Nick Bruining: The costs likely to rise under aged care changes and how rich baby boomers might avoid them

Baby boomers look set to cop the full effects of flagged changes to aged care.

The Aged Care Taskforce report released earlier in the month covers a number of areas that were highlighted in the 2021 royal commission into aged care quality and safety. That report recommended changes to the current funding model to ensure long-term sustainability.

While there are no specific details yet, experts are reading between the lines to work out the areas likely to be tweaked.

The final report specifically notes the increased wealth of seniors, thanks to superannuation, thereby setting the groundwork to justify a hike in the fees paid.

Some of the specific details are expected to be included as part of this year’s Federal Budget on May 14.

Margaret Walsh OAM was part of the taskforce and is a member of the Association of Independent Retirees. Mrs Walsh said the report’s recommendations would impact wealthier retirees the most.

“Retirees who have budgeted and planned their retirement carefully to enable a comfortable retirement and their estate could be forced to use this money for aged care,” she said

Mrs Walsh said the reforms could be counter-productive because they might instead encourage people to divest themselves of assets.

“It seems that if you can get yourself into receiving a part-pension, you’ll be much better off,” she said.

Australia’s aged care system essentially involves three levels of assistance. Myagedcare is the government agency responsible for the delivery and operation of aged care services.

The entry point is the Commonwealth Home Support Program which helps to keep people at home as long as possible. Subsidised services include cleaning, maintenance, personal and other forms of care.

To be eligible for CHSP, you need to be over the age of 65, or younger if you are Indigenous, homeless or at risk of homelessness. This had been set to change next year to a new program called Support At Home but this has been deferred to at least 2027.

Currently, your eligibility for support will be assessed by a regional assessor contracted by Myagedcare. This changes in July, when a single assessment body takes over. The same body will also conduct assessments currently done by Aged Care Assessment Teams.

CHSP-eligible seniors typically pay about 10 per cent of the cost of the service or an amount per item. For example, ready-to-go meals might cost you $10 each.

The Government is currently consulting with industry to see how the replacement program will be financed, but expect the consumer contribution to increase.

The next level of care is for people who need a more focused level of service. In this case, a specific weekly care program is designed to meet the needs of the individual.

Home Care Packages provide structured care arrangements at four different levels. Level one might apply for someone requiring modest assistance at home whereas level four is for someone who would have extreme difficulty looking after themselves on a day-to-day basis. There are add-ons for people with dementia or other conditions.

These amounts — ranging from about $10,271 a year for level one through to $59,594 for level four — are the amounts paid by the Government to the provider you choose.

HCPs are also means-tested, looking at income and using a similar deeming system to Centrelink.

And, depending on your provider, they may require you to contribute to the daily cost of your care. In many cases, when the person being cared for is on a full or part-pension, providers may waive the daily consumer contribution.

Industry expert Louise Biti from Aged Care Steps said one of the changes to be proposed could be to compel consumers to make the daily payment.

“Pressure is now on providers to ensure they collect all or some of the daily care fee from consumers, it’s a simple rule change to make it compulsory,” Ms Biti said.

The basic daily care fee currently ranges from $11.43 for a level one package up to $12.75 for a level four package but these can be as high as $36.60 a day under aged care means-testing rules.

There’s also a lifetime consumer contribution limit for income-tested fees of $79,942.44 where, once reached, you don’t pay any more. That’s another figure that could be up for review.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association