What the RC, Budget and Keating mean for aged care

Between the Aged Care Royal Commission’s special report on COVID-19 and the Federal Budget, there have been a lot of announcements in relation to aged care recently.

Keating steps into aged care

Last month the Royal Commission turned its attention to financing and funding arrangements. The most-anticipated witness was former Prime Minister Paul Keating. He suggested that aged care could be funded through a similar mechanism to the Higher Education Contribution Scheme (HECS), that is, the government could claim any aged care costs owed against the assets of the estate.

This is a dangerous idea for at least two reasons.

The first is that such a system could be exposed to rorting with people deliberately changing the ownership of assets to avoid paying. After all, not every asset is dealt with by a person’s estate – binding nominations, joint ownership, trusts and companies can all deal with assets outside of an estate.

The second, and in my opinion potentially the greater risk, is that this solution offers an ‘easy win’ for government. It could be adopted without fixing the fundamental issues of the funding and means testing arrangements which are complex and can be grossly unfair.

COVID-19 recommendations and the Budget

At the end of September, the Aged Care Royal Commission released a special report into COVID-19 providing six recommendations, including:

1. funding to ensure that people living in aged care can receive visits from family and friends
2. the provision of allied health including mental health services to people living in residential aged care
3. establishment of a national aged care plan
4. all aged care homes to have at least one trained infection officer and the provision of infection control experts to assist homes with training
5. developing an outbreak management plan to assist with outbreaks
6. that the Government should report to Parliament no later than 1 December on the implementation of the recommendations.

The Morrison Government accepted all six recommendations the next day, announcing an initial $40.6 million of funding. This was followed in the Budget with $746.3 million to further support the industry’s response to COVID-19 and $408.5 million to improve aged care quality (some of which was announced earlier in the year).

Other Budget measures include:

• $245 million to continue the COVID-19 supplement and a 30% increase in the viability supplement and homeless supplement for a further six months.
• $92.4 million to cover the costs of single site workforce arrangements in COVID-19 hotspots.
• $91.6 million to fund the second stage in the implementation of a new funding model for residential aged care which is aimed at delivering more accurate funding to meet the resident’s care needs.
• $71.4 million to support people who temporarily relocate from residential aged care to live with family due to the pandemic.
• $35.6 million to provide grants to eligible residential aged care facilities that are experiencing financial difficulty.
• $29.8 million to have almost 70 people staff a Serious Incident Response Scheme to ensure people in residential aged care will be better protected from abuse and serious incidents are better responded to.
• $11.3 million for specialist counselling teams will be available to provide expert psychosocial services to address issues raised by the Royal Commission around the use of chemical and physical restraints for people living with dementia.
• $10.6 million for up to 40 co-ordinators to stop young people going into residential aged care by connecting them with more age appropriate facilities.

Budget provisons for Home Care Packages

The Budget provided $1.6 billion for an additional 23,000 Home Care Packages, the additional packages will comprise:

• 5,000 Level 1 Home Care Packages
• 8,000 Level 2 Home Care Packages
• 8,000 Level 3 Home Care Packages
• 2,000 Level 4 Home Care Packages

The Government’s most recent Home Care Package data (as of 31 March 2020) shows the number of people waiting for a Home Care Package at their approved level as:

• 3,363 at Level 1
• 40,350 at Level 2
• 41,500 at Level 3
• 18,386 at Level 4

Home Care Package funding provides a Basic Subsidy based on the level of the package. At Level 1 the Basic Subsidy is $24.46 per day while at Level 4 the Basic Subsidy is $141.94 per day. There are additional supplements for people with special care needs of dementia, oxygen and enteral feeding.

As you can see, while $1.6 billion is a significant investment, with around 100,000 people waiting for a Home Care Package at their approved level it is a long way short of what is needed.

Granny flat arrangements

For people looking after an ageing relative, the Budget delivered some good news - a Capital Gains Tax (CGT) exemption for granny flat arrangements when a formal written agreement is in place. The potential CGT consequences of granny flats can be significant and sadly the desire to have children avoid the tax liability leads families to have no formal agreement. This can leave granny and the children exposed when circumstances change in the future.

The CGT exemption announced in the Budget would be limited to family arrangements with a formal agreement where the granny flat arrangement is supporting an ageing or disabled relative. The measure is expected to commence from 1 July 2021 (subject to the passing of legislation).

While the CGT exemption for granny flats is welcome, sadly the additional Home Care Packages (often needed to enable someone to stay in a granny flat) don’t go far enough. The Royal Commission heard that more than 16,000 people died waiting for a Home Care Package in 2017-18, undoubtedly many others were forced to move into residential aged care to get access to the care they needed.

The Government seems to be delaying necessary funding pending the Royal Commission’s final report, which is due no later than 26 February 2021. Maybe the next Budget will provide the funding needed to ensure that older Australian’s receive the aged care they deserve?

Rachel Lane is the Principal of Aged Care Gurus where she oversees a national network of adviser dedicated to providing quality advice on retirement living and aged care. She is also the co-author of a number of books with Noel Whittaker including the best-seller “Aged Care, Who Cares?” and their most recent book “Downsizing Made Simple”. To find an adviser or buy a book visit www.agedcaregurus.com.au