The indexation rate applied to aged care subsidies this week will not help organisations meet the increasing costs of care nor alleviate the financial stress many are experiencing, provider groups say.

The new indexation rates released on Tuesday show an increase of 1.4 per cent in the Aged Care Funding Instrument’s (ACFI) activities of daily living and behaviour domains and a 0.7 per cent increase in the complex health care domain.

The increase follows an indexation freeze across all ACFI domains in 2017-18.

The new rates, which will take effect from 1 July, include a 1.4 per cent increase across home care subsidies.

Aged care peaks Leading Age Services Australia and Aged and Community Services Australia both called for funding to match the true cost of care and highlighted a recent industry report showing an increasing number of facilities making a loss, and particularly those in regional and rural areas.

As reported last week, the latest benchmarking analysis from StewartBrown showed that 43 per cent of facilities reported a financial loss for the nine months ending 31 March 2018, up from 41 per cent at the half-year mark and 34 per cent for the previous financial year.

It attributes the decline in financial performance to the indexation freeze, January 2017 changes to ACFI and escalating direct care costs (read that report here).

LASA CEO Sean Rooney said the increase was “totally inadequate” and showed the Turnbull Government was oblivious to the true cost of providing care to older Australians.

Sean Rooney

“The majority of residential aged care facilities are experiencing significant and sustained financial stress due to funding cuts by successive governments, combined with rising operating costs and growing acuity and complexity of residents’ needs,” said Mr Rooney.

Mr Rooney said this indexation rise was a third of what was required for providers to keep up with rising costs.

“Despite ongoing data and evidence from industry experts and recent independent reviews finding that Australia’s aged care system is under-funded, there is no plan to address this situation,” Mr Rooney said.

LASA has been calling for a 4 per cent indexation of aged care funding, equating to about $470 million across the sector.

“Recognising the true costs of delivering services and providing realistic funding is the only way we can guarantee a sustainable aged services industry that meets the needs of all older Australians.”

ACSA CEO Pat Sparrow agreed the subsidy indexation would do little to provide sustainability for significant numbers of aged care providers in financial stress and said a new funding model was needed.

Pat Sparrow

“StewartBrown data has found there has been an increase in care labour costs of 4 per cent since June 2017 with over half of this attributed to additional costs and hours worked in both care management and allied health staffing,” Ms Sparrow said.

She called for an overhaul of aged care’s funding approach to meet the actual costs of care, which could only be achieved through a combination of taxpayer funding and user contributions.

“That is why a funding model – based on real delivery costs – needs to be developed. This would result in additional funding which could then be indexed appropriately to keep pace with inevitable cost increases.”

The new rates for all aged care subsidies and supplements are available here and the updated fees and charges applicable from 1 July is available here.

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