Aged Care Indexation

I am going to assume that most people reading this article will be aware that there is currently a Royal Commission reviewing matters of Quality and Safety in Aged Care.  Among other things, that Commission is inquiring into matters where poor and substandard care have been provided to residents in residential aged care and to care recipients in home and community-based care.

Where there have been findings of substandard care, all providers in the aged care sector should stand resolutely with care recipients and be highly critical of the events that took place to permit such poor care being delivered.  However, without wanting to escape from the responsibility of being a provider of aged care I do want to highlight again the dilemma that providers find themselves in desiring to provide the best care that they can.

One of the threads arising through the Royal Commission Hearings, and for some time prior to the Commission commencing has been a call for a higher staff ratio in care services being delivered.  

I agree with that call.

On Tuesday 25 June an update of subsidies indexation for the forthcoming 2019-2020 financial year was distributed by the Australian Department of Health to aged care providers.  That update advised that the rate for care subsidies was going to increase by 1.4% for the next financial year.  

Whilst that does compare favourably with CPI increases for the twelve months to 31 March 2019 (1.3%), it is a long way shy of the recent minimum wage increase of 3% provided for by a separate arm of government, the Fair Work Commission, to low paid workers in the 2019 annual wage review.  Indeed, for the twelve months ended 31 March 2019, the Wage Price index based on ordinary time hourly rates of pay (excluding bonuses, health care and social assistance) was 3.3%.

It is simply not reasonable to expect that providers can do more with, increasingly, less.  As I have shown before, this illogical expectation that aged care providers can improve quality and care provision with increasingly less, is not a new phenomenon.

For almost the past twenty years I have been monitoring Health Ministers making similar approvals for health insurance premium increases yet at the same time, as the senior Minister over the aged care portfolio, making starkly lower indexation for payments for recipients of care or, more indirectly, to the providers of care to aged care recipients.

The chart below clearly shows that whilst aged care funding indexation has indeed kept fairly much in line with CPI, it has failed to keep close to relevant wage rates for low paid workers – the bulk of our workforce.  At the end of March 2019, 45.1% of residential aged care facilities had negative earnings before any taxation was payable.  That was an increase on the previous year. For a fourteen-week period concluding 30 June 2019, there was some hope, with the Department of Health providing a generous helpful buffer to restore some of the loss of income over the past few years.  Sadly, this short period of increased indexation will not continue.

The comparison of funding increases made to aged care providers through the various indexations against several alternate indicia is shown below, from my last piece on this matter from December 2018.

In light of an at least 3.3% increase in wage rates around us, with almost 50% of facilities in a financially unsustainable position, and under the scrutiny of a Royal Commission, aged care providers are offered 1.4% increase in care subsidies to manage all that is before them in a sector that is receiving much community scorn about matter of poor quality and substandard care.

As StewartBrown, an aged care industry benchmarking service, has commented, ‘while the COPE increase is consistent with the increase in the price of commodities, it is not going to keep pace with the increase in the cost of labour – placing further financial sustainability pressure on the residential aged care sector, and particularly in a climate of staff to resident ratio concerns and what, if any, further productivity and efficiency savings can be achieved without impacting on the standard of care and accommodation’. The mid 2019 Aged Care Financing Authority Report suggested that costs for aged care providers was increasing annual at a rate of some 5.3%, but income was only increasing at 1.7% on average.

Quite simply put, there is no possibility of current dwindling funding mechanisms providing for an improved staff ratio in residential aged care.  Indeed, it appears that there will increasingly be a lower ratio as funding relatively further declines.

Providers generally recognise that the growing wave of frail and vulnerable elderly needing care is outstripping the capacity of the Australian Government to meet the cost of care alone.  For a decade or more several alternate funding systems have been proposed, but, sadly, ignored.  We could all do well to consider a social long-term care insurance system into which every working adult contributes throughout their working life.  Ignoring the desperate plight of today’s seniors and not paving the way to better manage the future are increasingly being shown as failures of our aged care system.

Perhaps the Royal Commission can urgently consider this matter in their review processes into the whole aged care sector quality and safety funding and performance?

Nice chatting

Wayne L Belcher

3 Replies to “Aged Care Indexation”

  1. Very aptly written Wayne, you have summed the situation up very well.
    Unfortunately, the Gov’t, be it Labor or LNP, trumpet about the big increases they allocate to aged care barely covers the costs of funding the additional new places coming on stream, just to keep up with community demand with our ageing population.
    So the general population marvel at the additional $billions each year to aged care.

    1. Thank you for this note David
      Yes, the Government’s response can be seen as “all care and no responsibility”, where indeed we know implicitly that they Government of whichever colour is entirely responsible for the plight the sector now finds itself in. The deplorable lack of Government intestinal fortitude is telling!
      Regards
      Wayne

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