Acknowledging that the present aged care system badly needs overhaul, the federal government is mulling for ways to effectively address the problem without derailing its goal of realising a surplus by 2013.

An earlier report issued this week by Alzheimer's Australia has indicated that funding boosts of up to $500 million will be required to uplift the plight of dementia patients underscored the overall dismal condition of Australia's care system for the elderly, whose ranks are only expected to swell in the immediate year ahead.

In a statement released on Wednesday, National Aged Care Alliance (NACA) called on Prime MinisterJulia Gillard to lay out a clear cut solution on the issue, meaning the government should support the reform recommendations that were presented in 2011 by the Productivity Commission.

NACA, which claims to represent a number of advocacy grous for the elderly, warned that without solid cash injection from federal authorities, the way Australia cares for its ailing senior citizens will radically deteriorate.

The group urged Ms Gillard to ensure that funding will be available come the next national budget on May 8 lest many elderly would be left without definite aged care entitlement either in a retirement institution or in their own homes.

While non-committal on specific spending plans for the aged care, Ms Gillard said on Wednesday that her government will deliver the promised surplus without compromising the existence of crucial state services.

"When we are called on to make choices we do it in a Labor way. We protect frontline services, like nurses and doctor," Ms Gillard told ABC in an interview.

The focus right now, according to Ageing Minister Mark Butler, is to implement a system that distributes the responsibility both on the government and to those who are able to finance their own aged care needs.

According to The Sydney Morning Herald, Mr Butler is working on the possibility of formulating a scheme he calls 'home equity release', a form of government subsidy that would allow retirees selling properties to retain their original value.

The scheme, the government said, should provide the elderly the required cash to secure an aged care coverage, which presently requires bonds that normally starts at $264,000.

Of course, Mr Butler added, the government will continue working on ways to likely restrain the seemingly stratospheric climb of aged care coverage.

Mr Butler told The Herald that apart from what government is doing, more work must be done to meet the thresholds set by the Productivity Commission review last year, which he admitted carries recommendations that "are better than the current system."

"Almost 40 per cent of residents in aged care homes now have had to pay a bond (in the present system)," Mr Butler conceded.

Other advocacy groups also highlighted the system's glaring inadequacies, among them the delays that were endured by the elderly who opted to simply get aged care at home because fees being charged by nursing homes were beyond their reach.