Aged care

Budget Review 2014–15 Index

Leah Ferris

Compared with recent budgets, aged care was not a prominent feature in this Budget. Most of the measures are aimed at reducing aged care expenditure in order to achieve overall savings and there is little funding for new initiatives.[1]  

This is the first budget since aged care has been moved from the Department of Health to the Department of Social Services. This change appears to reflect the Government’s view of aged care as a social service, as opposed to a priority area for reform. As noted by Hal Kendig, Professor of Ageing and Public Policy at the Australian National University, ‘it is telling that the Department of [Social] Services did not mention aged care in its media releases though the Budget outcomes statement did include residential and community care’.[2] Aged care was also not featured in the portfolio overview.[3]

The most discussed measure in the Budget with regards to aged care is the ceasing of the Aged Care Payroll Tax Supplement from 1 January 2015. This Supplement is currently paid to private residential care providers who, unlike not-for-profit providers, are required to pay state governments’ payroll taxes. In its report, the National Commission of Audit recommended that the Supplement should cease, ‘as it is effectively shifting the payment of a State tax to the Commonwealth’.[4] The Government has stated that by discontinuing the Supplement, it ‘will remove an indirect transfer payment from the Commonwealth to states, saving the Budget around $653 million over the next four years’.[5] Private aged care providers have opposed this change, with Leading Age Services Australia (LASA) stating that it will ‘erode capacity for providers to deliver frontline care services to older Australians’.[6] Ian Yates, the CEO of the Council of the Ageing (COTA), has stated that it ‘will see aged care providers pass on more than $650 million to consumers over the next four years in higher accommodation charges’.[7] Providers have also expressed disappointment over the lack of consultation.[8]

As a way of lessening the pain, the Government also announced that it will provide $1.5 billion over five years to increase aged care subsidies. Residential, home care and flexible care providers will have their basic subsidies increased by 2.4 per cent from 1 July 2014. This will also apply to some grant programs, such as the Home and Community Care Program (HACC). The viability supplement, which is aimed at supporting small providers in rural and remote areas, will be increased by 20 per cent. This is not new funding— it has been re-directed from the Aged Care Workforce Supplement which was introduced in the 2012–13 Budget to improve wage conditions for aged care workers and will be discontinued from 1 January 2015.[9]

This redirection of funding has been welcomed by the majority of aged care providers, who argued that the Aged Care Workforce Supplement was not an attractive option for providers and had resulted in inequality between those who chose to sign up and those that had not.[10] Catholic Health Australia argued that the funding should have always been available to all providers, regardless of wage conditions and that ‘governments should have no role in setting wages for workers’.[11] Blue Care especially applauded the increase in the Viability Supplement, noting that ‘small providers, particularly in rural and remote areas play a crucial role in many communities and are the only option for older people to remain in their community’.[12] However, other stakeholders noted that nothing had been done to address the growing issue of workplace shortages in aged care.[13] In particular, COTA commented that ‘giving aged care providers back the $1.5 billion Aged Care Workforce Supplement over five years will do nothing for development of the aged care workforce’.[14]

There were also significant changes to funding for home care services. Both the Home Care Packages Program and the Home Support and Respite Programme provide home based care, with the former providing high level care for residents still able to live at home and the latter providing more basic services. The Government has announced that it will cut the rate of real growth in the Home Support and Respite Program from 2018–19 to 3.5 per cent above indexation to align with the growth in Australia’s ageing population. This reduction ‘will not affect current funding to providers and [will] save the Budget $1.7 billion over the next ten years’.[15] This changed has been opposed by both COTA and Aged and Community Services Australia (ACSA). COTA noted that these changes will affect the front line of aged care and that it makes no sense to reduce the rate, while ACSA stated that it would be taking this up with the Government.[16]

The other change to the Home Support and Respite Program is the decision not to proceed with further grant rounds in 2013–14 under the National Respite for Carers Programme (NRCP). Under the Home Support and Respite Program, there are two main types of home support—the HACC program and the NRCP. The purpose of the NRCP is to provide respite to carers in a number of different settings. By not proceeding with further grant rounds the Government will achieve savings of $7.7 million. Providers of respite care had suspected this funding may be cut, with the Government refusing to confirm the Budget situation in March, but nothing was announced until Budget night.[17] While this appears to be a temporary measure, with $965.1 million over four years remaining in the Program, it will have a significant impact on those carers who rely on respite services and may lead to some families having to move people into residential care.[18]

With regards to the Home Care Packages Program, the Government has brought forward the allocation of home care places. This has been welcomed by stakeholders, though it does not allow for the provision of more home care places. [19]  

While the largest area of aged care expenditure is residential care, the majority of Australians who receive aged care services live at home or in the community and wish to remain there as long as possible. These changes to the current funding arrangements may limit consumers’ ability to access home care services and may force them into moving into residential care sooner.

Compared with other areas in the Social Services portfolio, aged care has been spared from the majority of funding cuts. The Government appears to be focused on continuing with implementing Labor’s Living Longer, Living Better reforms and has left the question of future changes open. Hal Kendig believes that ‘aged care will surely emerge more prominently in the lead-up to the next election’ and that consumers can expect to contribute more due to new means testing arrangements.[20] With the number of older Australians growing, it is important that the momentum for reform continues to address sustainability issues within the sector, while maintaining quality of care.

[1].           The budget figures have been taken from the following document unless otherwise sourced: Australian Government, Budget measures: budget paper no. 2: 2014–15, 2014, pp. 189–208, accessed 14 May 2014.

[2].           Australian Ageing Agenda, ‘Budget: Stakeholders react’, Australian Ageing Agenda website, 14 May 2014, accessed 15 May 2014.

[3].           Australian Government, Budget 2014–15: Social Services, 2014, accessed 14 May 2014.

[4].           National Commission of Audit, Towards responsible government: phase one, February 2014, p. 140, accessed 14 May 2014.

[5].           Department of Social Services, Budget fact sheet-aged care, 13 May 2014, p. 2, accessed 14 May 2014.

[6].           Australian Ageing Agenda, op. cit.

[7].           Ibid.

[8].           Ibid.

[9].           M Harrington and R Jolly, The crisis in the caring workforce, Parliamentary Library Briefing Book - 44th Parliament, Parliamentary Library, Canberra, 2013, accessed 22 January 2014.  

[10].         Australian Ageing Agenda, op. cit.

[11].         Ibid.

[12].         Ibid.

[13].         Ibid.

[14].         Ibid.

[15].         Department of Social Services, Budget fact sheet-aged care, op. cit., p. 2.

[16].         Aged and Community Services Australia, ACSA welcomes aged care Budget announcements, media release, 14 May 2014, accessed 15 May 2014.

[17].         A Hough, ‘Carers face uncertain future as Canberra tightens screws’, Adelaide Advertiser, 7 April 2014, accessed 19 May 2014.

[18].         Ibid.

[19].         Australian Ageing Agenda, op. cit.

[20].         Ibid.


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