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Aged care reform. Finding the money should not be the issue

Introduction by Croakey: The Royal Commission into Aged Care Quality and Safety provides Australia with a long overdue opportunity for generational reform of the aged care sector.

The upcoming Federal Budget will be the first indication of how serious the government is about seizing this opportunity, with Prime Minister Scott Morrison indicating today that the Budget package will be in excess of $10 billion (over four years).

A $10 billion package is a substantial commitment but this funding is likely to be exhausted through addressing the most urgent areas of need identified in the report – more home aged care packages and increased nursing ratios in residential aged care facilities.

To take up all or most of the Commission’s 148 recommendations, the government will also need new mechanisms to provide ongoing streams of funding into the aged care sector.

Croakey will be publishing a ‘Road to Aged Care Reform’ series to examine issues in the lead-up to the 11 May Budget.

In this first instalment, Matthew Crocker, Research Associate at the Caring Futures Institute, and Julie Ratcliffe, Professor of Health Economics at Flinders University, discuss some of the proposed options for aged care funding reform and identify the other challenges facing the government in implementing the recommendations from the Commission, particularly in relation to the aged care workforce.


Matthew Crocker and Julie Ratcliffe write:

On 26 February 2021 the much-anticipated final report of the Royal Commission into Aged Care Quality and Safety was handed to the Governor-General. Its main messages were not unexpected – Australia’s aged care system is underfunded and uncaring.

Much less predictable was the lack of agreement between the Commissioners on the fundamental issues of governance and funding. Their split recommendations have left some frustrated and fearful that this Royal Commission may become another dead-end report into aged care .

What is clear, is that there is no longer debate about the need for aged care reform. The debate is now in identifying the immediate priorities from the 148 recommendations outlined in the final report.

What are the priorities and what will it cost?

Amongst the Commissioners’ final recommendations, specific reforms have been put forward. Importantly, these include recommendations to increase and improve staffing in residential aged care facilities. Unfortunately, none have been explicitly costed.

With so many areas of the aged care system needing urgent attention – from fixing the home care waitlist so older Australians don’t die while waiting for care or to addressing concerns about attracting and retaining adequate numbers of Registered nurses – the financial cost to rebuild the aged care system will not come cheaply.

The critical question is – how are we going to pay for it?

The Grattan Institute has investigated this issue and have outlined a $27.4 billion plan to achieve meaningful reform of Australia’s aged care sector. Estimates from the Grattan Institute suggest that tax reforms to older Australians’ superannuation earnings and pension asset tests could raise $6.7 billion a year today.

A similar proposal outlined by Professor Anna Howe estimates that a 5 per cent aged care levy applied to the top quarter of super fund balances held by those aged 50 to 70 could generate $5 billion worth of revenue. And a report by StewartBrown indicated that there is over $1.1 billion worth of unspent funds within the sector.

Then there’s the Health Services Union’s idea of a Medicare-style aged care levy. Their proposal estimates that a 0.65% point increase to the Medicare levy could raise $5 billion this year.

Our work for the Royal Commission indicates general public support for an aged care levy.

Both Commissioners also support the idea, albeit they disagree on its scope and whether it should be hypothecated. But this idea may not even get off the ground. On the day of the Final Report’s release, the Prime Minister made it clear that a change to the Medicare levy would not be his first option. And just this week, Sky News reported that the government plans to ignore the Commissioner’s call for an aged care levy.

According to the Health Services Union, $4.4 billion is enough to give every aged care worker a 25 per cent pay rise, and increase the size of the aged care workforce to lift all 2,718 residential aged care facilities to 5 star quality.

How much money does the Government spend on aged care?

The Government spent $21.4 billion on aged care in the 2019/20 financial year, up from $19.9 billion in 2018/19. As Australia’s population continues to age, we can expect that the costs of providing aged care to all Australians in need will continue to rise.

Whilst concerns around the need for sustainable aged care funding are frequently raised, it is notable that concerns around other areas of public expenditure (e.g. defence spending or Australia’s $2 billion HomeBuilder program) are almost never questioned. Such ‘nation building’ programs are given an easier ride than sectors which fall within the caring economy.

Australia’s defence spending has outstripped aged care spending to the tune of $10 billion per year every year since 2012 (Sourced from the Australian Government Budget Outcomes). In the Government’s flagship Defence White Paper, the phrase “sustainable funding” is never mentioned. Contrast that to the 14 times “sustainable funding” appears in the Commission’s final report.

Should the Government pay whatever it costs to rebuild aged care?

If there is to be a silver lining from the COVID pandemic, it is that it has shown us that the Australian Government can – when it wants to – spend as much money as necessary to resolve a crisis.

Australia’s aged care system is in crisis. Following the shocking tales of abuse and neglect from the Royal Commission nobody would question that.

However, there will be no quick fix solution – no matter how much money is allocated. The real constraint which the Australian government faces is that of the available real resources. The aged care workers. The allied health staff and the nurses. Building a skilled and trained aged care workforce to meet the needs of Australia’s ageing population will take considerable time

Given the Commissioners’ agreement that aged care workers should be better paid and more nurses are needed addressing the shortfalls of the aged care workforce is a sensible first priority.

It will take a whole society effort. Public, private and not-for-profit investment will be needed to elevate the skills and size of the aged care workforce. But if our Government truly cares about older Australians, they already have the financial means to start fixing our aged care system.

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#IHMayday16
#IHMayDay17
#IHMayDay18
#LoveRural 2014
Croakey Conference News Service 2013 – 2019
2013 conferences
Australian Centre for Health Services Innovation Forum 2013
Australian Health Promotion Association Conference 2013
Closing the Credibility Gap 2013
CRANAplus Conference 2013
FASD Conference 2013
Health Workforce Australia 2013
International Health Literacy Network Conference 2013
NACCHO Summit 2013
National Rural Health Conference 2013
Oceania EcoHealth Symposium 2013
PHAA conference 2013
2014 conferences
#IPCHIV14
AIDA Conference 2014
Congress Lowitja 2014
CRANAplus conference 2014
Cultural Solutions - Healing Foundation forum 2014
Lowitja Institute Continuous Quality Improvement conference 2014
National Suicide Prevention Conference 2014
Racism and children/youth health symposium 2014
Rural & Remote Health Scientific Symposium 2014
2015 conferences
#CPHCEforum
#CRANAplus15
#HSR15
#NRHC15
#OTCC15
Population Health Congress 2015
2016 conferences