Australian Health Reform

Australian Health Reform

Australian Health Reform

Introduction

On 20 April 2012, after much anticipation, the Government released its response to the Productivity Commission's (PC) Inquiry into Caring for Older Australians and put forward its reform plan, Living Longer. Living Better, for aged care.

The initial response from stakeholders was largely positive. But as aged care providers and stakeholder groups have had the chance to reflect on the package, there have been claims that the cost of care provided in the home will increase for elderly Australians. Discussions about whether the family home should be included in the arrangements for paying for aged care also persist.

Discussion

The Government has adopted, in part, many of the PC's recommendations. Its response, however, falls short of the significant overhaul for the financing of aged care recommended by the PC.

Instead, the Government has opted to maintain current restrictions on the supply and allocation of aged care places. However, some of the anomalies within the system have been addressed; for example, the distinction between high and low care has been removed; bonds will be levied on all aged care residents; and all aged care homes will be able to charge for extra services (previously aged care facilities needed to apply for extra service status).

The Government will also increase the number of residential and community care places and the subsidy for the accommodation costs for aged care (for residents who cannot meet their costs). Despite the PC recommendation, the family home remains exempt from any means test and asset calculations.

The increase in government spending has been countered by the introduction of fees for both residential and community care, which are determined by means testing arrangements. This is consistent with principles articulated by the PC Report and the age well campaign (representing the majority of aged care providers in Australia), that individuals with the capacity to pay should do so.

The Living Longer. Living Better package has nine measures and provides $3.7 billion over five years for the aged care system (see box below).

There are two main features to the package: greater support for older Australians who want to remain in their homes and the introduction of means testing for the costs associated with the provision of residential and community aged care.

Many of the measures (such as means testing and increases in government subsidies) commence 1 July 2014. The rationale for this approach is to give providers and older Australians sufficient time to adjust to the new arrangements.

The majority of expenditure for this package will occur in 2016-17, outside the forward estimates period. There will be some expenditure in 2012-13 ($55.2 million) and 2013-14 ($26.9 million). The net cost to the Government will be $576.9 million over five years. In the context of what is currently a $12 billion program (in 2010-11), this represents very little new expenditure.

Of note:

To improve access to aged care services, a 'Gateway' will be created. The scope of the Gateway is unclear although it appears that the initial focus will be on the My Aged Care website and ...