Other recommendations include:
:: Involving residents and relatives in the running of their care homes.
:: Reducing hospital admissions by delivering care at home or in the community when appropriate.
:: The establishment by the Government of a care quality forum to look at all aspects of care home staffing.
:: Celebrating the contribution older people make and seeking to build on this, rather than casting them as a problem to be solved.
The three co-chairs of the commission - an independent body set up by the NHS Confederation, the Local Government Association and Age UK - said in a joint foreword to the report: "Like many others, we’ve been deeply saddened by the reports highlighting the undignified care of older people in our hospitals and care homes.
"In too many cases, people have been let down when they were vulnerable and most needed help."
They said they wanted the report to be a "call to arms to the whole health and social care system" and wanted hospitals and care homes to be "beacons to the rest of the community".
The draft report will undergo a month-long consultation, with the commission due to publish its final report by the end of June.
The health and care professions have offered a broadly positive response.
The Royal College of Physicians (RCP) praised its recommendations for underpinning the values, leadership and management needed to improve dignity of care for older people.
Dr Linda Patterson, clinical vice-president, said: "The focus on leadership and continuing training chimes with the RCP’s own recommendations to the commission.
"In addition, the RCP recommends that hospitals provide adequate staffing with sufficient time to care for patients, including those with complex needs like dementia, and better continuity of care in acute settings and across providers, with clear accountability."
The Royal College of Nursing (RCN) offered a more cautious welcome, also stressing it was critical that hospitals and care homes employed safe numbers of nurses with the correct skill mix.
Chief executive and general secretary Peter Carter said: "There is much to welcome in this report.
"However, worryingly, the Dr Foster Hospital Guide last year found wide variations in staffing levels across the country, while we know some trusts are cutting staff numbers by up to a quarter and axing a third of nursing posts.
"We need to see proper planning systems, based on sound clinical evidence, in order to ensure safe nurse staffing levels for patients of all ages."
Care services minister Paul Burstow said: "Kindness and compassion, dignity and respect must be central to care, whoever provides it and wherever it is provided.
"The big challenge for the commission is how to translate their recommendations into action.
"The commission’s draft report makes some good recommendations for the improvements needed and I look forward to working with them after their consultation to see how we can bring about the changes needed at the front line."