Extending the Pillars of Social Policy Financing to Aged Care

Against the background of a recent resounding rejection of substantial increases in user contributions for funding long-term residential care in Australia, and especially of measures that could require realization of housing assets, this paper examines the scope for extending to long-term care the "pillars" approach to financing of retirement incomes and health care. The two latter areas are funded through pillars of general revenue, private insurance, social insurance by way of compulsory levies, and direct user contributions, whereas long-term care is financed only by a large pillar of general revenue and a smaller pillar of user contributions which are themselves drawn largely from transfer payments. Examination of the various pillars in each area suggests that there is limited scope for extending private insurance and user contributions in long-term care, but that there are several social policy grounds for incorporating a social insurance pillar. However, while discussion of social insurance options is growing in several quarters, the current political climate offers little prospect for the adoption of such a scheme.