The transition of the baby boomer bulge into old age and their increasing longevity will lift the numbers of elderly in residential aged care. Population ageing and associated fiscal pressures have motivated governments to shift responsibility for the financing of aged care to the individual. We consider policies that include owner-occupiers’ housing wealth and imputed rental incomes in means tests that determine co-contribution charges for residential aged care. Differences in how housing wealth is included in the residential aged care resource tests of three OECD countries–Australia, England and the Netherlands–are documented. We find some neglected equity implications as tenants in all three countries typically pay higher co-payments for their residential aged care than homeowners with similar wealth holdings. These outcomes are a consequence of the concessional treatment of owners’ housing equity stakes, and of wider significance given the growing importance of asset-based welfare strategies. England has relatively progressive asset and income tests that offer more limited concessions. ... Read more

Population ageing and the fiscal pressures it is causing has motivated governments to shift the responsibility for the financing of age care to the individual. In this paper we consider policy initiatives that include older owner occupiers’ housing wealth and imputed rental incomes in means tests that determine user charges for residential age care.We begin by describing the motivation behind policy initiatives of this kind, before describing how housing wealth is included in residential age care asset and income tests applied in three OECD countries - Australia, the Netherlands and Great Britain. The paper proceeds to analyse the possible distributional implications of these differences, with particular attention to income poor, elderly households. It also takes a life cycle perspective by evaluating the likely impacts of different means test arrangements on the accumulation of wealth by households. Finally the paper outlines the consequences of different means test arrangements for bequests. ... Read more