Society should be “sharing in capitalism so that we don’t end up with a great divide” as people get older, Paul Keating has told the aged care royal commission.
Keating, an architect of Australia’s compulsory superannuation system, said a wealthy country like Australia should be able to support people beyond their 80s, but the super scheme alone was no longer enough to do so. Instead, older people should be allowed to borrow against assets, such as property, to fund their care, with the debt to be repaid after their death through the sale of the asset.
“Superannuation is the grease that lubricates the wheels of people’s lives later on, where no such lubrication would exist simply by reliance on the age pension,” Keating told the commission. “Superannuation intended to take some of the pressure off public financing of aged care … The aim of the policy was to help people [stay] at home, to help them be more independent.”
But with people born today expected to live beyond their 80s, Keating said, it was no longer realistic that superannuation alone would support people in old age, even if they worked into their 70s.
Keating told the commission he used to believe a “longevity levy” was needed in addition to superannuation to fund aged care. That would be a commonwealth-managed national insurance system, funded from workers’ wages, and would kick in once superannuation had been depleted.
But Keating said his thinking had recently changed on the practicalities of the scheme, and it would not be supported politically, with “moans” from small business organisations “and the violin-playing by members of the Liberal party backbench”.
Keating said he now supported a “post-paid” funding model where the commonwealth would provide aged care loans along the same lines as student loans. Aged care loans would be repaid through people’s assets after their deaths, including through the sales of property and shares and through any unused superannuation, Keating said.
“That way you’re also not asking members of families to chip in and pay for their relatives in their accommodation or their care,” Keating said. Asked if this would encourage people to people to divest themselves of their assets, Keating said policy measures would be needed to protect against it.
“It’s called policy dexterity,” Keating said. “There’s none around” in current thinking on aged care, he said.
Keating told the commission this system would mean some people might miss out on a large inheritance, but it was unfair to expect younger Australians to fund aged care through their taxes, given the rapidly increasing aged population.
“The number of people left in the tax system to support all this is falling,” Keating said. “Is it unreasonable that elderly people rely on assets and accumulations to meet the cost or should it be put to people in the tax system to bear the burden of it?”
Making people pay for their care after their deaths through their assets would “demonstrate to working people that they are part of it”, Keating said. “If we want a more cohesive society, the benefits of market capitalism should be extended to working men and women.”
Earlier on Monday, counsel assisting the commission Peter Gray QC highlighted the lack of transparency around how the aged care sector spends and accounts for government funding and subsidies.
“There are some surprising features of the current arrangements in out-of-home care,” Gray said. “For example, home care providers are not required to report to the government, including what kinds of goods and services are provided with the home-care-package subsidies ... which amounted to about $2.5bn a year based on 2018-19.”
Residential care providers received about $11.7bn each year in commonwealth care subsidies and about $4.4bn in overall care-related revenue, he said, including contributions from residents. They also received funding for additional services and deposits for accommodation.
But Gray said the health department recently conducted a survey of home care providers and the results had been “disturbing”. There were negligible amounts spent on nursing and allied health care, with only about 15 minutes of care allocated per fortnight, even for people on the higher levels of the home care package.
“No one can say whether the current levels of funding for providers for various forms of care is correctly calibrated to the costs of providing high-quality care,” Gray said. “The current funding system does not seek to establish whether funding is matched to need or the costs of supplying the care that would meet need.”
