Levy to make aged care sustainable

Cartoon by Bethanie Ray.

A compulsory social insurance scheme similar to superannuation could be used to pay for aged care services, according to a major West Australian provider.

Modelling conducted by KPMG on behalf of the Bethanie Group predicts that government expenditure on aged care will soar to $115.7 billion by 2050.

With no plans to meet this need, the group has investigated the introduction of a levy to provide care funding in residential and community settings, along with an accommodation safety net.

The Bethanie Model suggests the introduction of a 1.41 per cent levy on all Australian incomes this year, rising to 2.32 per cent by mid-century.

The CEO of the Bethanie Group, Wayne Belcher said existing funding arrangements were falling short.

“Currently the government provides about $9.5 billion to aged care services across the country which is supplemented by a range of state funds and user contributions but it is not adequate,” he said,

“The enormity of comment about the crisis and the insufficiency of funds in aged care over the last decade has been compelling.”

Similar social insurance schemes for aged care services have been in operation in the Netherlands and Japan for decades.

The KPMG report does not say how the levy would be collected but Mr Belcher suggested it could be administered in a similar way to superannuation or the Medicare Levy.

“I think the important thing is that we start talking about people making an equitable contribution to their own care,” said Mr Belcher.

“It could be paid out of PAYG earnings or through superannuation. There are other mechanisms that could also be used.

“What we need to do is think seriously about creating a more sustainable system.”

The Bethanie Group will submit its model to the Productivity Commission’s aged care inquiry before the 30 July deadline.

Mr Belcher said the Bethanie Model is compatible with calls for greater consumer control in recent reform proposals.

“One of the things that underpins our model is that the payment for the care component should be exactly the same for someone in residential care as for someone in community care,” he said.
 
“Until we get to that point – or very close to it – we are really not offering choices that are going to enable us to provide real flexibility.
 
“[This model] could of course simply fund more of the same. But what a missed opportunity if we don’t think about greater choice in services and breathe more flexibility and choice into service delivery.”

“This should be used as a lever to drive and enable more choice for consumers.”