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Aged care tripling over the next 40 years, how will it be paid?


Key Points:

  • Ageing Population Challenge: Australia faces tripling its elderly population, necessitating a planned increase in aged-care spending to ensure equitable access.

  • Diverse Care Services: Aged care encompasses two primary services: daily living costs and healthcare-like services. The latter should be publicly funded, akin to Medicare.

  • Public Funding for 'Care' Services: To guarantee affordability and accessibility, the government should fully fund services resembling healthcare in aged care.

  • Complex Payment Structures: The current labyrinthine payment systems for accommodation costs in residential care require streamlining to enhance equity and sustainability.

  • Means-Tested Contributions: Implementing means- and asset-tested co-payments and ensuring consistency in payment structures are crucial to maintaining financial sustainability in aged care.

Australia is facing an unprecedented demographic challenge. According to the latest Intergenerational Report, the nation's elderly population is set to triple in the next 40 years. As we prepare for this significant demographic shift, the question of aged-care funding takes centre stage. Aged-care spending is projected to double its share of the gross domestic product (GDP) by 2063. It's a looming financial challenge that demands a proactive and equitable approach.

Balancing Access and Affordability

The ageing of Australia's population necessitates an increase in aged-care spending. However, this growth must be planned. A thoughtful funding strategy is imperative to ensure equitable access to aged care, regardless of income. HCPA is dedicated to advocating for equitable access to high-quality aged care for all Australians. Aged-care funding should encompass both taxpayer-funded care and resident co-payments. Nevertheless, we must tread carefully to prevent reduced access for those with lower incomes.


Distinguishing Between Two Service Types

In navigating the complexities of aged-care funding, it becomes evident that two distinct service types require distinct policy responses:

  1. Ordinary Costs of Living: These include expenses for daily living, such as housing, accommodation, cleaning, and food preparation. In their earlier years, individuals typically covered these costs themselves.

  2. Care and Support: This category comprises services like nursing care, podiatry, physiotherapy, and other health-related services delivered either at home or in residential aged-care facilities. Such services are usually unnecessary earlier in life.

Public Funding for 'Care' Services

Australia has a longstanding commitment to publicly funded healthcare through programs like Medicare. This commitment should extend to aspects of aged care that closely resemble healthcare. These services often involve health assessments, with consumers needing to initiate them independently. Given these gatekeeping processes and the difficulty in assessing service quality, a strong case exists for public funding.


In light of these considerations, it is reasonable to expect the government to bear the total cost of care services (excluding ordinary living expenses) for all aged-care residents and individuals receiving care at home. At HCPA, we recognise the importance of providing top-notch care, and we're here to support providers in registering or expanding their services within the Aged Care scheme, allowing them to offer a more comprehensive array of services to a broader audience.


Addressing Future Funding Needs

Meeting the future funding needs for care services should be approached through strategies like economic growth, targeted adjustments to taxation revenue, or introducing an "aged-care levy" akin to the Medicare levy. An aged-care levy could be explicitly earmarked for aged care or contribute to the broader pool of Commonwealth revenue.


While hypothecated taxes, like an aged-care levy, come with certain downsides related to government flexibility and revenue predictability, they can serve as politically acceptable additional funding sources. An aged-care levy stands out as an equitable and efficient means of bolstering Commonwealth revenue to support aged care, albeit raising questions of "intergenerational equity." HCPA is at the forefront of advocacy and support, and the journey towards securing a sustainable future for aged care becomes more manageable for providers and recipients alike.


Funding 'Ordinary Costs of Living in Later Life

The expectation that individuals should cover their daily living expenses during their working years continues into retirement for most. However, there are exceptions, including low-income earners, retirees with reduced incomes, individuals unable to maintain their homes, and those with unique dietary or accommodation needs. These exceptions warrant subsidies for ordinary living expenses in later life.

A patchwork of policies governs consumer co-payments for ordinary living expenses, creating complexity for individuals in residential care facilities and those receiving home care.


Striking a Balance Between Equity and Sustainability

To address the financial sustainability of aged care while safeguarding equity, a structured means- and asset-tested co-payment system is essential, encompassing superannuation balances and income streams. Greater consistency in co-payment policies across providers is also crucial.


While aged-care policy must carefully balance equity and financial sustainability, it is vital to acknowledge that the complete cost of aged care, covering both care services and ordinary living expenses, cannot be exclusively shouldered by recipients. Calls for significant increases in out-of-pocket payments must be scrutinised for their potential impact on accessibility and affordability.


In conclusion, Australia's ageing population presents a formidable challenge for aged-care funding. A well-rounded approach can ensure a sustainable and equitable future for aged care by combining public funding, targeted adjustments to taxation revenue, and means-tested co-payments. At HCPA, we are acutely aware of the significance of top-tier care. These initiatives exemplify our dedication to nurturing an inclusive and respectful aged care system by empowering our elders to maintain their independence and dignity within their communities. This multifaceted issue demands thoughtful solutions to guarantee that all older Australians receive the care and support they deserve later.



HCPA is an all-in-one solution for Aged Care providers, supporting them with registration, growth and consulting. Contact us now here or call 03 9084 7472 to learn how we can help you succeed.


SOURCES | The ConversationWe need a new way to pay for aged care. But it can't shut out those on low incomes |

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