Hypothecated levy would work but only with Government oversight – Professor Ken Henry

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Dr Ken Henry’s appearance before the Royal Commission on Wednesday created some interesting talking points, that we thought would be useful to analyse.

The big topic of the day was a hypothecated levy to fund the sector.

While former Federal Treasurer Peter Costello had poured cold water on the idea earlier in the day, Dr Henry said it could work with Government accountability.

The former Secretary of the Department of the Treasury said he wasn’t actually a fan of the idea as it “ties the hands of the Government” on spending, but in the circumstances believed it would work as Government expenditure would increase faster than any tax base.

Boost investment confidence

Dr Henry said such a levy would provide necessary Government transparency, and there would be added benefits for consumers and providers.

“They would have sufficient confidence to be able to take long-term investment decisions to plan for the future,” he said.

Care and accommodation funding needs to be separated

The former Secretary also backed the unbundling of funding into accommodation, care and daily living services, saying it would provide the opportunity for Government to target subsidies appropriately and give the consumer greater choice.

Dr Henry argued an efficient approach would see the Government pay for healthcare costs, while the everyday living costs are covered by the consumer.

“If there is not an unbundling of services, people might choose a particular form of aged care simply in order to get access to a particular service that they really want but they end up paying for a range of services that they don’t really want and that’s clearly inefficient,” he said.

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