Funding reform absent from Budget

Mark Harrison
Mark Harrison, partner/executive director at national accounting and business advisory firm Pitcher Partners

A headline Budget figure of $17.7 billion across five years committed to aged care sounds impressive but dig down and little consideration has been given to the operators or funding reforms that will attract investment in the sector.

Amid the Budget released on Tuesday night, the Government also released its official response to the Royal Commission into Aged Care Quality and Safety, where several key recommendations around funding have not been accepted by the Government.

It has led to an aged care budget short on funding but big on unsustainable spending.

The Budget cost of existing programs for aged care is expected to increase 20 per cent by 2022-25 to $31 billion – about 5 per cent of total expenditure – and it will continue to grow as the ageing of the Australian population accelerates.

Yet the Government chose to reject many of the Royal Commission recommendations that relate to funding:

  • Residents paying for the ordinary costs of living (Recommendation 127)
  • Residents paying for accommodation (128)
  • Revisions to the means tests (129)
  • Industry funding via a levy (138)
  • Residents paying a fee for accommodation (140)
  • Revisions to the means test (141)
  • A new aged care improvement levy (144)

Spending has centred largely on two pillars – $7.5 billion to home care solutions, which includes an extra 80,000 Home Care packages being created over the next two years, and $7.8 billion to improve safety and quality of aged care services.

The home care acceleration, announced prior to the Budget, has been welcomed by the sector but as more people seek access to the packages, demand will quickly outstrip supply. An additional $10.8 million will also be spent designing a new home care support program.

On the safety and quality side of the ledger, the Budget falls substantially short with its $3.2 billion to create a $10 per day Basic Daily Fee supplement.

On average, a residential aged care facility has about 70 beds, so an additional $10 per day will add about $700 to lift the quality of care for all residents.

Using an average mid-level aged care employee’s wage as a guide, this represents additional salary funding of 25 hours, or 20 minutes of additional care per resident. And that is a typical weekday, not taking into account penalty rates for nights, weekends and public holidays.

Clearly, this daily fee supplement will not bridge the gap to meet the mandated 200 minutes of direct care per day in any meaningful way. It also provides nothing to encourage investment in aged care through the private sector, without measures to stop the additional funding heading straight into the pockets of shareholders.

The creation of 33,800 training places through Job Trainer means the government is supporting growing the talent pool of workers, allowing operators to support more people at a higher level of care and satisfying a recommendation of the Royal Commission.

However, there was no mention of lifting wages that will encourage people to consider a career in the sector. Filling these places may be a challenge, particularly in an environment of near full employment.

This Government does not acknowledge that funding needs to come from somewhere, but it is acutely aware of upsetting the aged community, a sizeable portion of the electorate.

The calamity of Labor’s franking credits proposal is fresh in Coalition minds and the Government does not want a repeat of that scenario. While money is cheap, it is simpler to live in a deficit and remain relevant.


  1. Mark,your article is spot on,big looking numbers but lacking in reality.nothing for additional hours or increased care time. The current $10 will hopefully keep some doors open but no funding for any substantial improvement at all.
    Well done.


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