Briefing Book Article, 47th Parliament

Aged Care

Rebecca Storen

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Key issue

The issues surrounding aged care and the challenges of providing care and services to an ageing population have been well documented over the last 20 years, with the Royal Commission into Aged Care Quality and Safety (Royal Commission) being the latest in a long line of reviews calling for change.

More than one year on, much work remains to implement the rights-based aged care system envisioned by the commissioners and, as aged care costs grow, the need to ensure safe, high quality care by a well-supported and fit-for-purpose workforce continues.

graphic with text that reads: in 2019-20, government expenditure was approximately $19.4 billion for commonwealth home support programme (CHSP), home care and residential care. Care recipients contributed another $5.3 billion.

Source: Aged Care Financing Authority, Ninth Report on the Funding and Financing of the Aged Care Sector, (Canberra: Aged Care Financing Authority, 2021), 21.

The aged care system faces many challenges and issues, some of which have been around for some time, such as costs, while others are emerging. The system design has competing priorities, seeking to control costs while also emphasising the need for safe, high-quality care and support that meets people’s needs. These issues are exacerbated with changing population demographics, increasing care needs and expectations, alongside ongoing workforce challenges. This has resulted in gaps and shortfalls in the provision of appropriate care. In response to significant and ongoing concerns about aged care, the Royal Commission was established, which concluded that profound change is needed to provide a system that not only provides safe, high-quality care and support, but also empowers and respects people’s rights. Aged care, as discussed in this article, refers to the system primarily regulated and funded by the Australian Government to provide care and support to older people who are no longer able to live without assistance in their homes and who are assessed as being eligible for services.

The Aged Care Act 1997 (the Act) is the principal piece of legislation setting out the obligations and responsibilities of aged care providers who receive Australian Government funding. The objects of the Act include provision of funding for aged care and promoting high-quality care and accommodation that meets people’s needs. To support these objects, the Act provides for:

responsibilities of approved providers (providers that meet the Aged Care Quality Standards)
subsidies and supplements (from the Government)
fees and payments (from the care recipient)
responsibilities of approved providers
how a person is approved for aged care services.

The Aged Care Quality and Safety Commission Act 2018 and its associated Rules set out the function of the Aged Care Quality and Safety Commission, the quality regulator for aged care.

People accessing aged care

In 2020–21, approximately 1.5 million people accessed aged care services across Australia, mostly through community-based programs (p. 13). Figure 1 provides a breakdown of aged care clients by jurisdiction.

Figure 1 Aged care clients and Australian Government expenditure on aged care by jurisdiction (2020–21)

Source: Department of Health (DoH), Aged care data snapshot–2021, 3rd release, client summary and expenditure summary tabs, 2022

While aged care services are generally accessed by people aged 65 years and over, there is no specific age requirement to access aged care services delivered under the Act (p. 8). People under 65 years who require care and support due to a disability may be eligible for the National Disability Insurance Scheme (NDIS). NDIS participants can continue in the scheme once they reach 65, and may also be eligible for some aged care services.

Unmet need

There is no single measure to quantify people’s unmet care and support needs. In its most recent survey of disability, ageing and carers, the Australian Bureau of Statistics found that most people over 65 years receive some form of help for at least one activity, either formally or informally. Of the 1.3 million older people needing assistance, 31% said their need was partially met and 3.1% their need was not met at all.

One of the indicators in the Productivity Commission’s Report on government services measures hospital patient days used by those eligible and waiting for residential aged care. In 2019–20, ten per 1,000 patient days were used by patients waiting to enter residential aged care nationally (Figure 2).

Figure 2 Hospital patient days used by those eligible and waiting for residential aged care, by jurisdiction and year

Figure 2 graph showing Hospital patient days used by those eligible and waiting for residential aged care, by jurisdiction and year

Note: Victoria has developed alternative pathways for people waiting for residential aged care.

Source: Productivity Commission, ‘Aged Care Services: Indicator Results: Unmet Needs’, Report on Government Services 2022, (Canberra: Productivity Commission, 2022).

Reports have also shown that despite existing programs, informal carers of older people still have high unmet needs (see for example the Royal Commission’s Final report (from p. 204) and The value of informal care in 2020 from Carers Australia).

Rights-based aged care

The Royal Commission’s Final report stated that achieving the fundamental reforms it envisaged will require a new Act- one focused on people’s needs and wellbeing rather than one defined by Government funded programs (p. 13). Recommendation 1 proposed that the objects of the new Act include providing ‘… a system of aged care based on a universal right to high quality, safe and timely support and care to […] assist older people to live an active, self-determined and meaningful life’ (p. 15).

The Morrison Government accepted this recommendation, with the new Act intended to commence from 1 July 2023. However, the Government’s response was silent on the issue of a rights-based Act, stating work would begin on a new ‘consumer-focused’ Act (p. 1).

Funding

The Australian Government is the primary funder of aged care, with contributions from care recipients and funding from state and territory governments for particular programs. Government expenditure on aged care services in 2020–21 was approximately:

Australian Government: $23.2 billion
state and territory governments: $348 million (Table 14A.3).

The 2021 Intergenerational report (IGR) estimated that the Australian Government funded approximately 80% of aged care in 2018–19, with care recipients funding most of the remaining 20% (p. 103). However, the contribution from care recipients is no longer routinely reported as the Aged Care Financing Authority was abolished following passage of the Aged Care and Other Legislation Amendment (Royal Commission Response No. 1) Act 2021. Note however the explanatory memorandum to the Bill stated a new aged care financing advisory body would be established (p. 20).

The IGR estimated that aged care spending as a proportion of the economy will increase substantially from 1.2% of gross domestic product in 2020–21 to 2.1% in 2060–61 (approximately $113 billion in 2020–21 dollars) (p. 104).

Financial health of the sector

StewartBrown, an accountancy firm, undertakes a quarterly benchmarking survey with approximately a third of all aged care providers. Its most recent publicly available report states:

The Survey for the 3 month period ending September 2021 continues to highlight the declining financial sustainability of the sector, with residential aged care becoming a major focal point of consternation.

The average operating results for residential aged care homes in all geographic sectors was an operating loss of $7.30 per bed per day despite the additional Basic Daily Fee supplement of $10 per bed day …

A report from the University of Technology Sydney, analysing mid-year results for the first half of 2021–22 for aged care providers, makes similar findings, estimating that over 60% of residential care homes are operating at a loss (p. 9).

Care recipient fees

Care recipients may be required to financially contribute towards the cost of their care and services. For some fees, people generally need to complete an income or means assessment (undertaken by Services Australia) to determine their means tested care fee and accommodation costs. In residential aged care and home care, most people will be asked to pay a basic daily fee, calculated as a proportion of the single basic age pension.

Care funding in residential care

The Aged Care Funding Instrument (ACFI) is the resource allocation tool used to assess people’s main care needs as a basis for funding allocation in residential aged care. An ACFI assessment is undertaken by the aged care provider. Concerns relating to the growth of ACFI subsidies and its ability to cover the cost of care are longstanding.

In 2019, the Government announced a trial of a new funding tool, the Australian National Aged Care Classification (AN-ACC), to replace ACFI. The 2020–21 Budget provided $91.6 million to fund a 12-month shadow assessment in which most residents would receive an independent assessment using the AN-ACC model.

The Government announced the AN-ACC model would replace ACFI from 1 October 2022 (p.108) and introduced the Aged Care and Other Legislation Amendment (Royal Commission Response No. 2) Bill 2021 to enable this change. However, the Bill lapsed at the dissolution of the 46th Parliament.

Accommodation deposits

Before a person enters permanent residential aged care, they must agree an accommodation price with the provider; however, the outcome of their means assessment will determine if they need to financially contribute towards their accommodation cost or if the cost is partially or fully covered by the Australian Government. People required to make accommodation payments can nominate to pay it as a lump sum, a daily payment or a combination of both. In 2019–20, the average refundable accommodation deposit was estimated at approximately $334,000 (p. 109).

Accommodation bonds, the predecessor to accommodation deposits, were introduced in the Act to encourage capital investment in residential stock to assist providers to meet building standards and improve building stock (pp. 11–12). As at 30 June 2020, the total value of accommodation deposits held by providers was estimated to be $32.2 billion, comprising 57% of providers’ total assets and 79% of liabilities (p. 109). Under the Accommodation Payment Guarantee Scheme, the Australian Government guarantees the repayment of accommodation deposits if a provider defaults on its refund obligations.

It is estimated that approximately 80,000 new aged care beds will be needed over the next decade to meet projected demand, and that providing these, in conjunction with refurbishing and rebuilding existing stock, will require capital funding of approximately $51 billion (p. 8).

In the Royal Commission’s Final report, Commissioner Briggs recommended refundable accommodation deposits be phased out from 2025 (p. 884). The Government stated that this would be considered further as part of the development of a reformed accommodation framework (p. 94).

Governance, safety and quality

System governance

In its Final report, the Royal Commission emphasised the requirement for robust system governance, identifying the need for a number of institutions, including:

a system governor
an independent standard setting body
an independent pricing authority (p. 40).

The commissioners differed on the form some of these institutions should take, with Commissioner Pagone proposing an Independent Commission model and Commissioner Briggs a Government Leadership model.

In its response, the Government broadly supported the Government Leadership model, including the establishment of an independent Inspector-General of Aged Care and the expansion of the Independent Hospital Pricing Authority (IHPA) (pp. 4–13). Among other things, the Morrison Government sought to expand the functions and governance of the IHPA through the Aged Care and Other Legislation Amendment (Royal Commission Response No. 2) Bill 2021.

Safety and quality

The Royal Commission was established, among other things, to inquire into the quality and safety of aged care services and they are discussed throughout the Final report. Chapter 3 in particular focuses on elements of quality and safety, such as how to define high quality aged care and tools to improve it with the commissioners making 12 specific recommendations (numbers 13–24), including:

amending the National Health Reform Act 2011 to expand the function of the Australian Commission on Safety and Quality in Health Care (ACSQHC) (the health regulator) to create standards, guidelines and indicators for aged care quality and safety (p. 122)
developing a star rating system, which includes performance against clinical and quality indicators and staffing levels (p. 131).

The Government accepted in principle the recommendation to expand the ACSQHC, stating it would transfer the responsibility for formulating the clinical care standards to the ACSQHC while the Department of Health would retain responsibility for the non-clinical care standards (p. 17). The star rating system is anticipated to commence in residential aged care from the end of 2022.

Workforce

Source: DoH, 2020 Aged Care Workforce Census Report, (Canberra: DoH, 2021): 8, 24, 38.

As outlined in the Royal Commission’s Final report:

Getting the aged care workforce right is vital to the success of any future aged care system

…

While many excellent people work in aged care, there are systemic workforce problems that must be addressed. Of the public submissions we received, approximately 70% identified staffing as a concern …

The aged care workforce is poorly paid for difficult and important work. There are often not enough staff members to provide the care that is necessary … (pp. 371–2).

The commissioners identified several key elements needed to achieve their vision for the workforce, including:

strategic leadership and workforce planning
greater proportion of health practitioners
minimum qualifications for personal care workers
improved pay and conditions
registered personal care workers (p. 372).

In addition, several of their other recommendations would have an impact on staffing numbers, such as recommendation 39, which includes clearing the existing home care package waiting list (pp. 183–184).

Vacancies and attrition

A 2022 report for Catholic Health Australia estimated a total of 59,067 full time equivalent (FTE) aged care vacancies across the sector, the majority being for qualified personal care workers (p. 6).

In the 2020 aged care workforce census, organisations were asked about the attrition of the direct care workforce between November 2019 and November 2020. Findings showed that in the 12-month period, the proportions of employed direct care workers leaving their employment were:

29% from residential care (p. 21)
34% from home care (p. 35)
26% from CHSP (p. 48).

The report does not provide details on whether people who left their jobs moved elsewhere in the sector or left the sector entirely.

Projections

The Royal Commission engaged Deloitte to project the number of direct care workers required to implement its recommendations at different ranges of minimum staffing levels for residential aged care (see Figure 4). The star rating system used in this model is from the US, with a 4-star rating for minimum staff time per resident per day best aligning with Recommendation 86 on minimum staffing levels. The baseline projection suggested that 316,500 FTE would be required by 2050 (Figure 3). Compared with 2020 levels, the 4-star rating in 2050 would require an additional:

35,900 nurse practitioner and registered nurse roles
6,000 enrolled nurse roles
113,600 personal care workers (p. 375).

Figure 3 Projected number of direct care FTE in aged care

figure 3 table showing Projected number of direct care FTE in aged care

Source: Royal Commission into Aged Care Quality and Safety (Royal Commission), Final Report: Care Dignity and Respect, Volume 3A: The New System, (Adelaide: Royal Commission, 2021), 375.

Remuneration

A report prepared by Korn Ferry HayGroup for the Aged Care Workforce Strategy Taskforce included a section on remuneration benchmarking, which found:

personal care workers are paid significantly lower than similar roles in the general Australian market and are generally paid between the (bottom) 10th percentile to 25th percentile of all organisations assessed
nurses are generally paid lower than the median fixed annual reward of similar-sized roles and often paid between the 25th to 50th percentile of all organisations assessed (pp. 97–98).

Undertaking research with its 218,000 members working in aged care, HESTA, a superannuation fund, released an aged care workforce report in 2021, finding:

the estimated median gross salary for its aged care members was $47,127
almost 40% of aged care members earn less than $50,000 per year before tax
aged care members have the lowest median super balance for all health and community services
43% of aged care members are aged 50 and over
25.6% of aged care members made a claim to access their super early under the COVID-19 arrangements. Of this group, the median super balance after the claim was less than $15,000 (pp. 8; 9 ;22; 23).

In March 2022, the Australian Aged Care Collaboration released a report looking at the average wage for aged care workers and costs of living. Using the income of a personal care worker at $900 for an ordinary full-time week ($773 after tax) the authors found:

a single household, after covering basic expenses, would have approximately $112 left for the week
a single-parent household would be unable to cover their basic expenses at -$148
a 2-parent household would have $17 left.

The Royal Commission identified issues with remuneration, recommending that aged care employee organisations collaborate with the Australian Government and employers to apply to the Fair Work Commission to vary wage rates for 3 awards: the Aged Care Award 2010, the Nurses Award 2010 and the Social, Community, Home Care and Disability Services Industry Award 2010 (p. 415).

The Health Services Union and the Australian Nursing and Midwifery Federation have lodged an application to the Fair Work Commission to vary the 3 awards. If successful, this application would increase the wage rates for aged care employees under the awards by 25%. As part of its election policy, the Australian Greens stated it would increase pay by 25% for aged care workers. The Australian Labor Party has committed to implementing the outcome of this case.

What next for aged care?

Aged care is a heavily regulated sector, with legislation and policy development and implementation tightly linked. The reasons behind this, partially at least, are a combination of system governance, especially as the Australian Government is the primary funder, and the need to ensure people receive safe and quality care and services. Alongside the funding and workforce challenges, there is a need to acknowledge sector fatigue, not only with an ongoing pandemic but also in the face of another possible set of reforms to which organisations and the workforce will need to adapt, while still providing day-to-day care and support. While this is certainly not without its challenges, the work of the Royal Commission identifies opportunities for developing and implementing a fit-for-purpose aged care system that enables people to age well in Australia now and into the future.