New modelling undertaken on behalf of the Health Services Union indicates that an additional $20 billion over four years is needed to provide high-quality aged care, and these extra funds could be raised by increasing the Medicare levy from 2% to 2.65%:
HSU national president and NSW secretary Gerard Hayes… said HSU’s Medicare proposal would deliver the necessary funding and, if there was a better idea out there, he would “love to hear it”.
I staunchly oppose raising the Medicare Levy to fund aged care for the following reasons:
- Over-65s are the wealthiest demographic in Australia, with over 80% owning their homes, whereas home ownership has collapsed for younger Australians.
- Over-65s have experienced by far the largest increases in wealth over the past 20 years, whereas the wealth of younger working Australians has stalled.
- Over-65s are paying far less tax today than they did 20 years ago.
- Raising income taxes by lifting the Medicare Levy would worsen the inter-generational divide by punishing younger workers for the benefit of the wealthy elderly population.
HSU’s Gerard Hayes says he would “love to hear” a better funding proposal. Well, here are two.
One option is to implement a HECS-style subsidy that would pay for people’s aged care upfront and then recover the cost from their estate when they die.
Under this proposal, every older Australian would receive the aged care they need without slugging younger working Australians with tax increases.
Strangely, the last time I suggested this proposal I was attacked by various readers in the comments section.
My counter-point to these readers is the following: what is wrong with having the government fund aged care upfront and then clawing the money back from the richest generation in history when they die? Why is this policy proposal less fair than funding aged care by lifting the Medicare Levy on working Australians?
Another option is to follow the Grattan Institute’s prescription and pay for aged care by winding back “excessively generous tax breaks” for older Australians.
According to Grattan:
- Only one in six people aged over-65 pays any income tax.
- Superannuation tax breaks cost around $35 billion a year and are growing rapidly.
- Superannuation earnings in retirement are currently untaxed for people with superannuation balances below $1.6 million. They should instead be taxed at 15%, which would save the budget some $4 billion a year in today’s dollars.
- Through the Seniors and Pensioners Tax Offset (SAPTO) and a higher Medicare levy income threshold, seniors pay less tax and get a higher rebate on private health insurance than younger people on the same income. These measures are unfair and should be abolished, saving the budget $700 million a year.
Regardless, simply lifting income taxes via the Medicare Levy to pay for aged care is lazy and inequitable policy.
Doing so would unfairly impact younger Australians, who are far less likely to own a home and are worse off financially than retired Australians.
