Aged care

Budget Resources

Rebecca Storen

The 2023–24 Budget contains several aged care reform measures as the Government continues to implement its response to the 2021 final report of the Royal Commission into Aged Care Quality and Safety (Royal Commission). In addition, the Budget provides funding for the COVID-19 Aged Care Response.

In the lead-up to the Budget, the Government announced that it would provide $11.3 billion over 4 years to fund the interim outcome of the Fair Work Commission’s Work value case – Aged care industry; a 15% increase to the minimum wage under 3 Awards. However, in terms of program expenses, the growth for aged care over the forward estimates may be more modest than anticipated when compared with the 202223 October Budget. For example, expenditure on ‘aged care services’ for 2023–24 was estimated at $29.7 billion in October 2022, and is estimated at $32.7 billion this Budget, a change of less than $3 billion (Budget strategy and outlook: budget paper no. 1: October 2022–23, p. 190; Budget strategy and outlook: budget paper no. 1: 2023–24 (BP1), p. 214). Payments for aged care services are expected to increase by $13.4 billion over the forward estimates, largely due to the wage increase, but this has been partially offset by other measures (BP1, p. 104).

Savings and offset measures

Most of the aged care measures are at least partially offset through redirection of funds or met through existing resources. The most significant savings measure identified is the Improving the investment in aged care measure at an estimated $2.2 billion over 3 years from 2024–25 (Budget measures: budget paper no. 2: 2023–24 (BP2), p. 136). This saving will be achieved by decreasing the provision ratio for residential aged care temporarily from 78.0 places to 60.1 places per 1,000 people aged 70 years and over. The provision ratio is used by the Government as part of its way of regulating supply of aged care. Since home care was added to the ratio in the early 1990s, there has been a steady shift to increase its proportion of the overall target to reflect people’s preference to stay in their home rather than move into residential aged care, with a resulting decline in the proportion for residential care (Aged Care Financing Authority, p. 29).

The Reinvesting in health and aged care programs measure identifies $1.7 billion of funding over 4 years from 2023–24 that will be reinvested within the portfolio (BP2, p. 146). According to information in the Health Portfolio Budget Statement (PBS), a significant proportion of this amount is made up from Outcome 3 (ageing and aged care) at approximately $835.2 million (p. 33) (this measure is discussed further in the ‘Health overview’ article elsewhere in this Budget review).

The increases in funding for aged care services have been partially offset by reduced utilisation of home care package program funds and funding that was provisioned in the contingency reserve in the last Budget (BP1, p. 104). The amount of unspent funds in the home care package program has been significant for some time, estimated at $2.4 billion as of September 2022.

Key regulatory reforms

The Budget confirms that a new Aged Care Act is anticipated to commence from 1 July 2024 (BP2, p. 125). Budget measures to support this and the new regulatory framework are:

  • $81.9 million over 3 years from 2023–24 to support the development and implementation of the new Act along with funding for the discovery and design phases of necessary ICT system changes (p. 134)
  • $72.3 million in 2023–24 for continued work on the development and implementation of a new aged care regulatory framework that will support the new Act (p. 125).

However, the new community based program—the Support at Home program that will replace the home care packages program and Commonwealth home support programme (CHSP) among others—has again been pushed back and is not expected to commence until 1 July 2025 (BP2, p. 133). This announcement has been met with disappointment from the Council on the Ageing (COTA) and the Older Persons Advocacy Network, while the Aged & Community Care Providers Association has stated they would prefer to get it right rather than rush to implement the new program in 2024.

The Budget confirms that the anticipated national worker screening and registration scheme should be in place from 1 July 2024, with $59.5 million provided over 5 years to support the ICT infrastructure to support the scheme (BP2, p. 125). Services Australia will be responsible for expanding the current National Disability Insurance Scheme (NDIS) worker screening model to enable the aged care worker checks, and for improvements to information-sharing between the regulator and aged care providers. Following the lapse of the Aged Care and Other Legislation Amendment (Royal Commission Response No. 2) Bill 2021, new legislation will need to be introduced (potentially as part of or alongside the new Act) to enable this screening scheme to be implemented.

The Budget also provides $41.3 million over 4 years from 2023–24 to build a new residential aged care place assignment system (BP2, p. 134), a change that was flagged in the Government’s response to the Royal Commission in 2021. This change will mean that, from 1 July 2024, the residential aged care place (sometimes known as a bed licence) will be assigned to the individual person rather than the aged care provider. Initial consultation indicated that people are broadly supportive of this approach but flagged that support would be needed to transition to these arrangements and the Government will need to play an active role in locations were there may be insufficient or very limited services (pp. 8, 11).

Funding a pay increase

The Budget provides $515 million over 5 years from 2022–23 for the Funding pay increases for aged care workers measure in response to the Work Value Case, which is partially offset by the Improving the investment in aged care measure. In addition, $10.9 billion over 5 years ($29.2 billion over 10 years) will be delivered through program indexation (BP2, pp. 131–132).

The $515 million measure is made up of several grant programs and targeted indexation boosts to some of the smaller aged care programs, including:

  • $311.2 million for a grant program for CHSP providers to cover the cost of the award wage increase
  • $58.9 million for indexation boosts to funding for the Indigenous Employment Initiative, Multi‑Purpose Service Program, National Aboriginal and Torres Strait Islander Flexible Aged Care Program and the Trusted Indigenous Facilitators program
  • $98.7 million for a grant program to fund historic leave provisions (BP2, p. 131).

The Budget also includes from 1 July 2023:

  • $8.5 billion for residential aged care
  • $2.2 billion for the home care packages program (BP1, p. 105).

The Budget provides $37.4 million for implementation costs for the Department of Health and Aged Care and Services Australia (BP2, p. 132). Services Australia is to determine the 24/7 registered nurse supplement rate that will be paid to providers using bed occupancy data.

Independent Health and Aged Care Pricing Authority (IHACPA)

Similar to the public hospital system, a common activity unit is set to enable a comparison and value to be set for each service for a resident’s care classification and facility category. A price is then assigned to the common unit. The Australian National Aged Care Classification (AN-ACC) price was set at $216.80 when the AN-ACC model was first implemented in 2022. The AN-ACC price has been set at $243.10 for the 2023–24 financial year (p. 10).

Following advice from the IHACPA, the Budget includes $2.7 billion over 4 years in additional indexation for residential aged care (BP1, p. 105). The Basic Daily Fee of $10.00, which had been included in the AN‑ACC price since it was implemented in October 2022, will be provided as a separate hoteling supplement of $10.80 from 1 July 2023 (BP2, p. 134). The Budget provides $116.3 million over 4 years for this new supplement.

The IHACPA has also been funded $71.5 million over 4 years to undertake work to develop annual efficiency unit prices for the Support at Home program (BP2, p. 133).

Transitioning to a new system

The Budget has several measures to support the sector as it moves towards a new Act and new programs and expand on some of the changes that have already been implemented, including:

  • $139.9 million to improve the star rating system
  • $12.9 million to develop, monitor and enforce new food and nutritional standards (BP2, p. 125)
    • the Royal Commission identified food and nutrition as one of 4 areas for immediate attention, alongside dementia care, restrictive practice use and palliative care (p. 92)
    • following the Royal Commission’s final report, work to review the aged care standards has been underway, with the possibility of harmonising regulation across aged care, disability and veterans’ care, and revised aged care standards potentially more aligned with the NDIS Practice Standards.
  • $166.8 million in 2023–24 for 9,500 additional home care packages
    • the previous Government’s response to the Royal Commission flagged that the home care package program would be replaced by 1 July 2023 and provided additional packages for the 2 financial years prior to that anticipated change with a new program set to be in place thereafter.
    • as of 31 December 2022, there were approximately 30,200 people who were waiting on a package and had not been offered an interim one and another 7,700 people who had been offered an interim package while waiting for one at their approved level (p. 9).
  • $73.1 million in 2023–24 for ICT changes needed to enable the Support at Home program
  • $15.7 million to establish the long anticipated single aged care assessment system
  • $0.7 million in 2023–24 to establish the Aged Care Sustainability Taskforce, which will provide advice to Government on the creation and maintenance of a high quality and sustainable aged care system
  • $0.1 million for an Independent Implementation Readiness Assessment of the aged care reforms (BP2, p. 133).
  • $98.7 million for a new Market Adjustment Program to provide business advice in an effort to improve the viability of residential aged care sector (BP2, p. 134)
  • $1.7 million for 2023–24 to appoint an interim First Nations Aged Care Commissioner (BP2, p. 135)
  • $12.9 million for the enhanced functions of the Aged Care Quality and Safety Commission in its new role as the independent financial and prudential regulator (PBS, p. 142).

COVID-19 response

The Budget provides $591.3 million for 2 years from 2022–23 for the COVID-19 aged care response measure, which will be partially met through existing resources. This measure includes $536.6 million for cost reimbursement for outbreaks and in-reach PCR testing in residential aged care homes up until 31 December 2023 (BP2, p. 126).


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