By Yasmin Noone
Older Australians will no longer be forced to sell their family home in order to pay for residential aged care under a new system proposed by the Productivity Commission (PC) in its final Caring for Older Australians report.
However, residential aged care will hardly be free.
The final report, which is currently being considered by the federal government, suggests a new ‘user pays’ system of aged care, where seniors will be required to pay up to $60 000 (up to 25 per cent) towards their own residential aged care expenses.
How seniors pay the cost of their care will be entirely up to them, the report states, as under the proposed system more options for payment will be made available.
Individuals will be able to choose to contribute by paying either a daily charge, an accommodation bond, or they can draw against the value of their home through a new government-backed reverse mortgage-type scheme.
In the report, the PC recognises that this kind of scheme would not be attractive to everyone, especially those nervous about their house’s worth over time (for various reasons). So, the report states, the proposed scheme will therefore protect people from owing more than their house is worth by setting a credit limit.
“If the outstanding balance and accumulated interest reached the minimum limit set by the Australian Seniors Gateway Agency, the interest rate would fall to zero, and no further draw down would be permitted under the scheme,” the report said.
“The outstanding balance of the line of credit would become repayable upon the disposition of the former principal residence including upon the death of the individual, except where there is a protected person permanently residing in the former principal residence.”
Interest paid on the government-backed loan is set to be kept on par with inflation.
The report also places a strong focus of enabling older adults to stay in their home for longer so that the time spent in a residential aged care facility and costs are kept minimal.