‘Time they don’t have’: Why Labor’s aged care fix fails vulnerable retirees

In January last year, the government increased the market price cap on aged care beds from $550,000 to $750,000. It turned the aged care myth of “if I don’t have any money, I won’t get in” into a reality.

That $200,000 stroke of a pen created a funding gap that priced out many financially disadvantaged residents. Some of those senior Australians have been waiting in hospital beds for a change to the policy that would mean they could access the care they need. The federal budget will take them halfway there.

When the market price cap increased, the government did not increase the amount it effectively pays providers for residents who cannot afford those prices – known as low-means residents.

So while providers could receive the equivalent of a $750,000 refundable accommodation deposit (RAD) from wealthier residents, the government support attached to low-means residents remained equivalent to around $300,000.

The result was simple: low means residents became financially unviable for aged care providers.

To receive the maximum accommodation supplement for low-means residents, providers already had to jump through significant hoops. Homes needed to be newly built or substantially refurbished and maintain at least 40 per cent low-means residents.

Aged care is underfunded, and the cost of that underfunding does not disappear – it simply shows up somewhere else.

Even then, the funding gap had become enormous. Providers could receive more than double the accommodation fees from a market-price resident than from someone who was government-supported. The maths simply didn’t add up.

It is why even large not-for-profit providers, including Uniting, warned that the system was becoming unsustainable. They were not saying they did not want to care for disadvantaged older Australians – they were saying they couldn’t afford to.

The consequences have been devastating. Some older people have remained stuck in hospital beds for months waiting for an aged care place that providers can afford to offer them. This year’s budget attempts to address part of the problem.

As part of a $3.7 billion aged care package, the government announced funding to incentivise 5000 new beds a year until 2029. The beds do not exist yet, and the industry estimates the current shortfall is already around 10,000 beds.

The budget also includes a $1.1 billion restructure of the accommodation supplement. From March 2028 homes with more than 60 per cent low-means residents will be eligible for payments of up to $127 a day, equivalent to around $580,000 as a lump sum. It is a significant improvement. But it is almost two years away and still falls short of the $750,000 (indexed) market price cap.

The reality is aged care is underfunded, and the cost of that underfunding does not disappear – it simply shows up somewhere else. It shows up in families providing unpaid care while juggling work and their own financial pressures.

It shows up in older Australians paying privately for support because they cannot wait for government services. It shows up in state hospitals, where around 3000 older people are currently stranded in beds because there is nowhere else for them to go. And it shows up in the lives of older Australians themselves, many of whom wait months, sometimes more than a year, for the care they need.

The budget changes will help, but they don’t start until March 2028. For older Australians waiting for care today, that is not just a policy timetable – it is time they may not have.

Rachel Lane is the author of Downsizing Made Simple, a book and website aimed at demystifying downsizing.

• Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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