OPINION: Pulling the right levers for reform

Above: Ray Glickman

Imagine you were sitting down to devise an aged care system or maybe just trying to reform the one we’ve got.

I reckon you’d be sitting there with various levers of change and you’d be working out how far you wanted to pull each one. When you’d finished you would have created your own aged care system. If someone else pulled the levers differently as they surely would – this one up more and that one down more – they would have created a different system.

Let me illustrate.

The first lever is called managing government fiscal risk. OK, pull the lever in accordance with how much of a priority it is for you to mitigate this risk. The next one is consumer direction and protection. After that we have provider sustainability. Finally we have a lever for wage levels and workforce.

All credit to the government and Minister for Ageing, Mark Butler, for developing a coherent package for aged care reform. And congratulations too to the government for putting older people’s care needs front and centre.

But when we analyse the package, we can see how deliberately the levers have been pulled to create a particular system. Managing fiscal risk is pulled hard. Consumer direction and protection is pulled pretty hard. The Minister illustrated his protection priorities at the recent launch and in his media releases by repeatedly referring to some rip-off level bonds, as isolated as these may be in the total scheme of things. Provider sustainability is not pulled that hard. After all, existing funds are actually clawed back and clear price controls are to apply. Finally wages policy is enshrined in the current enterprise bargaining system under Fair Work Australia.

The net result of this lever pulling by the government is pretty much a status quo system where revenue flows, standards and delivery are tightly controlled, and wages increases are tied to enterprise bargaining. This outcome is hardly surprising given the political framework within which this government needs and chooses to operate. Indeed many of the settings are surely virtuous. Taxpayer funds should be spent carefully. Consumers should be protected.

In a sense, the government took over responsibility for the machinery of aged care change from the Productivity Commission which had produced a comprehensive review at its behest. The PC set its levers quite differently. It recommended a system that was essentially market-driven with consumers enjoying entitlements to service and providers competing for customers on price and service. The PC also recommended that the family home be brought into play to generate additional non-government revenue, but with brakes on that lever to ensure the family home would not have to be sold from under people.

The government has now changed these lever-settings radically. An entitlement system was far too loose for their liking in terms of managing fiscal risk. The PC’s provider viability lever had also gone too far at the expense of consumer protection.

Clearly it’s the government’s prerogative to change the PC’s lever settings. The problem is – will the government’s own settings actually work?  If you don’t pull the levers in such a way as to foster provider viability and generate investment appetite, can our aged care system work?

On the assumption that the government doesn’t want to deliver aged care services itself, it needs to enlist others to do so on its behalf. Providers have felt distinctly disinclined to do so in recent times. Residential care (hostels and nursing homes) new bed offerings from the government have been drastically undersubscribed. Home care packages have been allocated haphazardly around the country so that providers desperately need packages in the Eastern states and providers in WA can’t fill many of theirs for love nor money.

Of course, as the CEO of a large provider and deputy president of the largest national provider peak body , I am in all probability biased. Nevertheless, I am worried that the government may not have pulled the provider viability lever anywhere near hard enough to generate the investment required to put the services needed by the burgeoning population of older people on the ground.

I argue this for various reasons, not least of which is the government’s failure to provide financial relief in its package to this highly distressed sector until 2014.

In relation to residential care, funds for ACFI (care needs payments) will be clawed back. There will be no enhanced accommodation payments for the entire existing stock of beds. The proposed boost to the accommodation supplement will only apply to new product, with the qualification criteria for stock upgrade unknown and the quantum of daily payments pre-set at levels that may not be sustainable in high-cost jurisdictions such as WA and in rural, regional and remote Australia.

Furthermore, in relation to bonds, the current lifeblood for cash flow to build beds, they will in future be pegged to the cost of production and regulated by a body that as yet doesn’t exist. This measure may cruel current opportunities to cross-subsidise from development profit.

Turning to home care, the picture for providers is also uncertain. Existing subsidies will be removed prior to proposed enhanced funding arrangements coming on-stream. The creation of extra care packages and the proposed improvements to funding for dementia-related services are contingent on increased user charges, the projections for which are unknown to us and untested.

In relation to measures designed to meet the sector’s massive labour needs into the future, additional funding is tied to outcomes negotiated via enterprise bargaining. This approach should make the sector more competitive in the labour market, however, it is also likely to drive a wages break-out such that the viability of providers will not be enhanced by the injection of additional government funding to fix these serious and urgent labour problems.

My purpose in detailing the qualifications and reservations outlined above is to question whether the provider sustainability lever has been pulled hard enough to make the new system work in the ultimate interests of older Australians. I am not knocking the government or the package overall which I have earlier commended in terms of the other system levers that are also important.

While it is clearly early days to pass judgment on the government’s reform package, the provider jury is already well and truly out.

There will be a lot of hard work ahead of the new Aged Care Reform Implementation Council if it is to generate reform that will truly work. Its challenge will be to tweak some of the levers up and some others down to rebalance the overall package such that it will promote sufficient investment to deliver an enhanced scope, range and quality of services on the ground.

I know that Aged & Community Services Australia, the national peak body for NFP providers, will put its shoulder to the wheel on this to ensure that the critically important NFP sector can generate sufficient surpluses to continue its work in providing services and support to disadvantaged and marginalised older people in accordance with its mission.

But the primary challenge will rest with the government, embattled as it is on so many fronts. Will it cling white-knuckled to the current setting of the levers or will it be responsive and flexible enough to re-crank the gears of the reform machinery to revitalise provider investment? No-one knows. By the way, who said aged care was boring?

Ray Glickman, the author of this opinion piece, is the CEO of Amana Living (WA), chairman of ACSWA and deputy president of ACSA.