This article is part of our series on the future of aged care.
With over 10,000 submissions and many hours of hearings, the Commission has identified systemic failures in the design, objectives, and regulation of aged care in Australia.
At their heart is a two-way lack of trust on funding and the cost of providing aged care.
This is topped up by user contributions of just over $5 billion.
At first glance, public funding and the continued prospect of demographically-driven demand suggest lucrative opportunities for providers.
More for-profit providers, fewer profits
In practice, profits have dived or barely kept pace.
Between 2017 and 2019 earnings per care recipient slid by 26% in residential care and nearly 60% in home care.
More than one third of aged care homes recorded operating cash losses during the nine months to March 2020. And that was before the full impacts of the hits to occupancy and infections from COVID-19.
Residential care is increasingly seen as a last resort, making the profile of residents older and more frail.
Even worse, uncertain profits
Declining profits is one thing. Uncertainty over profits is another. A recurrent theme in the evidence presented to the Commission is that funding is not only insufficient, but also uncertain, which itself is harming care.
The mistrust is compounded by a lack of transparency in the corporate structures employed in the sector as well as financial reporting practices which are blind to the terms, returns, support, or recoverability of loans to related entities.
This makes it difficult to tell what earnings truly look like.
It’s also hard to get a handle on key performance indicator data, such as direct care staffing costs.
What’s needed is an honest broker…
To address the challenges of trust and transparency, the royal commission is expected to recommend the establishment of an independent Aged Care Pricing Authority, tasked with identifying the lowest price for services achievable by those providing excellent care.
It would also estimate the uplift in price for regional and specialist services.
It is likely to expose the need for much more funding.
…and more spending
Australians appear open to the idea. A recent survey found taxpayers were willing to pay an additional 1.4% per year on average to ensure that all Australians in need had access to a satisfactory level of quality aged care, and an additional 3.1% per year if it gave all Australians in need access to a high level of quality aged care.
The royal commission was told that a European-style social insurance scheme could work. It would explicitly link contributions with the right to benefits and would quarantine them from general revenue.
It could come from a Medicare-style levy
A better option would be a dedicated tax similar to the Medicare levy. Its clear social benefit might be acceptable to the electorate and earmarking it for aged care could build the confidence providers will need to invest in its future.
It could differ by age to address intergenerational equity.
The reality is that in a world with fewer younger workers and more retirees with considerable wealth we will need a combination of measures, with extra funding coming from care recipients as well as taxpayers.
Current means testing caps and thresholds require too little from those with greater means and require too much from those with modest means.
The regime favours homeowners, couples, and those receiving care at home. Better and simpler means testing could raise more, reduce distortions, and improve fairness.
- ^ final hearing (agedcare.royalcommission.gov.au)
- ^ A$20 billion (www.health.gov.au)
- ^ residential, home care, and home support services (cepar.edu.au)
- ^ more than double (www.abs.gov.au)
- ^ from 35% to 41% and from 10% to 21% (www.pc.gov.au)
- ^ 26% in residential care and nearly 60% in home care (www.health.gov.au)
- ^ If we have the guts to give older people a fair go, this is how we fix aged care in Australia (theconversation.com)
- ^ financially viable (agedcare.royalcommission.gov.au)
- ^ as much as 80% (kalkinemedia.com)
- ^ operating cash losses (agedcare.royalcommission.gov.au)
- ^ hits to occupancy (agedcare.royalcommission.gov.au)
- ^ infections (www.health.gov.au)
- ^ staffing costs are climbing (hsu.net.au)
- ^ 60% (www.gen-agedcaredata.gov.au)
- ^ higher (agedcare.royalcommission.gov.au)
- ^ over-claiming (www.health.gov.au)
- ^ blunt tool (www.health.gov.au)
- ^ Despite more than 30 major inquiries, governments still haven't fixed aged care. Why are they getting away with it? (theconversation.com)
- ^ reporting practices (agedcare.royalcommission.gov.au)
- ^ Aged Care Pricing Authority (www.smh.com.au)
- ^ welcomed (agedcare.royalcommission.gov.au)
- ^ hospital system (www.ihpa.gov.au)
- ^ 1% increase in taxes (agedcare.royalcommission.gov.au)
- ^ survey (agedcare.royalcommission.gov.au)
- ^ Australian approach (www.cepar.edu.au)
- ^ The budget must address aged care — here are 3 key priorities (theconversation.com)
- ^ Paul Keating (www.abc.net.au)
- ^ Pension Loan Scheme (www.servicesaustralia.gov.au)
- ^ February 26 (agedcare.royalcommission.gov.au)
Authors: Rafal Chomik, Senior Research Fellow, ARC Centre of Excellence in Population Ageing Research (CEPAR), UNSW