Introduction by Croakey: The 2023-24 Federal Budget delivered a welcome increase in aged care funding, but hidden within the budget papers is a measure which could potentially reduce the resources going into aged care over time.
It’s to do with changes to the tool used by the government to allocate funding to the sector and what this means for the number of places funded by the government and the level of funding each place attracts.
Former senior public servant, Charles Maskell-Knight, explains the potential impacts of this policy change below.
Charles Maskell-Knight writes:
I am showing my age and my cultural background when I confess that I first became aware of the difference between suppressio veri (suppression of the truth) and and suggestio falsi (suggestion of the false) by reading Kipling at the age of 11.
Much later in life as a public servant I learned that, while lying was completely unacceptable in official government statements, suppressing the truth was fine – as long as this was not done in response to a direct question.
Budget ‘fact sheets’ very rarely contain outright lies – but anybody who expects them to contain the whole truth will be sadly disappointed. The Department of Health and Ageing’s document ostensibly explaining the Budget’s decisions on aged care is a case in point.
A welcome funding increase
The 2023 Budget included a massive increase in spending on aged care. As well as about $11 billion to fund the cost of a 15 percent award wage increase for aged care staff, it included a further $1.6 billion in spending on other aged care measures, as set out in the Department’s “Stakeholder pack”.
Many of these decisions should be welcomed in principle, although given the lack of detail surrounding most of them, there may well be problematic implementation issues that will only emerge in the coming months. But it is hard to argue against most of the measures, especially those that belatedly implement recommendations from the Aged Care Royal Commission, such as a national system of worker registration.
One of the decisions is to support “aged care recipients [to] have greater choice and control in decision making with $41.3 million in funding for systems that will assign residential care places to people, not providers”.
All of these decisions are reflected in Budget Paper No 2: Budget Measures – in some cases with more detail than in the departmental stakeholder pack.
A hidden policy decision
Budget Paper 2 also includes a measure titled ‘Improving the Investment in Aged Care’. Under this measure:
The Government will temporarily reduce the residential aged care provision ratio from 78.0 places to 60.1 places per 1,000 people aged over 70 years. The reduction in the ratio reflects the increasing preference of older Australians to remain in their homes, and will save $2.2 billion over 3 years from 2024–25.”
The savings are estimated at $600 million in 2024-25, $700 million in 2025-26, and $875 million in 2026-27.
This is the single largest policy decision affecting aged care in the Budget (the increase in wages is not technically a policy decision, but an indexation variation), yet it is not mentioned anywhere in the departmental stakeholder pack.
What is the aged care provision ratio?
The aged care provision ratio is a tool the government uses to determine the number and level of residential aged places it funds. Currently the ratio is based on the numbers of people aged over 70 which was appropriate a generation ago when people entering residential aged care generally did so in their 70s.
However, improvements in overall health and life expectancy, and the increasing provision of care at home, means that people are now more likely to enter aged care in their 80s. This means that the use of this tool will not deliver the level of funding needed to meet the higher needs levels of this older cohort of residents.
The Aged Care Royal Commission identified the fact the ratio was based on the over-70s cohort rather than the faster growing over-80s as one of the factors leading to annual underfunding of aged care of around $10 billion in 2018-19 dollars.
It recommended (rec 41) that the aged care provision ratio should be replaced by 1 July 2024 with a regime which “supports a funding allocation that is sufficient to meet people’s entitlement for their assessed need [and] provides for demand driven access to aged care based on assessed need”.
It is disappointing that the Government has not adopted this recommendation, and even more disappointing if it is fiddling with the ratio as a means of generating savings. And the decision appears inconsistent with the measure to “assign residential care places to people, not providers”.
Questions around savings
Having said that, it is not clear how reducing the ratio will actually generate savings of the magnitude claimed in the Budget.
If the ratio is lowered in 2024-25 this would ordinarily mean fewer new places would be approved in that year, lowering costs in subsequent years as the supply of places was lower than it would otherwise have been. However, a reduction in the ratio of 23 percent from 78 to 60.1 doesn’t simply mean no new places, it means a reduction in existing ones.
Does the Government intend to ration care from 2024-25 so that the number of residential aged care places that are taken up is reduced?
According to the AIHW, the vacancy rate in residential aged care as at June 2022 was 14 percent, reflecting an increasing preference for care at home – or increasing fear of entering residential aged care.
Higher vacancy rates automatically result in reduced funding, without the need for a policy decision, as only people not places attract funding.
It is all very peculiar. In an ideal world a departmental fact sheet would have set out exactly what the measure means and how it will work. Instead, we get a ‘stakeholder pack’ that doesn’t even mention the decision.
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