Coalition backs Labor’s heavy lifting on aged care, hoping to reap the benefit down the track

In agreeing earlier to the Albanese government’s changes to the NDIS and now endorsing its aged care reforms, Peter Dutton is calculating it’s easier for Labor than the Coalition to find big savings that produce serious “losers”.

There was only a small risk for the Coalition in embracing the NDIS reforms. These are largely focused on tackling rorts and reducing eligibility, and the political pain is mostly immediate and directed at the government.

The changes to aged care are, in political terms, rather more complicated for the opposition.

People already in the system will be grandfathered. But there’ll be many who know they do or could face the prospect of entering the aged care system in the not too distant future. They and their families will be looking at paying more. And this is when everyone’s attention is on the cost of living.

Importantly for the Liberals, those particularly hit will be self-funded retirees who, as some Liberals noted at Thursday’s Coalition parties meeting, are “our people”.

Governments of both complexions have found aged care policy a nightmare. By agreeing to the deal, the opposition has limited its ability to attack the government over the issue at the coming election, although some in Labor will fear it could still find some room to do so. The final package was rushed through caucus, where there were a handful of questions but no dissent.

Essentially the Coalition has sacrificed a possible short-term political advantage for a longer-term budgetary gain for a future conservative government.

This week saw a huge flurry of government activity, on issues ranging from social media to hate speech. It’s as if the government looked up at the clock and saw time was rapidly getting away from it for passing legislation. Somehow it has slipped up in organising its program.

But what loomed largest was tying down the aged care deal.

It’s been slow in coming. Although the Coalition had signalled early on that it was likely to be up for an agreement, it was happy to string things out, both to press for concessions and to make the government sweat.

The opposition said it had extracted a number of “significant changes” in the negotiations, among them grandfathering arrangements, the removal of criminal penalties that it said could have seen staff leave the sector for fear of such punishments, as well as the removal of provisions that would have “forced unionism into every aged care home”.

Like the NDIS changes, the aged care reform is crucially about sustainability – the budget bottom line.

The key net numbers from the package are a $930 million spend over four years and a $12.6 billion saving over the coming 11 years.

The government is aiming to cut the rate of increase in spending on the NDIS from around 11% to 8% annually by 2026.

On aged care, it estimates that as a result of its reforms, spending over the decade to 2034-35 will fall from a projected average annual growth of 5.7% down to 5.2%. As a share of GDP it would decline from 1.5% to 1.4% – despite the number of participants in the system rising.

The NDIS spending has been spiralling out of financial control because of flaws in the scheme that were not corrected. It was never meant to cover the number or range of people and disabilities that have come into it.

The aged care system’s unsustainability is driven in large part by demographics – Australia’s ageing population.

The government points out that over the next four decades, the number of Australians over 65 is set to more than double. Those over 85 will more than triple. By 2050 the residential aged care sector will need $56 billion in capital funding to upgrade and expand accommodation.

As the government puts it bluntly, “current funding arrangements  are not sufficient: in 2022-23, 46% of providers made a loss from accommodation”.

Under the government’s changes, there will be larger means-tested contributions for new entrants. But half of new residents will not have to contribute more – these include seven in ten full pensioners and one in four part pensioners.

For home care, which more and more people want, the government will pay for all clinical care, such as nursing and occupational therapy. Based on their means, recipients will contribute to the help they receive to live independently (such as assistance to shower and dress) and with ordinary living costs, including cleaning, gardening and preparing meals.

While some of the potential losers will be unhappy with the changes, many experts and observers will see it as a good policy to have those who can afford it pay more for their care.

Joseph Ibrahim, professor of aged care at La Trobe University, is not one of them. Rather than expanding user pays, he believes a more equitable system would be to have the community generally contribute what more is required.

Ibrahim sees a user pays system as unfair, and casts aged care as similar to schooling and health care.

“We don’t apply a user pays system to our schools where high need students pay more. In the health system, people who are in intensive care don’t pay more than those who go to the outpatients section.

"No one chooses to have a disability that comes with cognitive or physical decline. User pays is punishing people. They are seen by politicians as soft targets.”

Ibrahim plays down the argument about the increasing proportion of GDP the aged care system is taking up, saying this could be accommodated by making adjustments to other priorities.

While Thursday saw the “deal” done, the political story is far from over. “We look forward to now having an open conversation with older Australians and the aged care sector about the government’s proposed reforms,” the Coalition’s aged care spokeswoman Anne Ruston said.

There is a Senate inquiry ahead. Stakeholders will pore over the details. Those seeing themselves as losers will raise their voices. Baby boomer heat could come onto both sides.