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We need hard conversations about frailty planning

Observers of this year’s Federal Budget would have thought it was light on aged care reforms, and they’d be right. But I’d remind them that last year’s Budget delivered an aged care reform package with a five-year timeline. This year, the government reinforced its commitment to that plan and committed an additional $20.1 million in funding. That brings the total additional spend to $18.8 billion over five years, on top of the $21.5 billion-plus per year we already spend on aged care.

Whether enough is being spent on aged care, or whether we’re spending the money in the right places, is a contentious issue. But you can be sure this year’s Federal election is gearing up to be a debate on aged care:

  • The current Government is promoting its current program of reform – i.e., the five-year plan that is already one year into reform
  • The opposition is promising improvements in services and care
  • Unions are pushing for wage rises
  • The aged care industry is pushing for more funding to help stem the operational losses arising from increasing costs of care and wage pressures, and
  • The general public are confused.

What the Government announced

In this year’s Budget, the Government reconfirmed its commitment to the five-year plan announced in the 2021 Budget. This included a five-year, five-pillar package of reforms.

Demand for home care continues to increase, and the next tranche of 40,000 new home care packages (to be released over 2022-23) will continue to increase availability and reduce waiting times. While waiting times have reduced by approximately 25%, the reality is that waiting time for a Level 3 or Level 4 package is still estimated to be 6-9 months.

Navigating home care should be easier when the current Commonwealth Home Support Program (CHSP) and Home Care Packages are combined into one new Support at Home Program from 1 July 2023. Details are yet to be developed, with advisory committees and older Australians providing input into the development.

In residential aged care, concerns around adequate funding levels continue to dominate discussions. Last year, the Government introduced an additional supplement of $10 per day per resident to help care providers improve the quality of services, particularly food and nutrition. This $10 came with increased reporting requirements to provide data on services provided.

A new funding model to reset the cost of care for residents is currently being trialed (called AN-ACC), with implementation set for later this year. In this year’s Budget, an extra $20.1 million in funding was announced over the next three years.

The 2021 Budget also committed to a minimum of 200 minutes per day of care on average for every aged care resident.

Across the 2021 and 2022 Budgets, the government has committed to reforms costing $18.8 billion over a five-year period, and these reforms picked up on 126 of the 148 Royal Commission recommendations, with 12 more under consultation.

Labor’s Budget reply

The Budget reply from Labor outlined an intention to improve aged care, based on recommendations made by the Royal Commission:

  • A mandatory requirement to have a registered nurse on site at all times
  • A minimum of 215 minutes of care per day for every aged care resident
  • Support for the 25% pay case lodged by aged care workers with the Fair Work Commission, and a commitment to fund the outcome
  • Better food for aged care residents
  • Increased powers for the Aged Care Quality and Safety Commission and increased reporting requirements for aged care providers.

Labor has costed this reform package at an additional $2.5 billion over four years. But, this does not include funding pay increases for aged care workers. Given that wages represent around 70% of the costs for residential care, any wage increase will require significant amounts of extra funding and well over the $2.5 billion quoted.

Who is going to pay?

Neither party has addressed the ‘election killer’ issue of consumer contributions.

The government (which means we as taxpayers) currently pays 96% of all care costs – across the combined areas of home care and residential care. Whether consumers can afford to pay more and whether they should pay more are big questions still looming on the horizon.

The options any government has to increase aged care funding are:

  • Increase tax revenue
  • Reduce spending on other areas to redirect to aged care
  • Raise an aged care levy (like Medicare levy) to fund aged care as suggested by the Royal Commission
  • Dive further into debt
  • Shift some of the cost to consumers, or
  • Create efficiencies within the aged care system to reduce cost pressures.

The costs of aged care will only continue to increase as the Baby Boomer generation moves into their frailty years, increasing not only the demand for services but also higher consumer expectations around quality of service. Add to this an increasing level in the care needs of those who make the move into care.

Whichever party comes to power in May, there is a chance that in the new mini-Budget or the Mid-Year Economic and Fiscal Outlook statements we might expect to see some reforms to consumer contributions.

What individuals need to do

We need to start the hard conversations about frailty planning. Aged care is no longer an issue that can be ignored when planning for retirement. If people are not prepared for their frailty years, it can leave them exposed for around 15% - 25% of their retirement. This is a major gap. Australians need to start planning for how to contribute towards their cost of care. Even today, with money and financial resources the range of choices is wider and provides better quality of life.


Louise Biti is a Director of Aged Care Steps.


April 10, 2022

Two things that need consideration. A re-introduction of fund tax for superannuation funds in the "pension phase". This could be sufficient by itself to fund the additional government cost needed for aged care. It would also simplify the decisions that retirees have to make - either leave it in lump sum phase and take it out when it's needed, or start a pension if you want regular income (and get rid of the minimum percentages).
The second thing is the means tested fee cap. Annual yes, lifetime no. If you have sufficient assets to force you into meeting the maximum lifetime cap then you (and your estate) can afford to pay the annual amount for each and every year you need residential care.

April 12, 2022

Absolutely, spot on with you comment about the lifetime caps. Why should someone only have to pay about $70k over their lifetime, the amount is ridiculously low. Also, agree with KB’s comment about the fees coming out of one’s assets on death. This could even be applied to all social security payments, like HECS fees, if you want or need income support then it comes out of your estate on death. Also, these cash hand out will do nothing to solve cost of living pressures. If you read Clive Hamilton’s 2005 book Affluenza, the problem existed then. Problem is, for most, conspicuous consumption, ie must have too many things. Unfortunately those most in need get nothing, when for example an increase in rent assistance would go a long way (welfare recipients who own their own house or live with mum and dad are not so badly off) to helping their real problems.

April 09, 2022

The taxpayer can't afford it and more providers will have to close if the new measures are introduced so I suggest adding the costs of the care given care and taking any money owing out of the person's estates. People have to pay for their bed and board all their lives so they shouldn't look on their final years as any different. (And I am in my70's, just in case someone thinks this is a young person commenting.)

April 09, 2022

To better understand what to do about our frail Boomers, have a look at China. 30% of Chinese will be over compulsory retirement age (60) within 20 years. Currently under 20%. CCP policy calls for 90% of seniors to remain at home, 7% at intermediate facilities and 3% in nursing homes. China will dominate our region economically, politically and militarily within 20 years, in part to deal with its demographic time bomb, so we should plan for most Boomer Australians to age at home. This will require a larger mobile care workforce and punitive means tested fees for nursing homes as an incentive to delay admission until home care becomes impossible, not just challenging.

December 09, 2022

John, I think most people would prefer to age in their own home if at all possible, so making home care more accessible would help enable this. No need to punish the unfortunate people who have no choice but to enter residential care. Does anyone do that by choice if staying at home is a viable option?

David Williams
April 06, 2022

Thanks Louise - an excellent article. Two comments:
1. The AIHW data, on which we depend to understand the stages of longevity, does not define 'frailty', which has a variety of clinical overtones in the literature. The AIHW stages data reports on increasing levels of disability, with the final stage being dependent on others to carry out core activities (also defined by AIHW). To avoid confusion I suggest the term 'dependent' is more useful from a planning and support viewpoint.
2. You rightly focus on the importance of support in the dependent stage. However, many issues in this stage, such as dementia, often reflect a failure to take preventive action before the condition appears. Ignorance about how to make the best of our longevity (the rest of our life) means the community and individuals often do not act in their own best interests. Proper longevity education will improve quality of life and provide major cost savings. It would build confidence in the full range of key decisions a person makes to manage the later stages of life. We need a National Longevity Strategy to incorporate this in providing a more holistic approach to making the best of increasing longevity.

April 09, 2022

David - many people don't act in their own best interests. We still have people who smoke, do not exercise at all, eat very little fruit/vegetables, drink too booze, choose to eat foods that are known to be bad for us, and take recreational drugs. People DO know about all those things but they make their own choices and many don't care about longevity.


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