Labor’s budget fix fails vulnerable retirees
In January last year the government raised the market price cap on aged care beds from $550,000 to $750,000. It turned the elder care myth of “If I don’t have money, I won’t go in” into reality.
This $200,000 stroke of the pen created a funding gap that priced out many financially disadvantaged residents. Some of these older Australians are waiting in hospital beds for policy change that will mean they can access the care they need. The federal budget will fail them.
When the market price cap increased, the government did not increase the amount it actually paid to residents who could not afford those prices (known as low-income residents).
So while providers could charge refundable accommodation deposits (RADs) of $750,000 from wealthier residents, government support for low-income residents remained the equivalent of around $300,000.
The result was simple: miscarriage meant residents became financially unviable for aged care providers.
To get the maximum housing surcharge for low-income residents, providers already had to overcome significant hurdles. Homes had to be newly built or substantially renovated and support at least 40 percent of low-income residents.
Aged care is underfunded and the cost of this underfunding is not going away; it just shows up somewhere else.
Even then the financing gap had reached gigantic proportions. Providers could charge more than twice the cost of housing from a market-rate resident rather than a subsidized one. The math just didn’t work.
That’s why even large not-for-profit providers, including Uniting, are warning that the system is becoming unsustainable. They weren’t saying they didn’t want to care for disadvantaged older Australians; They said they couldn’t afford it.
The results were devastating. Some seniors were stuck in hospital beds for months, waiting for a senior care spot that providers could offer them. This year’s budget tries to solve some of the problem.
The government has announced that 5,000 new beds a year will be incentivized by 2029 as part of a $3.7 billion aged care package. The beds are not yet available and the industry estimates the current shortage is currently around 10,000 beds.
The budget also includes a $1.1 billion restructuring of the accommodation surcharge. Starting in March 2028, homes with more than 60 percent low-income residents will be eligible to receive payments of up to $127 per day; This collectively equates to approximately $580,000. This is an important development. But nearly two years in and it still remains below the $750,000 (indexed) market price ceiling.
The reality is that aged care is underfunded and the cost of this underfunding is not going away; it just shows up somewhere else. This occurs in families who provide unpaid care while juggling work and their own financial pressures.
This occurs with older Australians who pay privately for support because they cannot wait for government services. This is playing out in public hospitals, where around 3,000 elderly people are currently trapped in beds because they have nowhere else to go. And it plays out in the lives of older Australians, many of whom wait months, sometimes more than a year, for the care they need.
Budget changes will help, but they won’t kick in until March 2028. For older Australians seeking care today, this is not just a policy timetable; time they may not have had.
Written by Rachel Lane. Minification Made SimpleA book and website that aims to shed light on degrowth.
- The advice given in this article is general in nature and is not intended to influence readers’ decisions about investments or financial products. They should always seek their own professional advice, taking into account their personal circumstances, before making any financial decisions.
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Rachel Lane, bestselling Elder Care, Who Cares? He is the author of the book. and Downsizing Made Simple with financial expert Noel Whittaker.
