Reforming Australia’s aged care system: are we there yet?

Leah Ferris, Social Policy

Key issue
The Parliament recently passed legislation that gives effect to the Gillard Government’s Living Longer Living Better reforms. While these reforms will result in significant changes to the current aged care system, discussion has already commenced about the possibility of more reform.

A sector in need of reform

Australians are living longer—due largely to improvements in health care—and as the large cohort of baby boomers ages, the number of older Australians will grow. As Figure 1 illustrates, it is predicted that the number of Australians aged over 85 years will increase from 0.4 million today to 1.8 million in 2050. Significantly, by 2050 an estimated 3.5 million Australians are expected to access aged care services, such as residential aged care, each year. Older Australians are also seeking greater diversity in terms of the range and quality of services available to them.

Figure 1: Population projections (series B), 2010 to 2050Figure 1: Population projections (series B), 2010 to 2050

Source: ABS, Population projections, Australia, 2006 to 2101, Cat. No. 3222.0.

Since 1983, the aged care sector has undergone two significant periods of reform. While reforms have resulted in more varied and better quality services, they have delivered little structural change. A third era of reform commenced with the passage of the Living Longer Living Better legislation package.

Productivity Commission inquiry

In its final report, the National Health and Hospitals Reform Commission (NHHRC) recommended that current arrangements for the provision and financing of aged care services were reviewed. In 2010, the Rudd Government announced that the Productivity Commission (PC) would conduct an inquiry into the options for structural reform of aged care. Following a lengthy public consultation process, including the release of a draft report, the PC reported to the Government in June 2011.

The PC concluded that as the current system suffered from a number of key weaknesses, it needed to undergo comprehensive reform. The PC highlighted a number of issues: challenges faced by consumers in navigating the current system, the lack of integration between the aged care and health system and the need to reform financing arrangements.

The PC made a number of recommendations, including that costs associated with accommodation and care should be separated, and that consumers should have to contribute in part to the cost of their care (safety nets should be in place to protect those of limited means). In addition, consumers should be able to choose to pay either a periodic charge or a bond for residential care, there should no longer be a distinction between high and low care and the restrictions on the number of residential aged care places and care packages should be removed.

Living Longer Living Better reforms

In response to the PC report, the Gillard Government announced the Living Longer Living Better reforms (the LLLB package).

The LLLB package, while adopting a number of the recommendations made by the PC, does not structurally reform the financing of aged care, nor does it lift current restrictions on the supply and allocation of aged care places. In particular, the reforms do not provide for the level of co-contribution from recipients as envisaged by the PC. The PC’s recommendation to establish an entitlement-based system, where consumers choose which care they need, has also yet to be implemented.

Under the LLLB package:

  • the costs of accommodation and care will be separated
  • older Australians who can afford to do so will pay towards the cost of care with lifetime caps on out-of-pocket expenditure
  • accommodation payments for all people in residential aged care facilities will be introduced
  • there will be a greater focus on consumer directed care and
  • a ‘Gateway’ will be introduced to help older Australians navigate the aged care system (this will entail a single entry point comprising a new website and a national call centre).

The LLLB package has been structured as a ten year reform program.

The initial response to the package from stakeholders was largely positive. But as aged care providers and others have had longer to reflect, claims have emerged that, as a result of the package, the cost of care provided in the home will increase for elderly Australians.

Despite the package, debate about whether the family home should be included in the arrangements for paying for aged care also persists. While the PC recommended using the value of the family home to finance the cost of aged care, other proposals have suggested including the family home in means-testing calculations of eligibility for public funding.

Where to next?

As part of implementing the LLLB package, the Gillard Government legislated to undertake an independent review of the reforms. Under the legislation, the report of the review, to be provided by 1 July 2017, must consider: whether ‘the number and mix of places for residential and home care should continue to be controlled’ and whether ‘further steps could be taken to change key aged care services from a supply driven model to a consumer driven model’.

In the lead up to the 2013 election, the Coalition indicated that while it generally supported the LLLB package, more needed to be done to cut aged care red tape. It also committed to work with stakeholders to develop a ‘Healthy Life, Better Ageing Agreement’, which would ‘define reform implementation priorities over a five year period’. As part of this process, it would establish a Steering Committee comprising relevant stakeholders.

It would appear that given the legislative commitment to a review of the LLLB package and proposals for future stakeholder consultation in one form or another, further reforms to the aged care system may be likely to occur. Areas of particular interest for stakeholders may be the current restrictions on residential and home care places and existing financial arrangements. Other issues for consideration may include the level of accommodation payments, the adequacy of safety net arrangements and the ongoing debate over the status of the family home.

Further reading

R de Boer and P Yeend, Aged Care (Living Longer Living Better) Bill 2013, Bills digest, 106, 2012–13, Parliamentary Library, Canberra, 2013.

R de Boer, ‘Reform of aged care—a small step’, FlagPost weblog, 30 April 2012.

R de Boer, ‘Paying for aged care—should the family home be counted?’, FlagPost weblog, 2 May 2012.

R de Boer, ‘Changes to community care’, FlagPost weblog, 2 May 2012. 

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