Aged care in Australia should operate under a HECS-style model where costs are recouped from people’s estates once they die, former prime minister Paul Keating says.
The one-time Labor leader told the aged care royal commission taxpayers will face an increasing burden subsidising care for a population that is living longer.
Under the system, every Australian would be given a loan from the Commonwealth to cover their care which would later be claimed back from their assets.
Mr Keating, who designed the superannuation scheme as treasurer, said a system similar to the HECS university model would have many advantages.
“In other words, we’re not forcing anyone out of their home in old age, we’re not obliging aged persons to negatively mortgage their home,” he said on Monday.
“You’re not asking members of families to chip in and pay for their relatives in their accommodation or their care.”
When superannuation was in the works during the late 1980s, every person over 65 was supported by 6.5 people aged between 15 and 65, Mr Keating said.
That figure has dropped to 3.7 and is forecast to reach three by 2040, highlighting the increasing budgetary impact of aged care.
‘You’ll get the moans’ from small business
However, Mr Keating questioned whether the political appetite exists for a HECS-type scheme considering some federal government MPs are against lifting superannuation by 2.5 percentage points.
“You will get the moans from the small business organisations and the violin playing members of the Liberal Party backbench,” he said.
Mr Keating said if a person didn’t have enough assets to cover their care, the Commonwealth would pick it up.
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Council of the Ageing CEO, Ian Yates, said the idea is “worth exploring” but the devil would be in the detail.
The commission’s seven-day hearing is examining funding and financial models in the aged care sector and its regulation.
It heard providers aren’t properly revealing how they spend billions of dollars of federal government funding.
“Consistent with its origins, aged care today is a piecemeal system,” counsel assisting the commission, Peter Gray QC, said during opening submissions.
The commission heard residential care providers receive $11.7 billion a year in federal funding and $12.4 billion in revenue, which includes residents’ contributions.
“Their annual reporting requirements do not adequately reveal how that money is used or what profit or loss is made in providing residential care services,” Mr Gray said.
“Further, there is no specific requirement on residential aged care providers to spend any particular portion of that money on care.”
Mr Gray said the way funding levels have been indexed since the 1990s has meant funding has not increased in line with costs.
“The Commonwealth government took over full administration and funding responsibility in this area in 2012 but in our submission has not yet assumed a proactive system governance role,” Mr Gray said.
“It should do so now.”