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Extra funding for aged care in the budget, but not enough to meet demand

As a result of the mismatch of supply and demand, the government’s policy may need to change further, says Michael Woods.

In the 2018-19 budget delivered last week, federal Treasurer Scott Morrison made big promises for the aged care sector. He said the government would prioritise “caring for older Australians” – a direct take from the Productivity Commission’s landmark 2011 report of the same name.

The next morning, headlines relayed the treasurer’s message that the government would increase home care packages by 14,000 over four years at a cost of A$1.6 billion. But the aged-care sector quickly dampened the good news by pointing out more than 100,000 people are on the waiting list for a Home Care Package. While the new places were welcome, there was much more to be done to properly care for older Australians.

The 14,000 home care places are additional to those built into prior budgets. And there is extra money ($1.6 billion over four years) allocated to fund them in this year’s budget. But it still won’t be enough to meet demand.

Aged care funding in brief

As the needs of older people increase, they may seek support services from private or not-for-profit providers. The Australian government provides a safety net of subsidies for those unable to fully fund their own care.

The three main subsidised programs are:

  • the Commonwealth Home Support Program, which provides support services to enable older people to stay at home and be more independent in the community
  • Home Care Packages, which deliver an agreed set of services to meet a specific need, and come in four levels of care, ranging from basic to complex personal and health care (medical care is provided and funded separately)
  • residential care and accommodation, which is available for older people unable to continue living independently.

The level of subsidy varies according to the program and the person’s financial capacity to contribute. The federal government controls the amount of taxpayer money through both policy and the spending it announces in the annual budgets (if the parliament agrees).

These subsidies are provided through an aged care provision ratio, which aims to provide 113 subsidised care places for every 1,000 people aged 70 and over. In recognition of Australia’s ageing population and the growing demand for care, the government has been changing this policy so that the ratio will increase to 125 places for every 1,000 by 2021-22.

It remains to be seen whether this will be sufficient, or even appropriate. The use of a ratio based on the number of people aged 70 and over is becoming less relevant as people are taking up these services at later ages. The average age of a person receiving a home care package had increased to 82.5 in 2015-16. And the average age was 84 for those who moved into residential care.

Within the overall number of places, the government also sets sub-targets for the numbers of Home Care Packages and residential care places. Most elderly people want to stay in their own homes for as long as possible.

So, the government is altering the mix of home care and residential care in the target of 125 places per 1,000 people. By 2021-22, the target for home care packages will increase from 27 to 45 per 1,000, while the residential target is to reduce from 88 to 78 per 1,000 – with an additional two places for restorative care (support to restore a person’s wellness and capacity to live in the community).

What about the extra packages in the budget?

This year’s budget included an extra 14,000 home care packages. The number of home care packages is growing each year anyway because the number of people aged 70 or over is increasing and the “ratio” policy is giving more emphasis to home care.

This is evident in the forward estimates of the 2017-18 budget, which showed subsidised home care packages were growing to a target of 134,500 by 2020-21.

This year’s budget papers forecast that by 2020-21, the number of subsidised home care packages will increase from an actual allocation of 87,600 in 2017-18 to 144,500 places. This is an extra 10,000 from the previous year’s forward estimates.

By 2021-22 (the four years Morrison referred to) the target is 151,500 – an increase of another 10,000. So there will be an overall increase of around 64,000 packages from the number available last year (87,600), of which 14,000 are additional in this budget.

The numbers of residential and restorative care places are also increasing, by 13,550 and 775 respectively. And the budget decision to merge the residential and home care budgets will increase the flexible allocation of funds across the system. Unused residential care funding will be able to fund home care packages.

An increase in the proportion of care provided in a person’s home is not only what most people want, but it also helps the budget bottom line. In 2015-16 the average government subsidy for each home care consumer was A$16,760, compared to A$48,403 for those in residential care. Though a comparison with the higher Level 3 and 4 home care packages wipes out most of this difference.

So what about the waiting list?

The aged care sector has noted the demand for home care is far greater than the 14,000 additional packages. The latest estimate (at December 2017) is that 104,600 older Australians are in the national prioritisation queue, waiting for an approved care package.

Of these, 56,700 were not receiving any Home Care Package. A further 47,900 had been assigned a lower level of care through an interim package while waiting for their approved one to come through.

As a result of the mismatch of supply and demand, the government’s policy may need to change further. This will depend in large part on the evolving needs and wishes of our elderly citizens. But it will also depend on the affordability of the subsidies for taxpayers and getting the right balance with those older Australians who can draw on their own income and wealth to meet some or all of the costs of these services.

Funding pressures, of course, are not the only concerns that need to be addressed. Another is the growing demand for aged care workers and for that workforce to be properly trained. And quality issues are also continuing to make headlines.

Aged care reform is progressing, but the agenda remains unfinished.

Michael Woods is Professor of Health Economics, University of Technology Sydney.

This article as first published by The Conversation.

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