Aged care and the magic pudding

Australia needs a modern fit for purpose aged care system that is affordable and responsive to the needs of older people and their families. At the same time, it must not impose an inequitable burden on younger people.

In final submissions to the Aged Care Royal Commission, the first recommendation by Senior Counsel is a new aged care act in which the first object is to:

“provide a system of aged care based on a universal right to high quality, safe and timely support and care to: i. assist older people to live an active, self-determined and meaningful life, and ii. ensure older people receive high quality care in a safe and caring environment for dignified living in old age. [Link
https://agedcare.royalcommission.gov.au/media/29098]

At first reading, this objective is compelling. Aged care should be a human right. Older people have made a significant contribution to Australia and they have made Australia what it is today. It is now time for Australia to step up and meet their care needs in old age.

A critical question is how to fund these care needs. In a previous hearing of the Royal Commission, the Commissioners heard evidence about the pros and cons of three possible models to finance aged care going forward: more taxpayer funding via a Medicare style levy or the like, a social insurance model or a private insurance model [link

https://agedcare.royalcommission.gov.au/publications/consultation-paper-2-financing-aged-care
]. Senior Counsel submissions did not make recommendations about these options. However, the detail will not change the overall conclusion. There is no other option than that governments (taxpayers) will continue to bear most aged care costs into the future.

The core idea that aged care be legislated as a universal entitlement is reflected in multiple recommendations in final submissions to the Royal Commission. Senior Counsel is explicit in arguing that funding for aged care should be uncapped. Taxpayers will pay for most of the cost, apart from nominal user contributions. Instead of the tight fiscal environment in which aged care has operated for the last two decades, Government funding will become uncapped. Public funding will be spent at whatever level is necessary to meet the demand.

Aged care as a universal entitlement

In proposing an aged care system based on ‘entitlement’, Senior Counsel defines ‘aged care’. But there is no threshold definition of ‘need’ for aged care and there are no proposed limits around it. Likewise, there is no teasing out of the differences between ‘need’, ‘want’ and ‘demand’. There is also no recognition of the ‘elasticity of demand’, with a key recommendation being that there be no waiting list for community and home aged care services. As hospitals have amply demonstrated with their surgical waiting lists, the shorter the queue, the more people will subsequently join it.

At the level of the individual, the concept of ‘need’ for publicly funded aged care must be considered from at least two perspectives. One aspect is health needs and functional limitations. The other is capacity to pay for the services that you need, want or demand.

At the broader population and system level, the concept of ‘need’ underpins issues such as equity and efficiency. If funding is to be equitable, it must be distributed based on need. This implies that need can be defined and measured in objective ways. Likewise, if the aged care system is to be sustainable and efficient, it must direct resources to those who need them.

Equity

It is true that older people have made a significant contribution to Australia. However, it is equally true that the generation now going into retirement and old age are the richest generation in our history. Some 80% of older people in Australia now own their own home [link:
https://www.aihw.gov.au/reports/australias-welfare/home-ownership-and-housing-tenure
] and an increasing number are self-funded retirees with comfortable superannuation packages.

This is not the case for everyone of course. There are many people going into old age on very low and fixed incomes, including an increasing number of homeless men and women.

Given the disparity in wealth among baby boomers, there is a fundamental public policy question about the future of aged care. Should taxpayer-funded aged care at home be means-tested? Or should it, as Senior Counsel has proposed, be a universal entitlement irrespective of means?

Should the comfortable self-funded retiree who owes their own home and lives off their franking credits be entitled to the same level of aged care support as the homeless person on a full pension? This is a fundamental question for us all.

Minimum threshold for eligibility

The threshold for defining ‘need’ for residential care is quite straightforward. A person needs residential care if they cannot live safely in the community.

The problem arises in an entitlement funding environment in determining ‘need’ for care at home:

§ Should every older person be entitled to have their house cleaning, gardening and lawn mowing subsidised by taxpayers?

o If not, under what circumstances should domestic assistance and home maintenance be included as an aged care entitlement?

§ If a person elects to continue to live in their family home which is now too big for them to manage, should they receive more aged care funding than someone who elects to move to a smaller home?

§ If a person lives in a geographic area with more services on offer, does this give them the right to receive more aged care?

§ Should every older person who cannot drive be entitled to a government-subsidised support worker of their choice to take them to the supermarket? What about to play the poker machines? Or to go to church?

These reflect important policy questions that Senior Counsel did not address.

Inter-generational equity

There is an increasing understanding that baby boomers may represent the peak of financial security and prosperity. The generations following behind are less likely to be in secure work, to own a home or to have financial security. Most young people now entering the workforce have no likelihood of owning a home unless they inherit from their parents. Climate change and the long term economic consequences of COVID-19 will only add to their burden.

In thinking about our future aged care system, it is important to consider inter-generational equity. Should we expect the next generation (who are demonstrably less wealthy) to pay the lion’s share of the aged care costs of the tsunami of baby boomers now entering old age? Are we happy as a society for aged care to become, at least for some, a heavily subsidised middle class welfare scheme that others pay for?

I do not know the answer to these questions. But I know that these are the questions that must be answered. And I do know that these issues were not satisfactorily addressed in the final submissions to the Royal Commission.

In arguing that aged care should be a universal entitlement, Senior Counsel has avoided the need to address fundamental questions surrounding equity, efficiency, effectiveness, affordability and inter-generational equity.

In doing so, Senior Counsel also avoided the need to set out clear priorities. If everything should be funded as an entitlement, everything is equally important. And thus it is that Senior Counsel have set out proposals that would cost literally billions each year without the need to deal with practical issues such as the source of the dollars, how to deal with excessive profits currently being skimmed off the top of care funding or where the workforce would come from.

There is no magic pudding and there is no alternative but to make choices. Clear priorities are essential. Yet it does not seem at this stage that this multimillion dollar Royal Commission will deliver this. In the absence of a magic pudding, it will ultimately come back to government and to taxpayers to decide.

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Professor Kathy Eagar is Professor of Health Services Research and Director of the Australian Health Services Research Institute (AHSRI) at the University of Wollongong. Professor Eagar has undertaken extensive work in the aged care system over the last two decades. Most recently she led the design of the new Australian National Aged Care Classification and funding model for residential aged care and undertook research commissioned by the Aged Care Royal Commission into the adequacy of residential aged care staffing.

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