Australia’s aged care system needs $10 billion a year: Grattan

The cleaning bill needed to remove the aged care “stain on Australians’ conscience” should total $10 billion a year, a leading think tank says.

The Grattan Institute said the extra spending could be funded by some mix of a new Medicare-style levy on taxable income, changes to the pension assets test and/or the residential aged care means test, and reductions in tax breaks on superannuation.

“The aged care system is a stain on Australians’ conscience,” Grattan’s Stephen Duckett, Anika Stobart and Hal Swerissen said. “Fixing aged care is more than a political problem, it is a moral imperative.”

The royal commission identified a $9.8 billion annual funding shortfall in aged care.

Over the weekend The Sun-Herald reported that the government will promise at least $10 billion over four years for aged care in next month’s federal budget.

Quoting an unidentified source, the publication said while the exact figure isn’t yet finalised yet it would exceed $10 billion.

But writing for The Conversation, Duckett said this amount is “below what experts identify as necessary to fix the problems revealed by the royal commission”.

To come up with the $10 billion per year for aged care, Grattan said the government could consider a 1 per cent aged care levy on taxable income, as set out in the final royal commission report, which would raise about $8 billion per year and cost the median taxpayer about $610 per year.

The group added government should find more money for the sector by cutting “excessively generous” tax breaks for wealthy older Australians.

“More of the value of the family home should be included in the Age Pension assets test. And superannuation earnings in retirement – currently untaxed for people with superannuation balances of less than $1.6 million – should be taxed at 15 per cent, the same as superannuation earnings before retirement.”

Duckett added that should additional funding not be accompanied by system reform, “then an opportunity will have been wasted, and the spending will be wasted on system inefficiencies and excess management fees rather than on improved services for consumers”.

The Grattan report detailed a path forward for aged care based on the royal commission’s recommendations.

Its authors said their report seeks to provide a clearer roadmap to a better aged care system after the final report was “littered with disagreements between the two commissioners”.

“It navigates through the differing views of the Commissioners to show how Australia can achieve a rights-based system that provides adequate care and support for all who need it.”