Finance Welfare Morrison government mulls aged-care levy to bridge funding shortfall

Morrison government mulls aged-care levy to bridge funding shortfall

Scott Morrison holds the Final Report after Royal Commission into Aged Care Quality and Safety. Photo: Getty
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The Morrison government is considering introducing a specific levy to fund better aged care after two decades of cost cutting stripped more than $9.8 billion from the sector’s annual budget.

In an interview with ABC News on Tuesday morning, Aged Care Minister Richard Colbeck said the sector required “considerable additional resources” and the federal government would consider all 148 recommendations made by the royal commission in the May budget.

Both commissioners said the sector was underfunded but were split on how the government should bridge the multibillion-dollar funding gap.

Commissioner Tony Pagone said the Productivity Commission should formulate a “hypothecated levy” that sees each person fund their own aged care under a user-pays system.

Under one of the scenarios he presented, the levy would run up to 5 per cent for high-income earners.

But Commissioner Lynelle Briggs favoured a broad-based 1 per cent levy on income tax that funnels revenue into an aged-care improvement fund, and described a user-pays system as “a tax on frailty”.

Both commissioners said higher taxes were needed. Photo: Getty

Grattan Institute health program director Dr Stephen Duckett said the aged-care sector requires an additional $7.6 billion in annual funding to provide better care.

He described a user-pays system as inequitable and said “an increase in income tax through an aged-care levy was an appropriate way to find the money”.

The health economist also said that Commissioner Briggs’ idea would be easier to implement, as policymakers could imitate the design of the Medicare levy and the public already has an understanding of how it would work.

Modelling conducted by the Grattan Institute found that a levy of 0.5 per cent would yield about $5 billion in annual revenue.

And there’s reason to believe the public would support the introduction of such a tax.

The royal commission said the government must also invest in the workers that care for older Australians, through higher wages and better training.

Research conducted on behalf of the royal commission by Flinders University last year found that, on average, taxpayers were willing to pay up to an extra 3.1 per cent in income tax every year to ensure all Australians had access to high-quality aged care.

The same study also found that fewer than one in four aged-care residents felt their needs were always met.

National Seniors chief advocate Ian Henschke said although the sector clearly needed more funding, it was important for the government to reform the sector before throwing more money at it.

“Any increase in taxes to pay for aged care will first require government to demonstrate how it will reform the system,” he said.

No one wants to throw good money after a bad system that is inefficient and results in poor outcomes for older people.”

Mr Henschke said there was a need for greater oversight over aged-care funding so that taxpayers could be confident their money was being put to good use.

He said increasing the existing Medicare levy made sense but recommended establishing an expert panel to determine the most appropriate funding model.

“Given there is agreement on the need for a levy but disagreement on how to implement it, then the expert panel or Productivity Commission would provide the evidence base for the best option and seek to consult with the community,” Mr Henschke told The New Daily.

“One thing we know for sure is Australians want it fixed and are prepared to pay for it.”

Both the federal government and Opposition have kept the door open to supporting an aged-care levy down the track, while Greens leader Adam Bandt has called for the reversal of the sector’s privatisation and an immediate $3 billion injection.

Labor’s aged-care spokeswoman Clare O’Neil told Guardian Australia it was clear the sector needed additional funding but said Labor had no “fixed view” on how the government should bridge the monetary shortfall.

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