Aged Care

Few issues occupy the minds of baby boomers more than ageing.

The concern is not just with our own mortality and retirement, but also about what to do with Mum and Dad as they become increasingly dependent on us.

Of course, we are hardly the first or last generation to confront this dilemma.  It's just that there is so many of us;  our expectations are so high and so many of us are unprepared.  Also our parents, thanks to the wonders of modern medicine, live decades in retirement rather than the few years experienced by their parents.

While advances have been made in some policy areas notably retirement incomes, other policy areas in particular residential aged care has floundered.  Hopefully a series of studies launched this week by the Myer Foundation will spur debate and reform in this area.

One thing the studies make clear is that the status quo is not sustainable.  Unless thing change there simply will not be enough money available to maintain an acceptable level and quality of aged care services.  Moreover, while the studies are exploratory;  they make it clear that while governments should remain the dominate funders of age care, individuals need to make a greater contribution were they can.

More specifically the studies will rekindle debate about the need to use the family home to fund residential care.

Back in 1997 the Federal Government developed wide ranging reform to residential care including higher standards, greater investment and a rigorous accreditation process.  The Government had proposed that individuals in high level care aged homes be charged an asset tested capital bond and that the family home being included asset test.  A huge protest ensued lead in large part by the babyboomers who stood to inherit the home.  The reforms are now being implemented without the funding and providers are now exiting high level residential care.  The government has made up some of the short fall in funding but not all.

The studies show that many elderly have the capacity to contribute.  The average wealth of people over 65 years of age is around $225,000 per person and $400,000 per couple.  Most (71 per cent) owned their own home and the home is easily their most valuable asset.  Other studies show that people entering retirement home seldom return to the family residency and most sell, rent or give the home over to others.

The studies indicate that there are various mechanisms available to extract value from the family home to fund the capital bond without forcing the complete sale of the home.  The bond would not take all or even the majority of the retiree assets.

The study also highlights the need for long term incentives to save.  If people think that the states will pick up the bill, they will not save.  It is important therefore to send a signal to the pre-retirement population that they will be called on to contribute to their retirement cost.  Given that real estate is also the most importance investment vehicle for the young, it should be considered in the funding of their post retirement spending.

This will dismay many babyboomers, but its logic and fairness is overwhelming.

ADVERTISEMENT