Future-proofing the aged care sector

Released in mid-March, the final report of the Aged Care Taskforce provides a comprehensive strategy with recommendations to help support a more sustainable, fair and innovative sector. Included were recommendations about changes to the funding model and ways to make the sector more equitable and transparent.

The cost of aged care

The aged care sector is growing exponentially. In 2021–22, the government spent $24.8 billion on aged care services for around 1.2 million people. In the next 40 years, the population of people over the age of 80 years is expected to be around 3.5 million.

However, the sector isn’t profitable. The report highlighted that 69% of residential aged care providers made an operating loss in 2021–22. “While this is an expected low point for the sector, and performance has begun to improve, providers remain constrained in where they can earn revenue, particularly for accommodation and everyday living expenses,” the report stated.

Many of these issues are due to structural problems and rigid pricing structures.

“Unless the aged care sector’s financial viability improves, it will be difficult to attract investment, either as debt or equity. Improved financial viability is necessary to deliver improvements in service, quality and to address service gaps,” the report stated.

According to retired palliative medicine specialist Dr Will Cairns, consistencies in pricing could help drive investment.

“A more efficient system would be one that worked out what the fee would be from the nursing agency providing it, and what the standard would be, and would set the wages and the profit margin. And that would give an incentive to drive profit from efficiency rather than from how much you can charge.

“What’s happening in other parts of health are that private equity and venture capital are investing in health because they reckon they can make higher profit margins,” he said.

Changes to the funding

Currently, government funding pays around 75% of the cost of residential aged care funding, and around 95% of home care funding. One of the recommendations from the Royal Commission into Aged Care was that an aged care levy of 1% should be introduced. However, the Taskforce didn’t agree.

“There are substantial intergenerational equity issues in asking the working age population, which is becoming proportionally smaller to pay for these services,” the report said.

Instead, they suggested those with means should make a larger contribution to the cost of their aged care.

The Taskforce recommended clinical services should be primarily paid for by the government. Personal care tasks such as showering and dressing were deemed essential for maintaining independence but may necessitate a copayment. Expenses related to everyday living, such as food and utilities, as well as accommodation costs, should become the individual’s responsibility.

According to Craig Gear, CEO of the Older Persons Advocacy Network (OPAN), many older people with means know they need to contribute more.

“People have told us that as long as what they’re paying for is transparent … and what they’re purchasing and contributing to is of high quality … they understand they need to contribute more,” he told InSight+.

The Taskforce recommended there be a strong safety net for people with low means to meet their aged care costs. Mr Gear is concerned about what that might mean.

“We’d like to see more detail on the safety net, and making sure that we don’t have a two-class system of aged care,” he said.

“It’s not just being on the pension, there are people who might have some super, or some assets, that may still be low means.

“An example of that we have heard is about older women who may not have had the same superannuation opportunities as men to build up that wealth. There will need to be some nuance and consideration around that safety net so it still maintains equity,” he explained.

Improvements to consistency and transparency

Issues with transparency, consistency and complexity were highlighted as needing to be changed, particularly for home care pricing.

“Prices across the programs are inconsistent and inefficient due to variable price setting arrangements. This undermines the predictability and sustainability of funding and can cause confusion when comparing packages with other participants,” the report stated.

Mr Gear agreed, saying inconsistencies with the current home care package pricing model make it difficult for consumers.

“We’ve heard from people that the current means testing, particularly in home care, isn’t consistently applied. An example of that is one person might be with one provider that might be being charged co-contributions but another provider waives that. So, from an equity point of view, it doesn’t sit right with us,” he said.

Although participants could change providers, these lower fee options may not be available in every location.

“Contributions charged to people of particular means or conditions should be applied equally,” Mr Gear said.

Aged care workforce issues

The report noted workforce issues were central to improving the aged care system.

“Despite these being out of scope, the Taskforce notes further work needs to be done on workforce attraction and retention issues and their impact on quality care outcomes, and identifying workforce initiatives that would improve quality outcomes across the sector,” they wrote.

Days after the report was released, the Fair Work Commission announced substantial wage rise of up to 28% in aged care.

Dr Cairns remains unsure if it will solve the workforce issues.

“It doesn’t change the number of people available to do the work. Certainly, it may be that higher pay will increase the attractiveness of the work, but that remains to be seen. As there’s an overall nursing shortage, it may attract people from another area of health care, and, as a consequence, that will then become less effective,” he said.

However, Mr Gear said it’s a good start to getting the right people into aged care.

“Older people tell us that their connection with the right staff with the right skills is really important. Those staff need to be person-centred. How to attract people to this sector, which is a really wonderful sector to work in? You’ve got to pay people well and you’ve got to value them,” he concluded.

What are the goals of aged care?

Even if the funding changes, Dr Cairns highlighted that the report doesn’t define the goals of aged care. In particular, it doesn’t examine what it would cost to provide “best practice care” to a deteriorating population.

“It doesn’t really say what aged care is, what its goals are. It just talks about providing services.

“The real challenges in the longer term are going to be how do you fund so called ‘best practice care’ across the full spectrum of health care when you have a shrinking taxpayer base, and an ageing population with high dependency ratios? Those are the real issues. I think that it requires people to be very clear about what’s possible. That requires a certain candour,” he said.