Aged care funding in the spotlight

The tragic deaths from Covid-19 of more than six hundred residents of Australian aged care homes has shone a harsh light on the flaws in our aged care system. It has also given greater impetus to the Royal Commission into Aged Care, with its aim to improve quality and safety.

UTS Professor Michael Woods presented evidence to the Royal Commission yesterday, and is the lead author of a new report examining alternative models for funding aged care homes, just released by the Department of Health.

Professor Woods, from the Centre for Health Economics Research and Evaluation (CHERE), told the Royal Commission that while Australia rightly provides fully subsidised care and accommodation to pensioners with limited assets, wealthy older Australians should contribute more to their aged care costs.

“It’s absolute madness to have the taxpayer, just because a person has got old, suddenly paying for all of these things,” Professor Woods told the Commission.

In his Witness Statement, Professor Woods supported greater use of the Pension Loans Scheme, noting that it “is an existing flexible approach for an older person to draw more readily on their wealth to pay for goods and services, including aged care services, without having to sell their home during their lifetime.”

The new report by CHERE for the Department of Health: Impact analysis: alternative models for allocating residential aged care places, incorporates evidence from the Aged Care Royal Commission interim report.

Taxpayer funded places in aged care homes are currently allocated to residential aged care providers rather than consumers.

“Less-preferred homes may enjoy higher occupancy than they would in an open market. Providers have little incentive to excel in the quality of their care or to compete on other services or accommodation,” the report said.

The report argues that older people in need of full-time professional care should be able to choose an aged care home, in a more open market, that meets their needs and preferences.

With the provision of care, I think there's a very good argument that providers should not be able to make excess profits. 

Professor Woods also highlighted problems with the funding of aged care in a recent Think: Business Futures podcast, and noted there were three basic elements to funding aged care.

“One is the care that is delivered, and that's by nursing staff, personal carers, allied health workers and the like,” said Professor Woods.

“The second is the hotel type services – the food, the cleaning and the laundry.

“And the third component is accommodation.

“With the provision of care, I think there's a very good argument that providers should not be able to make excess profits. That's primarily why people are there, and it's primarily what the taxpayer is subsidising,” he said.

Fellow panellist Ian Henschke, chief advocate for National Seniors Australia, said Australia has one of the highest rates of institutionalised aged care in the world.

“What the pandemic is telling us is that people want to stay in their own home, and be cared for in their home, and only unless they really need institutional care, go into a home.”

Read Professor Woods’ Witness Statement to the Aged Care Royal Commission.

Read the CHERE report: Impact analysis: alternative models for allocating residential aged care places.

Listen to the Think: Business Futures panel discussion with UTS Professor Michael Woods and Ian Henschke, chief advocate for National Seniors Australia.