What does aged care look like for younger generations retiring deep in debt?

Another intergenerational report is out, and with it, the perennial scare campaign about the sustainability of public services. 

According to Labor’s Aged Care Minister Anika Wells, aged care is now on the frontline. Speaking at the National Press Club on June 7, Wells ominously warned: “We must act now. The baby boomers are coming.”

Some in the media have picked up the message, dutifully painting a terrifying picture of an impending demographic crisis: a tsunami of senior citizens wiping out the nation’s prosperity with their seemingly outrageous demands of dignity, care and human rights. The AFR’s Phil Coorey ran a piece in July approvingly reporting on Wells’ desire for “generational equity”, which, he wrote, means “increasing means testing and user pays”.

Wells has also appointed an aged care taskforce and charted an aged care “reform roadmap”, supposedly aimed at “improving the quality of care for older people and making aged care equitable, sustainable and trusted“. 

The subtext here is all about costs. According to its terms of reference, one of the primary objectives will be to ensure that “aged care funding is affordable for the Commonwealth” and will “balance equity and fairness between older and working-aged Australians”. 

Who’ll be paying?

The “big consultation process” that Wells promised has not quite lived up to the hype. In a series of pointed questions in the department’s aged care engagement hub, the taskforce asks: “What costs do you think consumers in aged care should contribute to and to what extent?” 

The rhetoric assumes that aged care is somehow a nirvana of public provision. Far from it. User contributions accounted for 27% of aged care provider revenue in 2020-21. Older people and their families battle a Frankenstein’s monster of complex means testing and eligibility arrangements during one of the most stressful times of their lives. 

The decision by the Abbott government to introduce consumer contributions in 2014 ushered in a sub-industry of aged care brokers and financiers, ever ready to spruik reverse-mortgages or shepherd pensioners through Centrelink’s home equity access scheme, which exposes debtors to compounding fortnightly interest payments of 3.95% until the debt is clear. 

The looming demographic cliff of ageing baby boomers that Wells is so worried about is probably not the long-term problem facing aged care. The intergenerational report predicts that while the old-age dependency ratio — the ratio of older to working-age Australians — has remained on a steady incline since 1982, most boomers will have worked their way through the system by the 2030s. 

On the other hand, asset-poor gen-Xers and millennials are in real trouble. Saddled with HECS debt, low rates of home ownership, and uncontrolled rent rises, middle-aged millennials might have put away some super, but are well behind their parents when it comes to generational wealth levels. This exposes them to major risk in a system built around the assumption that most older Australians will own their own homes. 

One-third of people aged 35 to 54 are renters, which leaps to three-fifths for people under 35. Increased superannuation contributions will be a buffer for some, but many will reach retirement age deep in debt, or at the mercy of the private rental market. 

“Changing trends in home ownership rates and in mortgage indebtedness present a fiscal risk to age pension spending in the future and may impact patterns of how superannuation is drawn down,” the intergenerational report admits. 

Who uses care, and why?

It is important to understand who uses aged care and why. Like health, aged care is an essential service. Characterising aged care as a lifestyle choice ignores the hard truth that people are in residential aged care because they need 24-hour care. 

Forty-one per cent of entrants to permanent residential care entered permanent care within three months of their aged care (ACAT) assessment. Such is their level of frailty and ill-health, people admitted to permanent residential care generally live only for another two years. 

Governments say they want to let people remain in their own homes. However, this is not always possible. Australia’s home-based care model already relies heavily on unpaid family carers to fill the gaps; 29% of people use home care to access allied healthcare (for example, physiotherapists and occupational therapists), while 13% require home nursing. More than one in five people are on the highest level of support available. It is reasonable to expect that people receiving this level of care require daily nursing. 

Providing dignity in our ageing society will become more expensive. But as a society we can afford better quality aged care if we choose to. After all, the intergenerational report forecasts a big increase in defence spending. It also implausibly insists that long-term taxation levels will remain at 24% of GDP.

The Albanese government’s ideas for aged care “sustainability” are all about placing the burden on individuals. But Wells and Treasurer Jim Chalmers could equally raise taxes if they really wanted to. The Health Services Union took a proposal for a 0.65% healthcare levy to the ALP national conference. A whopping 85% of Australians support a levy to fund aged care. 

For gen Xers and millennials facing increasingly uncertain retirements, the sustainability rhetoric looks like just another aspect of a profoundly unequal generational skew. Wells’ aged care taskforce says it wants “to ensure that the aged care system is fair and equitable for all Australians”. A user-pays system won’t be either. 

Would you be happy to pay an aged care levy? Let us know by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.