Above: Anne-Marie Archer, CEO of Leading Age Services Australia – WA.

By Stephen Easton and Yasmin Noone

The aged care industry has renewed its call to the Commonwealth for an independent ‘cost of care study’ to ensure the funding allocations match the real cost of providing a high standard of care.

At the heart of the matter is whether future aged care funding is based on an objective measure of what it costs to provide a reasonable or acceptable standard of care, or whether an amount of money is allocated in the budget first, before being stretched as far as it can.

The debate is complicated further by differences between building and staffing costs in different parts of Australia as well as differences between business models and levels of charitable donations in different parts of the sector.

The CEO of Leading Age Services Australia – WA, Anne-Marie Archer, said the gap between funding allocations and true care costs was widening every day and services would struggle to provide the care that would be needed in future.

Ms Archer said the situation in Western Australia was amplified by higher staffing costs and further compounded by increasing utility and operational costs.

“Whilst all of the industry’s expenses are going up – the [federal] Minister for Ageing has put changes in place to reduce funding dollars to deliver the same provision of care for residents entering care from 1 July 2012,” Ms Archer said.

“It is critical that the Commonwealth commits to an independent cost of care study to establish the true cost of care – as opposed to what the Commonwealth is willing to pay.”

She said the situation in WA was so critical that Leading Aged Services Australia (LASA) national CEO, Gerard Mansour, traveled to the state last week to speak with local providers and get a firsthand understanding of the situation, and how it could be addressed at a federal level.

Mr Mansour said he was concerned by the shortfall in future aged care infrastructure and service development in Western Australia.

With a shortfall of over 3000 aged care beds, based on federal government projections, and an uncertain commercial future for the industry, LASA has warned it is unlikely that WA will be equipped to accommodate the future demand for residential aged care.

“We have reviewed individual situations … and it does not bide well for the future provisions of care in Western Australia,” Mr Mansour said, referring to two case studies sent out with together with the statement.

“I have kept abreast of the WA hospital overcrowding and congestion and unless the Commonwealth undertakes an independent cost of care study and revises the care funding to realistic rates, Western Australians will become more dependant on the state services for their aged care.” 

Mr Mansour said research recently commissioned by LASA from the Centre for International Economics predicted aged care facilities would face unrecoverable losses as a result of the recent changes and that this would further compound the issues for WA providers.

The National Aged Care Alliance (NACA), which represents the aged care industry as well as professional bodies, unions and seniors advocates, has called for a cost of care study for several years, and funding that reflects the true cost of care was a key theme running through the Productivity Commission’s reform recommendations in 2011.

Unions have long argued that a realistic assessment of the cost of care would include more staff on duty and higher wages, which would mean a substantial increase in government outlays, as staffing costs represent the biggest overhead for providers.

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  1. Hopefully cost of care will be separated from the extremely high costs of corporate salaries.
    The govt needs to address where funding is going and separate the salaries of corporate staff from care staff. Are all these corparate staff who end up outsourcing projects to consultants really worth the money they are being paid.

  2. A cost of care study is likely one of the key actions we all need to take, however I believe it is probably unlikely to make any real difference to the political and funding situation.
    It will tell us that the funding we all receive is a long way short of providing our aged care services right now let alone what we need to provide for in the future – which we know now. I am quite sure the Commonwealth already know this!!
    I have experienced this same dilemma in both hospital and higher education funding reviews.
    The overriding cap on all this is the Treasurer saying that is all the money available..now make it fit.
    I for one will be getting as thorough an understanding of my organistaions “real costs linked to activities that deliver our outcomes” and advising our Board accordingly.

  3. I believe the true cost of care is very easy to establish and validate. the question will be will it be accepted by the governemnt and the community. At the end of the day the argument is going to be over who is going to be paying the bills. staff wages need to come first because if keep paying peanuts we will only attract the monkeys. applollogy for the PUN , but it is the reality of how we value our elderly.

  4. Some 3 years ago, about 10 – 12 very senior bureaucrats from DOHA’s Canberra Office came over to WA and with officers from the local state office met with WA aged care providers to find out why we were handing bed licences back, stopped applying for bed licences in the ACAR, and by and large had stopped building needed new residential care facilities. They were told, it all went up on white boards, they took notes and went back to Canberra. The simple facts were and remain to be, WA providers could not afford to cover the high building costs @ $250K per place, service a loan, and operate the facility or expanded wing on the current funding. So what did the bureaucrats do about the problem once it was identified? Absolutely nothing to this day!! Just another “Talkfest” with no accountability or outcomes. Horse feathers!!
    The aged care industry has been asking for an independent “Cost of Care Study” to be done at least on a regional basis around Australia. Incorporated within the “Cost of Care Study” there should also be a capital component to identify regional costs. One size does not fit all, so there needs to be allowances for regional cost differences in the delivery of aged care. Such a study is long overdue and would be a major challenge to whichever Government was in power because they would then have to ensure that the funding levels were adequate for each region.

  5. Yes, I was at that “Talkfest at Perth’s Duxton” too and what you say is spot on. The bureaucrats just came over for a jolly, using valuable aged care funds in the process. “Horse feathers” is being too polite. These educated academics just haven’t got a clue about the delivery of aged care, yet it remains their responsibility to ensure that there are adequate services available to meet the growinging demands of an ageing population, when aged care providers are continually being short-changed.
    Let’s find out exactly what it costs to provide both the capital and the care in each region across Australia, then work out how it can be equitably funded with co-payments from the consumer.

  6. It is not only the lack of reliable residential aged care costs that is causing real concern. The likely costs of having home-based care (which the majority will use) are still a mystery for many. While ASFA publishes useful Retirement Cost guidelines, these do not take account of caring costs of any kind.

    Financial advisers need reliable data with which they can assist clients to make informed tradeoffs and commitments as they manage their lives in later years.

    We would certainly like to incorporate this in the longevity analysis and management training which we have recently begun to provide to professional advisers at http://www.longevityadviser.com.au

    If the Federal Government cannot provide such guidelines (and it is very much in their interest to do so) then the sooner the aged care industry gets on with the job the better. I suspect this would be much quicker anyway and would be prepared to contribute to such an industry effort.

  7. Great call Anne-Marie, but is anyone in Canberra listening at all? I concur with the previous comments about the day when the boffins came to Perth to find out why WA providers were not building at the Duxton. Yes, we did tell them and yes, they have done nothing to address the issues, so the shortage of residential care beds has worsened. One size does not fit all and costs do vary from region to region within each State. Yes we do need a comprehensive ‘Cost of Care’ for both residential care and community care, but don’t hold your breath waiting for Government to do it. They know that they simply will not be able to fund the true costs of care delivery once the costs have been identified. You will have more chance of the fairies at the bottom of the garden assisting the industry, and of course our older Australians, than the secretariat of DoHA.

  8. Surely if NACA has the ear of the Minister, then they could apply some pressure and persuade him to have an independent cost of care study undertaken for aged care services around Australia? NACA has largely cooperated with the Minister so it’s time he did something for NACA and the wider industry.
    Surely Mr Yeates wouldn’t object to this transparency of having the costs associated with aged care identified around Australia. Maybe NACA has been ‘conditioned’ to just say yes sir?

  9. I am passionate about improving the care for older Australians who find themselves in aged care. However I think there is a bigger question – as long as we all, including me, avert our gaze from the reality that we too may end up in an aged care facility – our community does not care enough to lobby government for additional funding. As many of my friends and colleagues tell me, I won’t end up in a place like that! Whereas the evidence is you might if you live long enough.

    What we need to consider is some simple maths – workers deserve higher salaries, especially personal care workers, residents deserve more activities to increase their Quality of Life. But if we give each resident $10 more subsidy per day that works out at around $365 million a year for those just in resi care (est 160,000).

    If we want to make the system better we need to invest properly, we need an NDIS scheme for ageing, one based on fairness, quality and a commitment to aged care as a foundation of our community. At the moment I think most of us would rather ignore the reality – because it is just too awful for us to face. We need to wake up as a community and be self interested what do you want when you are over 80 years – based on today’s system you probably won’t get it.

  10. The federal government has a responsibility of ensuring that approved providers have access to all the resources they require to provide the required quality aged care to all those who need it. To do this the actual cost of providing this care need to be established on a regional basis across Australia and indexed. No one is saying all the cost must come from government, government just need to make way for it to be collected. So far, in spite of all the promises, the Gillard government has failed dismally.

  11. It is important that the true cost of care is established by an independent body so that Government, providers and consumers all have a common understanding on the matter.
    If the Government cannot afford to fund that cost, and will not allow providers to charge consumers to enable the cost to be covered, then that is a political decision for the community to consider.
    Simply put, if Government cannot afford the level of care for consumers (either directly from Government outlays or indirectly from consumers), then that standard of care cannot be delivered and we will all have to accept a less than ideal aged care system.

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