The Actuaries Institute has launched its latest Green Paper, titled Aged Care Funding: Assessing the Options and Implications. The Green Paper, commissioned by the Institute and written by actuaries Gillian Harrex, Andrew Matthews, Hadyn Bernau and Kylie Hogan, calls for a considered conversation about funding of the Aged Care system.
The Institute projects Aged Care costs will increase 7% pa over the next 20 years, likely the fastest-growing line item in the Commonwealth budget and well above that projected in the Intergenerational Report, as Baby Boomers move into extreme old age.
The Green Paper finds a potential challenge in Commonwealth Government funding at 2040/41 with a shortfall of about $9 billion in 2020/21 dollars (nearly 0.4% of GDP), notwithstanding the significant additional funding announced this year.
“Our research indicates that the cost and funding pressures at government and society levels will be significantly greater than currently projected and that these will be most acute over the coming 20 years due to the safety nets and projected demographic, social, and health trends,” the paper said.
|Ahead of the Green Paper’s release, Gillian Harrex and Andrew Matthews joined the Actuaries Institute Podcast to discuss the key points outlined in the paper. Gillian and Andrew were interviewed virtually by Vanessa Beenders, who is the Executive General Manager, Public Policy & Professionalism at the Actuaries Institute.
This poses significant funding challenges on the Commonwealth budget over time with current policy settings and raises with important intergenerational considerations.
The Green Paper provides a framework for the funding conversation and calls out two specific areas where the sharing of costs between the government and consumer could be worth further investigating.
It also supports the introduction of a capital standard and recommends better financial regulation, including a future viability component and disclosure. These too will build better Aged Care.
The Green Paper highlights better financial regulation of the sector will enable more agile responses to ensure the continuation of quality care and to lessen the risk to consumers and taxpayers of the costs of rescuing failed service providers, or an Aged Care home.
As noted by Gillian in the podcast, “the financial challenges that are created by aged care costings are well suited to the work of an actuary”.
Actuaries are experienced in projecting costs, especially when it involves thinking about demographics and how populations age. They are also experienced in thinking through funding solutions that are sustainable and the accompanying regulatory framework and settings.
Andrew adds, “It’s what actuaries do in a lot of other industries.”
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