The federal government has unveiled a once-in-a-generation reform package for aged care, which is designed to provide better outcomes for older Australians while ensuring the financial viability of the system.

Aged care is one of the biggest expense items in the Budget, and, according to the government, without action, spending would more than double as a share of GDP over the next 40 years.

As a result of the reform package, the government claims that, by the 2034-35 financial year, aged care spending as a share of GDP will fall from 1.5% to 1.4%, “even as the number of participants and the quality-of-care increases”.

The two key elements of the government’s reforms are the new Support at Home program and changes to Residential aged care fees.

Support at Home

Support at Home, which will come into effect on 1 July 2025, is designed to help more Australians remain independent, in their home and their community for longer.

The program will provide support for:

  • Clinical care (e.g. nursing care, physio, occupational therapy)
  • Independence (e.g. help with showering, getting dressed, transport)
  • Everyday living (e.g. cleaning, gardening, shopping, meal preparation)

The government will pay 100% of clinical care services, while individuals will have to make a contribution to their independence and everyday living costs.

“How much someone contributes will be based on the age pension means test and highly dependent on their personal circumstances, from the level of support they are assessed to need, to their combination of income and assets,” the government says.

A lifetime contribution cap will apply across the aged care system and means no one will contribute more than $130,000 to their non-clinical care costs – whatever their means or duration of care – with every Support at Home contribution counted towards the cap.

The government says the benefits of Support at Home will include:
  • Support for an additional 300,000 participants in the next 10 years
  • Shorter average wait times to receive support
  • More tailored support, with eight ongoing classifications all the way up to about $78,000 a year
  • Support for home modifications, with up to $15,000 to make homes safer
  • Fast access to assistive technology, like walkers and wheelchairs, including a new equipment loan scheme

Support at Home participants will also have expanded access to restorative support to get back on their feet after an illness or injury, through a 12-week program that works with a team of allied health and other professionals.

There will also be support for palliative care at home, which has not previously been available.

“When current Home Care participants transition to Support at Home, from 1 July 2025, they will maintain the same level of funding and retain any unspent funds,” the government says.

Under the new Support at Home program, participants will not be able to “stockpile” funds as only minimal rollovers seem to be allowed each quarter. That is, the funding must be used up or you will lose those funds. However, funding for large equipment (which would previously have been a legitimate reason to build up unused funds in the home care package) will be funded from a different source. This is fairer and allows funding to be better allocated to those who need it.

“Everyone who, as of 12 September 2024, is receiving a Home Care Package (a package), on the National Priority System, or assessed as eligible for a package, will make the same contributions, or lower, as they would have under Home Care arrangements. They will stay on the existing contribution arrangements when they move to residential care, unless they opt to move to the new program.”

Other positive outcomes also include the fact that there will be a cap of 10% (of the package budget) that can be used for care management (at present some providers charge substantially more in administration and management) and there will also be caps or maximum prices that can be charged for a particular service, which should provide more consistency across providers.

Aged care

In the next 40 years, the number of Australians aged over 65 is expected to more than double, and current funding arrangements will not be able to cope with the increased demand for aged care services, according to the government.

The government wants to help aged care providers attract the investment they need to keep current centres open, improve quality and build new facilities. As a result, it has introduced a series of changes, including:

  • A higher maximum room price, which is indexed over time
  • The retention of a small portion of refundable accommodation deposits by providers
  • Indexation of Daily Accommodation Payments
  • Changes to the means testing with two daily fees now means tested, but in a different manner and with different caps

Government projections show that half of new residents will not contribute more under the new consumer contributions:

  • 100% of “fully supported” residents will not contribute more
  • 75% of full pensioners will not contribute more
  • 25% of part pensioners will not contribute more

The new contributions and accommodation arrangements will apply only to new entrants to residential aged care from 1 July 2025. Everyone in residential care on 30 June 2025 will maintain their current arrangements until they leave care.

Also, the government has pledged:
  • A no-worse-off principle means people already in aged care won’t make a greater contribution to their care
  • The treatment of the family home won’t change under the new legislation.

 The changes that will occur as one set of rules is replaced by another mean it will be vital to plan ahead and seek appropriate advice.