby Boomers did for their forebears, straining the ‘generational bargain’ to breaking point.

The report insists that policy changes are required. Policies to boost economic growth – such as tax reform, better education and smarter infrastructure spending – are wins for all, but especially for the young. Changes to planning rules to encourage higher-density living in established city suburbs would make housing more affordable. And a fair go for younger people means winding back age-based tax breaks for ‘comfortably off’ older Australians.

Just as policy changes have contributed to pressures on young people, they can help redress them.  The time for action is now: none of us wants the legacy of a generation left behind.

What is the cost of dying?

Like everything else, the cost of dying is increasing as much as the rising cost of living.  A study commissioned by Australian Seniors and CoreData in August 2023, The Cost of Death Report 2.0 found that estimated funeral costs have increased by more than 20% for burials and cremations since 2019. In 2023, the average burial costs $11,039, compared to $9,055 in 2019. Similarly, the average cremation now costs $8,045, compared to $6,334 in 2019.

The study revealed that we are paying up to $18,652 for a basic burial funeral, and up to $5,953 for a basic cremation funeral. This is due to the rising costs of funeral services – including embalming, viewing, transportation, and professional fees – along with the cost of coffins and burial plots to name a few.

A third of the responders who recently helped pay for a funeral experienced some form of financial hardship. Two-thirds of those who experienced financial hardship said that it took months to financially recover.

Saying goodbye to those we hold dear should be a time of love and unity. Regrettably, this is not always the case.  It’s no secret that funerals can exact a heavy financial toll, but they can also create tension between family and friends. Unfortunately, more than a third of responders encountered arguments with loved ones over funeral finances, adding weight to an already heavy situation.

Further, the study suggests that a trend is emerging where families are pressuring us to spend more on funerals than initially planned, a trend which has more than doubled since 2019.

Consequently, it seems our funeral preferences are changing. Many of us are now opting for simpler services (26%), being more cost-conscious (24%), and choosing cremations or cheaper alternatives to traditional burials (22%). Some of us are even getting creative and considering a DIY funeral (9%).

Tradition is taking a back seat as we focus less on mourning and more on celebrating life. In fact, most (83%) of us now prefer the celebratory approach. We want a funeral that reflects us – who we are and what makes us, us. An example of this are our changing music preferences, moving away from conventional funeral songs. Instead, iconic artists like Elvis Presley, Queen, Frank Sinatra, and Elton John emerged as the most common choices.

On the other hand, many of us are yet to discuss our wishes with loved ones. In fact, only 1 in 2 (53%) of us have made our families aware of our funeral preferences. For those of us who are yet to have this conversation, it’s important that we communicate our funeral wishes to our nearest and dearest to ensure we receive the farewell we desire.

Australian Seniors:  The Cost of Death 2.0 Report, November 2023, https://www.seniors.com.au/documents/australian-seniors-series-cost-of-death-report-2023-whitepaper.pdf