The Final Report of the Aged Care Taskforce, which was completed in December 2023, does not make specific and detailed recommendations in relation to the practical operation of any proposed changes.
The Final Report of the Aged Care Taskforce does propose several key changes, including the:
-
calculation of home care and residential care co-contributions;
-
phase out of lump sum RADs, and
-
reintroduction of a retention amount.
Home care
Home care services should be available on a fee-for-service basis to ensure:
-
care receivers only pay for services received, and
-
a fair and increased contribution (relative to current arrangements) is made by those who can afford it.
Currently, only 5% of total home care funding is from individual’s contributions.
Residential aged care
The Government should continue to be a key contributor to funding aged care, and a specific tax or levy, recommended by the Royal Commission into Aged Care Quality and Safety', to fund the sector should not be adopted.
Residents should make a fair co-contribution to their care and accommodation costs based on their means, with a strong safety net for low-means individuals.
Liability for fees could be anchored to Age Pension status and possibly home ownership, to increase fairness, simplicity and transparency of costs for consumers, particularly in the planning stages. There could potentially be separate means-testing arrangements for self-funded retirees.
The Government should consider improved funding arrangements to cover everyday living and accommodation costs of aged care residents. This will ensure the sector remains viable.
The Government should fully fund the cost of care, less the proposed increased resident co-contribution. Alternatively, if full coverage of costs by the Government is not adopted (ie ensuring the provider isn’t making a loss), the removal of annual and lifetime caps on the means-tested fee should be considered.
Recommendations relating to accommodation fees
Phasing out of RADs (refundable accommodation deposit): The lump sum RADs should be phased out by 2035 (pending a review of the system in 2030), with a transition to a rental-only style model.
This would reduce the liquidity risk that exists for operators, as well as the disparity between full RAD payers and those who pay a non-refundable daily accommodation payment (DAP). While RAD payers receive the full amount back upon exit and therefore don’t make a direct contribution to the cost of their accommodation, residents who pay a DAP make a significant annual contribution to their accommodation costs. The Taskforce acknowledges the interaction with the Age Pension (where RADs are currently fully exempt) and indicates further consultation is required.
Taskforce member Grant Corderoy, Senior Partner, StewartBrown Chartered Accountants, said the phasing out of RADS is "most certainly not a done deal (or even anywhere close) but has opened the discussion considerably".
Reintroduce a retention amount: Service providers should be required to retain a portion of a RAD paid (similar to the previous "retention amount") to help plug the current funding gap, and to reduce the impact of DAP payers subsidising RAD payers. A cap should apply to the number of years a RAD is subject to retention to protect long-term residents.
DAP as focus of accommodation fees, with indexation: The current system calculates the RAD equivalent (DAP) based on an interest rate at the time of entry. It is recommended that the new fee model have accommodation fees based on a DAP, with any conversion to a RAD not linked to an interest rate. DAPs should be subject to indexation twice per year, with an exception for full Age Pensioners. This approach will support a future transition to a rental only model.
Increase maximum RAD limit: The maximum RAD that can be charged without additional approvals (which the Final Report notes that providers are deterred from doing due to costs and the time involved) should be reviewed and increased. While a specific figure is not proposed, the Final Report notes that in 2021/22, 31% of rooms were priced either at or above the current maximum of $550,000, and that should the maximum RAD have been indexed in line with construction costs, it would now be approximately $810,000. Increasing the maximum RAD would provide service providers with capital to undertake new construction.
Though not a recommendation, the report does state "there is a need for an immediate increase in the rate and indexation" of the RAD price, and "implementing the prior recommendation from the Tune review is a prudent first step".
Protection of low means residents: Additional safeguards should be introduced to protect low-means residents, including those making a co-contribution to their care costs.
What happens now
The Government will now consider the Final Report recommendations. No formal announcement had been made.
With a new Aged Care Act coming into effect from 1 July 2024, it is anticipated the Government may announce proposed changes based on the Report in the May Federal Budget.
