Boost to daily living subsidy won’t eliminate financial pressure

The financial viability of residential aged care providers will improve with the $10 supplement for daily living services but viability concerns remain, according to StewartBrown’s economic analysis of the Federal Budget.

Accounting and benchmarking firm StewartBrown’s Federal Budget 2021 Aged care Sector Impact and Analysis report finds the $17.7 billion aged care Budget targets reform rather than financial outcomes for providers.

The budget measures include $3.2 billion for a Basic Daily Fee supplement of $10 per resident per day to go toward daily living services such as food, laundry and cleaning in return for additional reporting, and the continued 30 per cent boost to the viability supplement for non-metro facilities.

The report finds that the new supplement “will improve but not eliminate the financial viability concerns” of residential aged care providers.

“There also needs to be further clarity that this supplement does not relate to increased care staffing hours because this distorts the critical discussion in relation to improved workforce entitlements,” StewartBrown said in its analysis.

StewartBrown senior partner Grant Corderoy said the additional funding in the budget for residential aged care was insufficient.

“Some of the $10 [Basic Daily Fee] will obviously be used on food and related everyday living services and with the transparency, there’s going to be significantly more compliance costs,” Mr Corderoy told Australian Ageing Agenda.

“I think it’s a good first step. But certainly, under the current residential aged care system I don’t think the budget measures are enough to significantly enhance the viability of the sector,” he said.

If aged care providers could retain rather than spend both supplements then 45 per cent of aged care homes will be operating at a loss in the 2022 financial year instead of 60 per cent in the 2021 financial year, the report predicts.

“Forty-five per cent is still a very large number of homes operating at a loss. But the reality is it will be higher than 45 per cent because a portion of that $10 will have to be used to provide basic everyday living services,” Mr Corderoy said.

The report also predicts that 23 per cent of all aged care homes will have a cash loss in the 2022 financial year as a result of the budget measures, down from a 33 per cent of homes in 2021.

“An objective analysis would conclude that having 23 per cent of homes making a cash loss is not sustainable,” the report said.

Accommodation funding, workforce unaddressed

The budget also lacked adequate measures related to aged care accommodation, Mr Corderoy said.

In its report, StewartBrown proposes an accommodation pricing model where a rental amount is deducted from the lump sum Refundable Accommodation Deposit for residents who choose that method.

This could be at a discounted rate of a normal Daily Accommodation Payment as the provider can use the funds to earn additional revenue or reduce debt costs and the government can pay the rent for supported residents at the national average DAP, the report said.

“This would result in an equitable accommodation rental flow for all residents and an appropriate revenue flow for providers to support the high capital cost of building and maintaining residential aged care homes,” the report said.

This model would improve the viability of the sector, Mr Corderoy said.

“If providers did get a commensurate return for their accommodation from the consumer and a minor amount by way of a supplement, then this would certainly change the viability and the sustainability of the residential sector,” Mr Corderoy said.

 The budget also failed to set aside funding for an increase in wages, he said.

“They need to get more funding to improve the employee entitlements. Now that won’t improve the viability, but it will certainly improve the ability to attract and retain staff and provide staff the right environment, which are very necessary to provide the care that’s required,” Mr Corderoy said.

Access the report.

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