For-profit providers have called upon the Productivity Commission to acknowledge the need to implement capital incentives, which will in-turn create more accommodation options for older Australians, over the need to increase community care services.

While many organisations have urged the Commission to recommend a move to consumer-directed care as the way of the future, a joint submission from Deloitte and the Aged Care Association of Australia (ACAA) which describes financial inadequacies in community care.

Transport and staff costs were highlighted as having a major impact on the costs of service provision: “Both of these have been rising more rapidly than the community care payments and are likely to continue doing so,” the submission said.

“While there is some potential for new technology to reduce costs in community care (for instance, through improved remote monitoring), those reductions are not likely to be sufficient to offset other sources of cost increase, including rising levels of acuity in the population being served.

"As those cost pressures play themselves out, providers will have little choice but to reduce the hours of care they provide for each package."

The submission also stated that the move to consumer-directed care will most likely create further financing issues.

According to the submission, “this involves shifting some or all of budget control into the hands of the consumer, which can have many benefits.

“However, it also means that providers can no longer subsidise 'high cost to serve ' cases from low cost.'

It said the result will be to erode providers' ability to bridge the acuity gap through cross-subsidisation within the providers' pool of consumers.

Deloitte partner and senior living leader, Helen Hamilton-James, said that ideally, the Commission will recommend a solution that will strike a balance between community care service provision and greater investment in the future supply of accommodation for older Australians.

“An expansion must occur in the formal care sector if the care needs of a changing population are to be met,” said Ms Hamilton-James.

“…“I think there needs to be a middle ground. If you think about community care and the cost of having individual care [being provided to older people], scattered all over the place, it is more costly than care being located all in one place.”

Deloitte and ACAA recommended four possible models to ensure that sufficient savings are available to fund future high and low aged care needs-the use of superannuation or other long-term saving products; a user pays system; the use of insurance products and the use of capital markets for funding requirements.

“The fact is that if we don’t do anything now and if we don’t change the system then we are going to have four times more elderly over the age of 65 years old, and we won’t be able to fund their care,” she said.

“At the moment levels of investment are very low because the returns are low, so what we need to do is increase the incentives for the capital market and put money into aged care accommodation.

Ms Hamilton-James said that the best approach would be to integrate all of the suggested models, to some degree, in order to guarantee that older Australians benefit from greater levels of choice. 

“Perhaps we need to look at how large the funding gap is today and split it between residential care and care in the home then examine how this gap would change if funding models change. Also it may be worth looking at the impact an additional one per cent of super savings could have on the funding gap.

“At least a debate is now taking place, as these issues will only become more prominent in the future as our ageing population increases.”