Funding aged care: Diffusing a demographic time bomb

A recent CEDA event in Melbourne explored aged care from both a national and state perspective and provided insight into the draft Productivity Commission report into aged care.

Consultant gerontologist Dr Anna Howe addressed if there was a time bomb, if the Productivity Commission report and subsequent government response would address the issues in aged care and what else can be done.

She highlighted that there was recognition of issues in aged care with 30 reports done on different aspects of aged care at a national level in the last five to six years, but that a lack of action and uncertainty in the field about what would be done had been bad for business.

Dr Howe said she didn't believe there was an aged care time bomb, highlighting that while in the next 40 years an almost three fold increase was expected, in the last 40 years, increases had been slightly above that.

However, she highlighted that the biggest increases in the next 40 years would occur in the next two decades so we would need to act quickly.

"Over the last 40 years we have been very successful in managing these projected increases in costs," she said.

"We are not hapless victims, we do have a lot of policy levers, financial instrument and so on and we've pulled them in the past and reading the Productivity Commission report they give us an array of options for the future.

"So the only time bomb we are likely to face is through our own neglect of doing something."

However, she said while there may not be a time bomb, there was no harm in putting up sand bags.

One area she highlighted that she hoped would be further addressed was an aged care investment fund.

Dr Howe said that self funded retirees had benefitted from significant superannuation tax breaks and that the cost of these was more than $22 billion a year, more than twice the $10 billion a year cost of aged care.

She said the paradox was that we were spending $22 billion a year on an inequitable system, with most men having significantly more super and therefore benefitting more.

Dr Howe suggested a small contribution or levy from superannuation could be made to set-up an aged care investment fund.

When asked about gaps in the Productivity Commission report Dr Howe highlighted a lack of focus on:

• Broader factors impacting on aged care, like the GFC;
• The structure of the system and who will make the final decisions; and
• The overlaps of various parts of the system with the Productivity Commission taking a fragmented view of the sector.

Victorian Minister for Health and Ageing David Davis called for the final Productivity Commission report to be circulated in the public arena as soon as possible because states such as Victoria had not been privy to the final report yet.

Mr Davis said the Victorian Government's fear was that as greater private provision of aged care services occurs that commonwealth support may diminish over time - although not necessarily by this government - and that a risk for Victoria was also that over the longer term support for aged care will be pushed back to the states.

Other key speakers at the event included:

• Shadow Minister for Aged Care Senator Concetta Fierravanti-Wells who outlined the Oppositions plan if elected and the key challenges facing aged care, such as the difficulty in calculating if compensation being offered from the carbon tax would be enough for aged care facilities to protect them from rising utility costs.
• Benetas Australia Chief Executive Officer Sandra Hills who highlighted the strong position Australia's aged care sector was in compared to places like the UK, where services and wages are being cut, and the opportunity Australia has to provide a showcase of how a developed population can run and finance an aged care system.
• Aged and Community Care Victoria Chief Executive Officer Gerard Mansour who highlighted that aged care in Australia was currently in a consolidation phase with the long term trend of declining returns in the industry stabilising due to a much better alignment between funding and the cost of aged care.

However, he said the big issue and the big gap was that the opposite was occurring in community care and that we currently don't have a community care system where services increase as a person's care requirements increase.

He also highlighted that:

- Construction time lags were a huge issue with it taking four to five years from a decision to invest to doors opening on a facility in some local government areas;

- Government needs to address accommodation payments which research shows are about half what they need to be; and

- How Home and Community Care services are managed into the future still needs to be resolved.