Despite the aged care sector’s $36-billion budget windfall, when it comes to reform, the Albanese Government is still behind the ball, according to new analysis.

Professor Henry Cutler

Speaking to Australian Ageing Agenda, the inaugural director of Macquarie University’s Centre for Health Economy Professor Henry Cutler said: “The government is playing catch-up after resources were shifted to the Covid pandemic response last year.”

While Professor Cutler acknowledges that aged and primary care are the budget’s “big winners”, he said “more focus on structural change is required.” 

This includes abandoning the residential aged care planning ratio, suggest the authors of the MUCHE Health Report 2023. The government should instead “invest in research to improve provider efficiency and care models.”

In a bid to save $2.2 billion between 2024-25, the budget included a temporary reduction in bed licences from 78 places to 60.1 places, reducing the number of bed licences otherwise budgeted for by more than 60,000 a year.

However, as the authors note, unless the government keeps a “vigilant eye” on demand for bed licences, any savings from the ratio reduction will be transitory.

According to the MUCHE Report, Australia’s ageing population will see the residential aged care intake rate double between 2027-31 compared to 2022-26.

This – say the authors – is “likely to increase demand for residential aged care quicker than before,” meaning the new aged care planning ratio has a “short half-life”.

Addressing the 15 per cent workers’ wage increase that comes into effect from 1 July, Professor Cutler told AAA: “In this budget, the government is primarily looking to optimise the health and aged care workforce … and wants to secure the aged care workforce through increased wage.”

But while the Australian National Aged Care Classification price changes will increase the care subsidy to meet a rise in expenses to cover such things as the wage hike and mandatory care minutes, “AN-ACC prices still need to incorporate the expected increased marginal costs associated with delivering better care quality in the future,” say the authors.

The report also advises government to enact further reform to support its market-orientated approach to improving quality care. “This might include expanding the National Aged Care Advocacy Program to help consumers engage with quality information.”

Among the government’s market-orientated approaches to improving the quality of aged care is the introduction of the star rating system in December 2022.

Whilst noting that initially some providers resisted the system, the authors say, “such initiatives are necessary to harness competitive forces to encourage greater quality.”

Based on the US experience, the authors say the star ratings will ultimately “raise the average level of quality received by residents within the sector based on changing consumer preferences alone.”

Despite such initiatives, the authors acknowledge that “market failure persists” within the residential aged care sector. Business models must be adjusted “to operate within a more competitive market and to ensure compliance within a strengthened regulatory and monitoring environment.”

Ultimately, when it comes to reforming residential aged care, Professor Cutler told AAA, that in future budgets, the government will need to address the “elephants in the room” – low value care and access inequity. “That can only be achieved if funding and financing mechanisms are reformed.”

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1 Comment

  1. WE do not need a market -oriented approach to aged care -we need the approach to be a “care recipient ” one. the new ACT will have the older Australian at the centre of the framework not the provider,
    I understand that the government is paying the increase in the wages due in July.

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