The report of the aged care taskforce, released on Tuesday, makes eminently sensible proposals for changes to cover the ever-growing cost of aged care. But since its solution is to require the well-off elderly to bear more of the cost, I doubt if Aged Care Minister Anika Wells will be able to implement the changes without much pushback from those well-off elderly – otherwise known as the “wealthy Boomers”.
The cost of aged care – both residential care and, increasingly, at-home care – is expected to grow hugely in the coming decade for three reasons. First, because federal governments have been underspending on care, as repeated Four Corners exposes have kept reminding us.
There’s been a lot of catch-up spending since the shocking report of the Royal Commission into Aged Care Quality and Safety in 2021, but there’s more catching up to do.
Second, there’s the continuing retirement of the Baby Boomer bulge, plus the increased care that later, longer-living generations will require.
Third, as living standards rise, so do the expectations of the aged for something a lot better than their parents settled for.
The federal government’s spending on aged care last financial year totalled $27 billion. It’s expected to have reached $42 billion by 2026-27. And there’s a lot more to go after that.
The royal commission suggested that the increased spending could be covered by a Medicare-like levy of 1 per cent of everyone’s taxable income. But the taskforce rightly rejected that idea as too unfair to younger taxpayers.
Don’t forget that few of the elderly pay much income tax, even those earning so much that, were they younger, they’d be paying a lot.
So the taskforce has come up with a solution that previous governments have, for decades, not been game to propose: ask the well-off elderly to pay a higher proportion of the daily living expenses – meals, laundry and cleaning – and accommodation costs.
At present, those in residential care who can afford it are required to pay a “refundable accommodation deposit” of many thousands, which is refunded when they leave or die. Effectively, it’s an interest-free loan to the provider of the residential care facility. On the strength of this, those who provide a deposit aren’t asked to pay much of their accommodation costs.
It’s never been a popular arrangement, so the taskforce proposes to phase it out between 2030 and 2035. Those on the old arrangement would be “grandfathered” – allowed to stay on the old deal.
But newcomers would go onto the new, rental-only scheme and be asked to pay a lot more for the accommodation cost than people of lower means.
Unlike me, many Baby Boomers vociferously object to being held responsible for the unfair way the younger generations are treated by the tax system, the superannuation system, the university fees system and the gig-economy system.
But though it’s wrong for youngsters to assume all Baby Boomers are rolling in it – some are still renting and others are locked in long-term unemployment – the truth is that, as a generation, most Baby Boomers have had a rails-run.
Those who went to university got scholarships rather than debt. Most males had little trouble finding a good, permanent, full-time job. They were able to buy a first home without much trouble, have stayed in the property market and today own a house worth an unbelievable sum – through no great effort of their own.
Baby Boomers are the first generation to gain much from the introduction of compulsory superannuation in 1992. These days, almost everyone retires with some significant superannuation sum, and those of us who’ve taken advantage of the various concessions have reached retirement age with super sums in the millions.
The super system is wildly biased in favour of the well-off. And the people who try to tell you that having super and other savings sufficient to eliminate (or even just reduce) their eligibility for the age pension makes them a “self-funded retiree” are deluded.
They have no idea what a high proportion of their payout has come from accumulated tax concessions rather than contributions.
So how would the well-off elderly afford to pay for a much greater share of their aged care costs? By dipping into their super.
The justification for superannuation and all the money it costs the taxpayer is to allow the retired to live comfortably in their final years when they’re too old to work. So the notion of many that they must live only on the annual earnings and never dip in to the principal is wrong-headed.
No, you were granted such generous tax breaks only to support you in retirement. For the well-off elderly to want to pass what’s left of their super on to their offspring is to make the world even more unfair than it already is.
Let’s hope Minister Wells and her boss have the conviction to stick to their guns when the Boomers start crying poor in defence of their privileged existence.
