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Aged care funding overhaul

A new government initiative encourages families to keep the elderly at home and out of nursing homes.

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AN OVERHAUL of the aged-care sector to be released today will enable tens of thousands more people to be cared for in their homes and will inject $270 million into dementia diagnosis and care.

But the reform, a signature element of the budget on May 8, will introduce a co-ordinated, user-pays system, including requiring those with greater means, such as self-funded retirees, to pay more for their care. Costs will be capped and there will still be a government contribution.

There will also be options to reduce pressure on people to sell their homes to pay for care or secure a place.

People will be able to pay with a lump sum bond, raised perhaps by selling their home or from savings; or periodic payments, raised by either selling their home and banking the proceeds, reverse mortgaging the property, or from savings or other assets. People can combine a lump sum and periodic payments.

To prevent people being forced to conduct a fire-sale of their house to secure a scarce spot in an aged-care home, there will be a cooling off period allowing them to enter the home and then work out how they want to pay.

The Prime Minister, Julia Gillard, promised to reform aged care before the election after the Productivity Commission found last year the system was ill-suited to cope with a rapidly ageing population.

Under the reforms, money will be taken from funding now used to subsidise care in nursing homes, which has blown out by $2.3 billion, to fund care services for ''tens of thousands of people'' who wish to stay in their homes.

''If you want a nursing home place, we will make it easier to get one,'' Ms Gillard said. ''If you want care in the home, we will make it easier to get that care. More people will get to keep their home and more people will get to stay in their home.''

Of the $268.4 million to be set aside for dementia over five years, $164.3 million will be paid as supplements to those in both aged-care facilities and at home. The rest will be used to promote earlier diagnosis of the disease.

The aged-care package will be one of the few budget measures to involve any significant new spending because the main theme will be striving to return to surplus.

Yesterday Ms Gillard insisted the Reserve Bank was independent when she was accused of pressuring it to drop interest rates in return for a surplus budget.

''What we can do as a government is to have the right budget settings for the economy today, and that is to bring the budget to surplus,'' she said.

''It also means it gives the Reserve Bank more room to move should it choose to do so.''

As Ms Gillard argued the case for a surplus, one of the world's most influential investors endorsed the government's spending discipline and pledged to continue buying Australian government debt.

US firm GMO, which manages $US97 billion ($93.4 billion), said Australia's debt was attractive to foreign investors because government spending was sustainable.

The head of asset allocation at GMO, Ben Inker, wrote in a note to investors: "The only bonds we have much fondness for are Australian and New Zealand government bonds because only those countries give a combination of a decent real yield and government spending policies that are sustainable in the long run."

Ms Gillard criticised the Minerals Council of Australia for running full-page newspaper advertisements warning the government not to increase the tax burden on miners.

Despite speculation to the contrary, the government has no plans to pare back the miners' diesel excise rebate by more than the already-announced 6.2¢ a litre, nor abolish their exploration or accelerated depreciation concessions.

with Clancy Yeates

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