INSIGHTS: A sector priced out | Findings from the Aged Care Taskforce’s final report

April 8, 2024


Nevena Brown

The Aged Care Taskforce (the “Taskforce”), established in response to the Royal Commission into Aged Care Quality and Safety, has released its final report about current policy recommendations to enhance the aged care sector.

The final report highlights serious structural problems facing aged care providers with the need for a more sustainable, fair, and innovative aged care system.

The release of the report follows significant structural change in the sector since the Royal Commission concluded in February 2021. Years of high inflation, and the economic aftershocks of the COVID-19 pandemic, have placed serious cost pressures on small to medium-sized providers, significantly undermining the quality of aged care services. However, at the same time, the demand for aged care services has grown exponentially, with Australia having one of the fastest growing ageing populations in the world.

In this article, we explore the Taskforce’s five major policy findings:

  1. Future labour shortages in aged care
  2. The rejected aged care levy
  3. The required success of the 2025 Support at Home Program
  4. Phasing out refundable accommodation deposits
  5. Innovations required for aged care services

Future labour shortages in aged care

Of the 23 findings made by the Taskforce, the most pressing is the need to secure a long-term supply of skilled aged care workers to support the long-term viability and quality of the sector. By 2025, it is predicted that there will be a labour shortage of almost 40,000 aged care nurses. This will inhibit an expansion of the sector and place upwards pressure on the cost of aged care, pricing out both providers and patients.

The rejected aged care levy

The Taskforce recognised that aged care sector funding, as a proportion of total government spending, will need to increase by at least $37 billion by 2050 to support the growing demand for aged care services. However, it rejected the recommendation that an aged care levy should be imposed on the working population to fund this increase. The Taskforce found that private sector investment in aged care must increase to offset the major expenditure burden that the government will face to secure the expansion of the sector.

As a result of economic shocks in recent years, almost 70% of residential aged care providers have run at a loss, thereby disincentivising private sector investment.

The Taskforce has therefore proposed that the new Independent Health & Aged Care Pricing Authority (IHACPA) should be given more funding to advise the government on how to implement a series of subsidies. Doing so, could relieve some of the cost pressures facing the sector and attract greater investment.

The Taskforce also advised that the IHACPA could determine a more equitable system of fees for residents that focused more on services provided, rather than accommodation costs.

A major concern considered by the Taskforce was the need to protect financially vulnerable patients in the backdrop of rising aged care prices. This will likely require establishing new limits on the amount of co-contributions that low-means aged care residents are required to make to access aged care accommodation that is subsidised by the government.

The Taskforce proposed that the means tests used to determine the amount of co-contributions to be made by vulnerable residents will need to be recontextualised in the current environment of reduced savings rates after recent economic shocks.

The required success of the 2025 Support at Home Program

The Support at Home Program (SHP) due to be introduced in 2025 aims to treat elderly patients at their home residences for as long as possible. However, the report concluded that without major investment the program will be unable to service a growing ageing population.

Currently resources are not being utilised effectively by this program. Although the Taskforce remains optimistic about SHP as it would reduce supply pressures by allowing some patients to be treated at home. In addition, it would improve the quality of life for many patients who suffer mental health conditions.

The Taskforce also suggested that a fee-for-service model with service caps for non-essential services should be considered in the roll out of the SHP, meaning the most financially vulnerable patients could ‘pay as they go’ and receive treatment only for the services they require in their care journey.

Phasing out refundable accommodation deposits by 2035

Wealthier residents usually pay an upfront deposit, known as a refundable accommodation deposit (RAD), on their residential aged care accommodation that is paid back when they leave care. This can cause a structural cost pressure for providers as these refunds add up when patients leave care. Accordingly, the Taskforce agreed with the findings of the Royal Commission and proposed that RADS should be phased out by 2035, in favour of a new system of periodic payments made during a patient’s care.

Innovations required for aged care services

Echoing the findings of the Royal Commission, the Taskforce also considered the lack of innovation in the aged care sector. New technologies or care models that could allow providers to scale their services will be essential in the backdrop of increasing demand for, but limited supply of, aged care services.

The Taskforce argued that superannuation policies need innovation too, with a greater need for younger Australians to be incentivised by government policies to contribute to their super funds.

The implications of the report

The Taskforce has made many recommendations that would substantially change the aged care sector if they were implemented. Aged care providers are encouraged to read the full report to better understand the potential policy changes that may be announced prior to the 2025 Federal Budget.

Proposed Commonwealth funding

The new regulatory model for Commonwealth funded aged care services and new Aged Care Act, which are due to commence 1 July 2024, will set out regulations governing Commonwealth funding for aged care services.  The Consultation Paper about this proposed model is available on the Department of Health & Aged Care’s website.

This Insight was written by Principal Nevena Brown and Paralegal Joshua Jones. For further advice, please contact Nevena.

Disclaimer: This information is current as of April 2024. This article does not constitute legal advice and does not give rise to any solicitor/client relationship between Meridian Lawyers and the reader. Professional legal advice should be sought before acting or relying upon the content of this article.