The Royal Commission into Aged Care Quality and Safety (the Commission) said from the beginning that they wanted to hear from people directly affected by the work of the Commission, and particularly the consumers of aged care services and their families and carers. COTA has been putting your views to the Commission, by giving evidence at the hearings, being involved in the workshops, and making submissions.

In proposing a complete shakeup of the aged care sector, the Royal Commission has also contemplated how services should be paid for. These options are discussed in their paper, Financing Aged Care. The Commissioners say aged care expenditure will need to increase by between 50% and 100%. So, this brings us to the question of “Who pays?”

Currently, the government provides around 75% of funding and consumers provide the remainder. In Australia, aged care spending in Australia is much lower compared to countries with comparable populations. It’s about 1% of GDP.

The Commissioners have looked at three broad approaches:

Minimal change

This option would mean continuing the current system of taxpayer funded aged care with co-payments from users. This is what we have done for the past 60 years.

It could be funded by general taxation or by a levy, or by a mix of both (as the NDIS is funded).

Levies can be used in a number of different ways.

·         The funds could only be for aged care

·         The funds could be spent for other similar purposes (which is similar to how the Medicare levy works)

Increasing aged care funding by 50% would need an increase in personal income tax rates of 1%, or a 100% increase would need a 2% rise.

Co-payments could also be increased, for all services including government subsidised low level supports at home.

Social insurance models

This model was considered by the Productivity Commission in 2011 and if we were to adopt this, Australians would be obliged to make contributions to funds managed by either an Aged Care Insurance Commission or by private providers.

This could also mean a levy applied to the incomes of working age people to the age of 65. Of course, the risk here is that the funds may not fully cover the costs of care and the Government would have to top up funds.

The last of the social insurance options put forward was to have a private aged care contributory scheme with people given the choice of a range of private insurers.

Private insurance and other voluntary arrangements

Finally, the paper examines the option of a private aged care insurance scheme. These are not widely used in other countries similar to Australia, where they make up just 0.9% of aged care funding. The Commission’s paper says the model would need large numbers of people to take it up to allow pooling of funds and risk sharing.

Lump sum annuities to pay for aged care costs, private gap insurance to cover extra aged care expenses and tax deductions for long-term investments in aged care (like school building funds) and even individual donations are also canvassed.

The paper identifies that there are other options, and the potential to combine the options already described, for example, higher income tax plus a social insurance scheme, higher co-contributions and donations. The Commissioners conclude that implementing any new financial arrangements would be complex.

This is an important debate and COTA Australia wants to hear your views.