In a few weeks, a new aged-care system commences, one that profoundly changes the way aged care is funded and delivered in this country.
From July 1, the system of government funding residential aged care will disappear.
In its place will be a regime where older people remain primarily responsible for their accommodation costs — whether at home, in retirement living or in an aged-care facility — but are supported in their care needs, depending on their means, by the government.
At a broad philosophical level, there is merit in this change.
Australians of all ages have long accepted their responsibility to pay for their own accommodation if they have the means to do so.
To suggest older people are any different is to infantilise them and nobody would deny people assistance in paying care costs.
Unfortunately, the detail of the July 1 changes, far from simplifying the necessary decisions on aged care, adds fresh twists and turns to an already barely penetrable maze.
The complexity of the new arrangements makes it more, not less, difficult to navigate. This is the experience even for professional financial advisers, let alone those worried about how mum or dad might cope with moving out of the home they lived in for decades. Or mum or dad themselves. Taking one wrong turn can have serious financial implications.
If it was simply an issue of the July 1 changes adding a further layer of complexity to an already opaque system, then perhaps the system might self-regulate over time to assist the consumer, but the changes have two other disturbing ramifications for all taxpayers.
First, they may well lead to outcomes that can be described as, at best, a potentially significant drain on the already pressurised federal budget, and at worst as simply perverse.
For example, on my organisation’s analysis of the post-July 1 changes, a single person with $1.26 million of assets can organise their finances to pay a smaller means-tested co-contribution to their cost of care than someone with less than half their assets.
Furthermore, this single person with $1.26m of assets, for instance, will cost the government (and by extension taxpayers) $32,807 more each year by keeping their family home, compared to paying for their accommodation costs after selling their home. Sounds like having your cake and eating it, too.
Second, the new laws threaten to restrict residential aged-care providers’ capacity to invest in the sector, despite strong future demand from an ageing population. This is because the new rules appear to have been designed to encourage people to opt for daily payments over a refundable lump sum.
If this happens, the pool of refundable accommodation payments, which suppliers of residential aged care rely upon to build new stock, will diminish. The likely flow-on effect is to leave older people short of modern residential care and instead rely on existing obsolete facilities or, worse, the public hospital system to act as de facto accommodation, again an impost on the taxpayer.
There is some light at the end of the tunnel, however. The July 1 changes were introduced under the Gillard government, and Aged Care Minister Mitch Fifield has made it known he will be carefully watching the implementation of the new system in its early weeks, with an open mind on whether changes are needed.
Greater complexity, a handbrake on the construction of facilities and perverse outcomes that could hit a federal budget already in deficit — this isn’t the new aged-care system Australians, especially older Australians, deserve.
Derek McMillan is the chief executive of retirement living at Australian Unity
This article featured in The Australian on 11 June 2014