Keating proposes HECS-style loans to fund aged care

A HECS-style loan system should be introduced to help fund Australians' aged care, former prime minister Paul Keating says.

People would be given credits towards their aged care and their estate then used to pay off the loans after they died, Mr Keating told the Royal Commission into Aged Care Quality and Safety.

"We're not forcing anyone out of their home in old age, we're not obliging an aged person to negatively mortgage their home," he said on Monday. "You're not asking members of families to chip in and pay for their relatives. I think such a system has a lot of advantages."

The latest round of royal commission hearings is looking at funding and prudential regulation in the aged care sector.

Senior counsel assisting Peter Gray, QC, told commissioners that aged care providers were not required to report how much they were actually spending on care.

"Reporting is inadequate," he said.

"The current funding system does not seek to establish whether funding is matched to need or the cost of supplying the care that would meet need."

Mr Gray said providers followed a vague requirement of "adequate and appropriately skilled" when it came to addressing staff numbers and their qualifications.

The retirement system should morph into an aged care system.
— Paul Keating, former prime minister

Commissioner Tony Pagone asked Mr Keating if his HECS-style proposal could be seen as a death tax by requiring people to pay off their loans with their assets.

"Putting on my former hat as a tax lawyer, I can see lots of people trying to make sure they don't have the assets there that can be called upon," Mr Pagone said.

Mr Keating said the government would have to introduce policies to make sure that didn't happen.

Similar to HECS, Mr Keating said the loan would not have to be repaid if it couldn't, like university students who never meet the income threshold to start paying off their debt.

Brick and mortar assets, superannuation, cash and other investments would all be called upon after the person died to pay off the loan, he said.

"In such a proposition you couldn't think of much political opposition from any quarter," Mr Keating said.

The former prime minister, the man behind Australia's compulsory superannuation, said he changed his thinking on his previously proposed "longevity levy".

The levy would tack 0.5 per cent to 1 per cent extra on to super payments to fund an insurance scheme for Australians once they passed their mid-80s.

But he said such a system would be politically impossible now.

"You'll get the moans of the small business organisations and the violin playing by members of the Liberal Party backbench," Mr Keating said.

Even if it were introduced today, he said it wouldn't be able to address current shortfalls in aged care, such as 18-month wait times for high-level home care packages.

He said with Australians living longer, some living well into their 90s or past 100, people's superannuation couldn't be expected to support them once they retired.

"The retirement system should morph into an aged care system," Mr Keating said.