The Australian Government has announced substantial changes to aged care funding as part of its 2024-25 Mid-Year Economic and Fiscal Outlook (MYEFO), aimed at achieving significant budgetary savings.
The MYEFO, released on Wednesday, highlights a challenging fiscal environment, with the federal budget unlikely to return to surplus for at least a decade. Spending remains near record levels, debt is projected to surpass $1 trillion, and cumulative deficits over the next four years are now forecast to be almost $22 billion higher than estimated in May.
Transition to payments in arrears
Starting 1 July 2026, residential aged care providers will transition to a payment-in-arrears system, aligning with practices in the National Disability Insurance Scheme and home care programs. This shift is projected to save the budget $2.5 billion over three years from 2025-26 and $234.1 million annually thereafter.
The government asserts that paying providers based on services delivered will simplify processes, reduce administrative burdens, and improve funding forecasts. The transition is planned over two years, with an option for providers needing additional support to extend this period to four years.
Linking funding to care minutes
Additionally, from 1 October 2025, care minute funding will be directly linked to the actual delivery of care minutes for residential aged metropolitan areas. This measure aims to ensure that funding correlates with the level of care provided to residents.
The Aged & Community Care Providers Association (ACCPA) has expressed concerns over these changes, citing a lack of consultation.
“These are unnecessary changes to funding and do nothing for older people, while placing a greater burden on struggling providers in the short term.”
ACCPA CEO Tom Symondson
ACCPA also opposes linking funding to care minutes compliance for providers unable to meet targets due to workforce shortages beyond their control.
The government claims that these reforms are designed to improve payment integrity by aligning funding more closely with services delivered, the efficiency and effectiveness of aged care funding
