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Elderly Australians to pay more under aged care deal struck by government

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In short:

New aged care entrants will make larger means-tested contributions in a "once in a generation" reform.

Under the reforms, three in ten full pensioners and seven in ten part pensioners entering residential care will be required to make greater contributions.

What's next?

The reforms already have the support of the Coalition, after months of back-room negotiations, but they will be interrogated through a senate inquiry.

A deal to reform aged care has been struck between the federal government and the Coalition, including new requirements for many elderly people to pay more for their own care.

The reforms will mean new entrants will have to make larger means-tested contributions to their care — but a "no worse off" principle means the contributions of anyone already in the aged care system will remain unchanged.

In residential aged care, new entrants will pay a supplement if they have more than $238,000 in assets, $95,400 in annual income or a combination of the two — but the treatment of the family home will remain unchanged.

The price of rooms in residential facilities will be increased, with providers able to charge up to $750,000 for a room without seeking special approval, an increase of $200,000 above the current limit; that price will also be indexed over time.

And residential aged care providers will be able to retain 2 per cent of accommodation deposits from residents per year for five years, with almost half of providers currently making a loss from accommodation.

Three-in-ten new entrants receiving a full pension and seven-in-ten receiving a part pension would be required to make greater contributions under the reforms, with fee structures targeted at higher means residents.

New home care scheme to help 300,000 more Australians

For home care, a new Support at Home program will take effect from July next year, which the federal government says will benefit hundreds of thousands more Australians over the next decade.

The reworked program will provide support for nursing care, occupational therapy, supports like help with showering or taking medications, and everyday living like cleaning and gardening, as the government aims to help more people stay in their homes for longer.

Those packages will also be subject to greater means testing, which will vary depending on individual circumstances.

Full pensioners will pay 5 per cent of the cost of their supports, and 17.5 per cent of their everyday living costs.

Self-funded retirees will pay 80 per cent of their everyday living costs, and half of costs that go to supporting their independence.

All residents will have their clinical care costs completely covered.

Anthony Albanese speaks at a lectern with Anika Wells and Jim Chalmers beside him.

Anthony Albanese, Anika Wells and Jim Chalmers announced reforms to the aged care sector they described as "once in a generation". (ABC News: Adam Kennedy)

The government also proposes to lift the lifetime cap on how much an individual can pay for non-clinical care costs from around $80,000 to $130,000 across home and residential care.

Aged Care Minister Anika Wells said the new scheme would provide support for 300,000 more Australians to receive care at home, and reduce wait times for entry into the scheme.

The reforms already have the support of the Coalition, who have been in back-room negotiations with the government for months.

$12.6 billion in savings over 11 years

The federal government will save $12.6 billion over the 11 years from the reforms, which will include a "no worse off principle", meaning no person already in aged care will have to make a greater contribution to their care.

It will remain the primary funder of aged care, contributing $3.30 for every $1 contributed by residential care recipients and $7.80 for every $1 contributed by home care recipients.

Overall the reforms will reduce the share the government contributes to residential care by 3 per cent, to 73 per cent, and its share of home care costs by 6 per cent, to 89 per cent of sector costs.

And while the government will save billions over the decade, its reform will require an increase of spending of $930 million over the coming four years.

That money will help to enshrine new laws to protect the rights of older Australians, including stronger investigative powers, a new complaints commissioner and greater obligations to hold providers and people in leadership positions accountable.

"Our reforms will create better and safer care, [and] help reduce the fear of a system that has been neglected for far too long," Ms Wells said.

Prime Minister Anthony Albanese described the reforms as the "greatest improvement to aged care in 30 years".

"This is about caring for the generation that cared for us," Mr Albanese said.

"Reforms like this don't happen every day, they are once in a generation."

Shadow Minister for Aged Care Anne Ruston said the opposition welcomed the bill being introduced in parliament after lengthy negotiations. 

"We remain disappointed by the lack of transparency that has been shown by the government through this process, with conversations forced to occur behind closed doors," she said.

"We look forward to now having an open conversation with older Australians and the aged care sector about the government's proposed reforms."

The royal commission into aged care recommended an Aged Care Act when it handed down its report more than three years ago.

The federal government had already moved on several other recommendations of the royal commission, including requirements for all facilities to have a registered nurse on duty at all times, and improvements to the rules governing providers.

But the future of how it would pay for aged care, the fourth largest government expense at a cost of about $32 billion last financial year, remained uncertain.

Only payments to the states and territories, pensioner payments and the National Disability Insurance Scheme rank as greater expenses, with aged care similar to the NDIS growing in cost well above the rate of economic growth.

The reforms are expected to slow the growing cost of aged care from rising at a rate of 5.7 per cent each year to 5.2 per cent.

The Older Persons Advocacy Network welcomed the reform deal as a package that could ensure high quality care and financial viability for the sector.

"The new Aged Care Act has the potential to enhance quality standards, increase protections for older people, and create a financially sustainable aged care system for future generations," its CEO Craig Gear said.