Back in January, Pat Garcia penned a piece for the Fin Review calling for the wealth in the family home to be unlocked to pay for future aged care – now with the Royal Commission currently calling for submissions on how the sector can be funded into the future, the Not For Profit’s CEO has called for Australia to finally make a call on how it finances aged care.
In the 850-word piece – titled ‘Let’s do better for our elders’ – Mr Garcia, who took on his role since October last year, argues that while there is some room for debate at the edges, no one can dispute the fact that a significant amount of funding is required to fix the system.
“More than half of aged-care homes operate at a loss. In rural and remote areas, that figure rises to almost three-quarters,” he notes. “Before COVID-19 struck, 15 per cent of aged-care providers suggested they would close their doors within a year. The pandemic is likely to have made things significantly worse.”
However, Australia shied away from how the money can be raised.
“Despite what modern monetary theorists may tell us, there’s no pain-free way to find funding. Any method will raise a squeal from someone. And for the past 20 years every squeal has been met with a hasty retreat.”
The CEO notes that his earlier article raised the idea of tighter means testing so older Australians who owned wealth would be required to use it to pay for their care.
“The reaction Catholic Health Australia received was predictably impassioned. Many agreed with me. Many did not.”
However, he says dissenters need to come up with a viable alternative.
Mr Garcia points to the Royal Commission’s recent consultation paper on funding and financing which estimates incomes taxes will need to rise by 2% to foot the bill – around $1,700 a year for the average income earner – through a Medicare-style levy.
The CEO says that while this makes sense, he claims fairer means testing – and higher user contributions – are still key.
“We quarantine a potential source of billions in funding: housing wealth. It’s only the first $171,000 of the value of a home that is means tested for personal and nursing care. It’s a profligacy we can no longer afford.”
He adds that the Pension Loans Scheme (PLS) could be a viable option for people to draw down against the value of their homes, with those who don’t have any significant wealth to remain supported.
“As the Royal Commission has made stark, there are no easy options here,” he concludes. “To better provide for our parents and grandparents, all of us must sacrifice a little – whether through a general levy or through greater levels of private contribution. Either way we need to square up to the challenge and make a call.”
Mr Garcia’s point about avoiding the debate is a valid one.
I was recently reminded of then-Family Services Minister, Warwick Davis’ appearance on The Midday Show with Ray Martin in the 1990s where he raised the idea of higher contributions for aged care – and was almost booed off-stage by the older audience. A week later, he was gone from his post.
Neither side of Government wants to take the unpopular measure of increasing taxes or pushing through a levy to pay for aged care.
What is needed is a bipartisan approach – and that will require both advocacy and unity from the sector to secure the support of both sides of politics – and quickly.
Can the peaks and providers pull together in the common cause?
