Federal Government strikes aged care deal reached to change funding for wealthy Australians

Older West Australians have mixed views about a bipartisan political deal on aged care that will see wealthier people paying more for their care.

The Government and Opposition came to an agreement on Thursday in a bid to set the sector on a financially sustainable footing.

Changes across in-home and residential aged care for people entering the system from July 2025 will mean those who can afford to pay more will do so, although taxpayers would still cover the bulk of the costs of care.

The number of Australians in aged care is set to skyrocket over coming decades, with the population aged over 80 expected to triple over the next 40 years.

Prime Minister Anthony Albanese, Aged Care Minister Anika Wells and Treasurer Jim Chalmers labelled the $5.6 billion reform package was “the greatest improvement in aged care in 30 years”.

“Reforms like this don’t happen every day, they are once in a generation, and this is very significant,” Mr Albanese said.

The Coalition has agreed to back the financial framework aspects, although it may seek changes to other elements of the legislation.

Opposition Leader Peter Dutton said the system had to be made sustainable.

“I want people to know that when your mum or dad, grandma or grandpa go into an aged care setting, that they’re getting the best care provided,” he said.

“And it’s difficult because there’s no easy solution, there’s a lot of money involved, the beds aren’t being built at the moment, we’ve got an ageing population, early onset of dementia.”

Members of Perth’s Radio Sailing Club – who are all retired but not in care – agreed it was fair that wealthier Australians pay more for their aged care.

Former teacher Mal McKercher, 67, said it made sense that those with more money and could pay should do so, noting that would likely include himself.

“In a country like this, you work through life and you have it in the back of your mind that it is the government’s responsibility to look after those who can’t look after themselves – for whatever reasons – and life deals you some pretty dodgy cards, so you don’t begrudge someone being helped,” he said.

Barry Martin, 84, pointed out Australia’s progressive tax system worked in the same way, where the more someone earned, the more they paid.

But Bicton self-funded retirees Peter and Lynda Morrison said it was “totally unfair” to those who had worked hard to save for retirement.

“The people that probably haven’t saved for retirement as well as others seem to get looked after more than what the people that do,” Mr Morrison said.

“We don’t expect a free ride but it’s just another change to something that we thought wasn’t going to change.”

The centrepiece of the deal is a $4.3 billion investment into a new system of home care, called Support at Home, to help 1.4 million Australians stay in place as they age.

The Government has promised there will be 300,000 new at-home care packages over the next decade and shorter wait times for people to get the help they need.

Taxpayers will still cover the entire cost of clinical care.

But individuals will pay more to help cover everyday living and independence supports such as assistance with showering, getting dressed or taking medications, cleaning, gardening, shopping or cooking.

Ms Wells said the aim was to support people to live in their homes for as long as possible.

The amount paid will vary depending on whether they are a full or part pensioner or self-funded retiree, and how much the package for their care will be.

However, there will be a lifetime contribution cap meaning no one will pay more than $130,000.

This is nearly double the existing cap on residential care – about $76,000 – but it now includes the total paid across in-home and residential care.

Under existing arrangements, people with at-home care arrangements pay just 5 per cent of the cost.

The new scheme would see people who enter the system after July 2025 pay on average between 5 per cent and 31 per cent of the highest-level package costs – or between $3750 and $24,375 for a $78,000 care package.

There will also be changes affecting the funding availability of residential aged care.

People newly moving into residential care after July will face larger means-tested contributions than exist now and a maximum room price of $750,000 that will increase in line with inflation.

Providers will be able to keep two per cent of accommodation deposits a year for up to five years to help them be able to cover the costs of maintenance and building new facilities.

But the Government says the means testing applied to these changes means half of new residents will not pay any more.

The reforms also include new laws to protect Australians in aged care with stronger powers to investigate bad behaviour, mandatory food standards, screening of workers and civil penalties for breaches.

“This is not about new taxes and it’s not about changing the treatment of the family home,” Dr Chalmers said.

The reforms will also be grandfathered, meaning Australians who are already using the aged care system will not be impacted by the changes.

The government says the measures will cost $930 million over four years, but will save the budget $12.6 billion over the next decade.

The reforms were introduced to parliament late on Thursday and will be sent to a Senate inquiry that is expected to report in November.

Shadow aged care minister Anne Ruston said the Opposition had worked “tirelessly” to ensure the reforms did not unreasonably disadvantage Australians who had saved for their retirement.

Patricia Sparrow, head of leading advocacy group COTA Australia, said it had taken too long to get to this point given that “business as usual is unacceptable” on aged care.

“Ambitious reform is required to fix the current aged care system to meet the needs of our ageing population and increasingly complex aged care needs and the Aged Care Act is central to making this happen,” she said.

Older Persons Advocacy Network head Craig Gear said his group was keen to understand how well the financial safety nets would work with the new sliding scale for contributions.

CEDA chief executive Melinda Cilento said the reality was older Australians would need to contribute more to the cost of their care or providers – many already at risk of collapsing – would not be there to meet their needs.