Should your inheritance pay for aged care?

Sam Hawley: Getting old. We can’t avoid it, but when we do should we really have to fork out more to pay for the care we might need? The government is looking to shake-up the aged care sector to make it much more user pays, particularly if you’re a wealthy baby boomer. Today, investigative journalist Anne Connolly on what that means for the family inheritance. I’m Sam Hawley on Gadigal land in Sydney. This is ABC News Daily. Anne, before we delve into this, I just want you to remind me how our aged care system works at the moment, because it was effectively privatised by John Howard back in the late 90s, wasn’t it?

Anne Connolly: That’s right. But up until then, it was mainly charitable, church-run organisations that ran aged care. And in 1997, John Howard changed the legislation to allow nursing homes to charge what were called accommodation bonds.

News report: The Federal Government’s belief in the user pays principle has now extended to nursing home care. The new system will mean the elderly will pay tens of thousands of dollars in upfront bonds for access to nursing homes.

News report: For those who’ve been working on government working groups, all they can see is two tiers of care will be established, one for the rich and one for the poor.

Anne Connolly: One of the other reforms that he made is he took out registered nurses, so there was no longer a requirement to have a registered nurse on duty. The private sector moved in and so there was a need to make a profit. And this was one of the driving forces that unfortunately led to some of the horrible issues of neglect that we saw all through the Royal Commission.

Sam Hawley: Yeah, and it was your reporting really that exposed some of that neglect and abuse in the lead up to the Royal Commission, your Four Corners program. So just tell me then, and since the Royal Commission, what has changed?

Anne Connolly: I mean, I think, you know, one of the things to say about once Labor came in in 2022, it put registered nurses back on duty 24-7. I mean, you still only need one, you could have 100 residents and still have one, but hopefully a lot of places have more. They’ve also brought in some other reforms, such as a star rating system. So they said that this is to ensure that the public knows exactly what’s happening inside their aged care facilities. So it’s rated out of five stars. But the problem is that that star rating system actually has been roundly criticised. In particular, homes are beginning four out of five stars, even when they failed, say, half of the standards of a regulator’s inspection. So what it means is a family looking can look at that and say, well, it’s four out of five stars, but they can’t dig down into the detail. And this has been a real criticism. I mean, how can you have a home failing half of its standards and still getting four out of five stars? It’s just misleading.

Sam Hawley: So they brought in this star system after the Royal Commission. But even if a facility gets five stars, what you’re saying is you can’t really trust that rating.

Anne Connolly: Well, this is another thing. You’re not going to find out if there have been terrible, serious incidents. I mean, at the moment, there’s 40 alleged sexual assaults or unlawful sexual contact per week in Australia. I mean, it is an absolutely astounding figure. In the first instance, people should be aware if their home is having these sorts of incidents. But then if you’re going to, on top of that, ask people to pay a lot more money, then you would think that they’re going to have to have a lot more transparency because they’re not going to want to spend a fortune on a home where these shocking incidents are happening on a regular basis.

Sam Hawley: So it sounds like transparency is still a major problem. Just tell me, Anne, how big an issue is the funding? Does more money mean a better service, if you like?

Anne Connolly: Well, I mean, it’s hard to know because we don’t really have that system. So the regulator and the government and the Department of Health has no oversight of what the providers are giving to the public. And in fact, it’s really hard to know exactly what state the sector is in because they’re constantly saying that they don’t have enough money. Well, since the Royal Commission, they’ve increased funding by about $5 billion a year. It used to be about $23 billion. And now it’s close to $30 billion per year because of the Royal Commission findings and then COVID. So they got a lot more money, but they’re still saying they don’t have enough.

Sam Hawley: There was, of course, a task force that was set up to look at ways to fund the system more effectively. And it’s now handed down its report. So just tell me who was part of that task force.

Anne Connolly: So there was an aged care task force set up last year. It was under Prime Minister and Cabinet. And Anika Wells, the aged care minister, chairs it. And it is essentially composed of aged care providers, ex-public servants, some financial and economic experts, and some people who are advocates or older people. And they were tasked with examining the funding options. Specifically, the option that came from the Royal Commission, which recommended an aged care levy. In reality, that was ruled out almost the day that the Royal Commission report came out. Neither government wants to impose a new tax. We’ve already got a levy for the NDIS. There’s a lot of controversy around that because the costs keep blowing out. They do not want to do it again. So when the task force says they’ve ruled it out, they’ve ruled it out very, very quickly. So they’ve come up with another option, and it’s the option that the aged care providers have always wanted to do. And that is to get money from people themselves, the family estates, if you like, homes, super. They want more of a cut of that to go back into aged care to fund the whole system. Not just their care, but the whole system.

Sam Hawley: So how exactly would that work? That’s a more user-pays system.

Anne Connolly: That’s right. I mean, it’s already a user-pays system because when you go into care, if you have a home, most of the time you have to sell it because you’ve got to pay the refundable accommodation deposit. And on average, that’s about $470,000. It can go up to a million dollars and more, especially in metro areas where houses are worth so much more. There’s a plan to eventually get rid of these refundable accommodation deposits and everyone just pays a rent. But for the foreseeable future, up until 2030-something, providers are now saying that under this proposal, they would be keeping 3% of the deposit every year for a maximum of five years. And there would be other payments on top of that. So if you’re talking about, say, a $500,000 deposit, that means an extra $70,000 over the five years. If you’re talking about a million, that’s $140,000 over the five years. But also, that’s on top of what people are already paying. So if they’re already paying $50,000 or $60,000 a year, that ends up being a lot more.

Sam Hawley: And it goes to inheritance too, doesn’t it really? Because a lot of people want to pass on their wealth to their families.

Anne Connolly: Well, it’s very interesting because right now, as we know, there’s a housing crisis. Virtually any young person you will speak to knows that they generally will not be able to get a deposit together or buy a house until they get their inheritance. So if we’re talking about that super or the value of the house just basically being whittled away in aged care costs, that’s going to pose some interesting questions. I mean, older people are already very reluctant to go into facilities like this. Everybody wants to stay at home. And in reality, the people that are going into those facilities are really unwell. They have very advanced dementia. Often they can’t walk. They’re seriously disabled. So they need a lot of care. And I guess the question is, how fair is it also to be saying, well, we want extra money from you now when you’re in the final stages of your life?

Sam Hawley: And it’s thought, although it’s not entirely clear, as you mentioned, that this proposal would really hit wealthy baby boomers the most. They’d pay the most.

Anne Connolly: Well, that’s exactly right. We’re talking about baby boomers because they’re the next people who will be going into aged care. But the people in there right now are self-funded retirees. Whether you would call them wealthy or not, they’re people, as I said, who’ve watched the value of their home grow. They’re paying maybe $40,000, $50,000, $60,000 a year already. So the idea of asking people to spend even more than that, you then have to ask the question, and this hasn’t been articulated, what are they getting extra for it? They’re not getting anything extra. They’re actually funding the whole system. And the responses we’ve had from people are along the lines of, why after all these years at the end of my life, am I forced to fund other people? I’ve paid taxes all my life. No other sector of society is asked to contribute anything in terms of when they need care. So for example, the NDIS is not at all means tested. With childcare, people do pay, but they do get some money back tax-wise. So we’re asking people at the very end of their life to pay a lot of money. We’re not quite sure how much. For unknown reasons, we’re told that it will improve care, but there’s no particulars on how that will happen. How do we know that this is going to go into care? How do we know it’s not going to go straight into their profit? There’s no transparency around how the money is spent. So what do we know? But what is interesting about it is the fact that both parties seem to support it.

Sam Hawley: Yeah, okay. So it seems like it will happen because it has bipartisan support.

Anne Connolly: Well, it does have bipartisan support and neither party, winning government, wants to be burdened with this. I mean, let’s be honest, the industry would probably love if there had just been a levy because that would just be money coming in that would be assured. That’s not going to happen. So this is the next best thing. And the government and the opposition is always going to support it because it lets them off the hook.

Sam Hawley: Yes. No extra taxes, which is pretty good at the polling booth. And that’s something the Minister, Anika Wells, was very keen to highlight.

Anika Wells, Aged Care Minister: And we rule out any new tax, any levy, and any changes to the treatment of the family home. Those were some red lines the opposition had expressed. And we do this in the hope that we’ll be able to work together in a bipartisan way to land a sustainable way forward for aged care.

Sam Hawley: So just tell me what are aged care providers saying about all of this?

Anne Connolly: Well they’re saying that it’s necessary, it’s warranted. They say that people have a lot of wealth and they should spend it on their care. They shouldn’t be holding onto it to hand on to the next generation. And that the system is failing because of the ageing population that we have. That this is the only way forward. And the other point to be made is this has all been done really fast, very, very quickly. By July 1 we’re supposed to have a new Aged Care Act in place. I am sure that the government and the opposition probably want this to be done and dusted pretty quickly. Because to be honest, no one really cares about aged care funding.

Sam Hawley: And what do you think this whole debate says about how we actually value people in Australia as they get older?

Anne Connolly: I think it says that as a society we do disregard the elderly as something of a bother. That they’re not relevant any longer. That they don’t have anything to contribute. They really don’t have a voice. We’re such a youth obsessed society. I think perhaps if young people started to think about what might happen to their inheritance, they might take a bit more interest in the debate because it could be whittled down somewhat.

Sam Hawley: And of course we all get old.

Anne Connolly: That’s right, we all get old.

Sam Hawley: Anne Connolly is an investigative reporter with the ABC. This episode was produced by Bridget Fitzgerald with audio production by Sam Dunn. Our supervising producer is David Coady. You may have seen that Vladimir Putin has been re-elected as Russia’s president for another term. If you want to hear more about that, look for What Will a Re-Elected Putin Do Next? That’s in your feed from last Friday. I’m Sam Hawley. ABC News Daily will be back again tomorrow. Thanks for listening.