Key points
- The new Support at Home (SaH) program asks older Australians who can afford it to contribute to the cost of their own care.
- International evidence shows aged care co-payments could paradoxically deter necessary care and eventually push people into needing more expensive services.
- The rollout of SaH in Australia is an ideal opportunity to assess whether co-payments could ease the burden on the public sector.
Australia is in the middle of the biggest overhaul of its aged care system in decades.
The centrepiece is the Support at Home (SaH) program which launched in November 2025, introducing a significant new feature: older Australians who can afford to will now be asked to contribute to the cost of their own care.
These 'co-payments' - out-of-pocket contributions for non-clinical services like help around the house, social support and personal care - are a landmark shift in how Australia funds home-based aged care.
Whether the reform is smart or risky depends on something we don't yet have: rigorous evidence.
The case for asking people to contribute
The policy rationale for co-payments is well established in health economics.
When services are free, people may use more of them than they strictly need - a phenomenon economists call 'moral hazard'.
Asking people to share the cost can improve efficiency, reduce waste and make public spending go further.
In the aged care context, there's also a compelling equity argument.
Government expenditure on aged care is projected to reach at least $41 billion in 2026, and with Australia's population ageing rapidly that figure is only going to climb.
The 2023 Intergenerational Report projects aged care spending will roughly double as a share of GDP by 2063.
At the same time, today's older Australians are on average, wealthier than previous generations, with home-ownership rates around 82 per cent among those aged 65 and over - significantly higher than for younger Australians.
Asking those with means to contribute more to their own care is, in principle, a reasonable way to ease the burden on working-age taxpayers and the broader public purse.
The SaH co-payments are income- and asset-tested, which means only those assessed as having the capacity to pay are required to contribute, and clinical care remains fully subsidised regardless.
It's designed to protect the most vulnerable while improving sustainability for the whole system.
The risk hiding in the logic
Every person entering the SaH program has already been assessed by a clinician as having unmet care needs.
The standard efficiency argument for co-payments - that they reduce unnecessary or discretionary use - doesn't apply in the same way when someone's already been told by a professional that they need help.
The risk is not that co-payments will reduce waste; it's that they may deter necessary care.
The international evidence, while limited, supports this concern.
A study of Japan's community long-term care system found that even modest increases in co-payments significantly reduced service use among older adults living at home, with the biggest effects concentrated among lower-income recipients.
European research similarly shows that the financial burden of cost-sharing in long-term care falls disproportionately on those with lower incomes and higher care needs - the very people least able to absorb it.
If older Australians reduce or forgo assessed home care because of cost, what happens next?
The international evidence shows a reduction in home-based care is associated with increased emergency department presentations, avoidable hospitalisations and earlier entry into residential aged care.
And here is the fiscal paradox: a day in hospital costs vastly more than a home care visit, while a week in residential aged care costs more than a month of home support.
If co-payments push people out of home care and into more expensive parts of the system, the expected savings could be offset - or worse, reversed.
This risk is not evenly distributed. Those who are socially isolated, live in regional or remote areas, have complex care needs, or cannot draw on family support have nowhere else to turn if they reduce their home care.
They are the most likely to end up in hospital or residential care, and least likely to be able to absorb out-of-pocket costs in the first place.
A rare window to get the evidence right
The SaH reform rollout has created a natural experiment that could provide evidence on its whether it will work.
Because of the staggered introduction of co-payments, there are 3 distinct groups of older Australians in the system:
- Assessed before September 2024 - grandfathered under a 'no-worse-off' principle and pay nothing.
- Assessed between September 2024 and November 2025 - went through a transitional period.
- Assessed after November 2025 - fully subject to the new co-payment rules from the outset.
All the groups have been assessed as needing home care, but face very different financial obligations driven entirely by the timing of their assessment.
This is a gift to researchers who can compare outcomes across the groups such as uptake of services, subsequent hospitalisations, transition to residential care and mortality.
We can generate credible, causal evidence on the real-world impacts of co-payments. This kind of rigorous evaluation is currently absent from Australia's aged care oversight.
Existing reporting focuses on the progress of implementation and descriptive metrics, not on whether reforms are actually improving outcomes.
That is a serious gap when we're talking about billions of dollars in public spending and the wellbeing of some of Australia's most vulnerable people.
Research requirements
Generating this evidence will need accessible, timely and linked data that connects aged care records with hospital admissions, GP visits, medication use and mortality.
Australia's National Health Data Hub is a significant step forward, bringing together health and aged care data at a national scale for the first time.
But independent researchers need better access to the data.
It's not enough to know whether co-payments reduced home-care expenditure in isolation - we need to know what happened across the entire care system, including hospitals and residential aged care.
A reform that saves money in one column while generating costs in another is not working.
The bigger picture
As our population ages and aged care costs rise, some rethinking of who pays for what - and how - is inevitable.
There is a legitimate debate to be had about whether wealthier older Australians should contribute more to their care costs, and about longer-term options like compulsory long-term care insurance that has operated in Germany and the Netherlands for decades.
But good intentions and sound economic theory are not enough. What we need now, while the reform is still new and refinements are still possible, is honest, independent and rigorous evaluation.
We need to know whether co-payments are deterring assessed care. We need to know who is being affected most. And we need to know what is happening downstream in hospitals, in residential care and in people's health.
The window is now open to find out - and fix anything going wrong - and should not be wasted.
Dr Lenzen has written a submission to the current Senate inquiry into the aged care Support at Home (SaH) program, introduced by the Australian Government in November 2025 as the centrepiece of a shakeup of Australia's aged care system.
About the author
Dr Sabrina Lenzen is a Senior Research Fellow at UQ's Centre for the Business and Economics of Health . Her research focuses on the causal evaluation of aged care and health policy using quasi-experimental methods and linked administrative data.
