Opinion: Aged care reforms in Australia – ambitious, but Insufficient to address sector struggles

Russell Egan, Chief Executive Officer, Superior Care Group

In this guest post, Russell Egan – CEO of Superior Care Group, shares his views on the current reforms being implemented by the Albanese Labor government, and the struggles of the aged care sector due to staffing challenges, inadequate funding, and pricing regulations, jeopardising the viability of aged care homes and the reforms themselves.

The reforms implemented by the Albanese Labor government, whilst ambitious, will not address the aged care sector’s struggles because staffing mandates cannot be satisfied by the current aged care workforce and providers are not properly funded for the cost to deliver care.

Prior to the 2022 aged care reforms, providers for the last 30 years had the discretion to organise their care workforce to achieve quality standards. This outcome was monitored by an independent quality assessor on behalf of the government through the accreditation system.

The Royal Commission into Aged Care published three key findings of interest in this article:

1. The aged care sector is subject to systemic neglect of residents.

2. A mandatory care minutes regime is required to ensure sufficient care staffing.

3. The aged care system is underfunded by $9.8b p.a. through cuts and indexation sleight-of-hand.

These findings formed a narrative of successive governments suppressing aged care funding growth to ensure fiscal objectives whilst some providers exploited an aged care quality system that did not prescribe minimum staffing levels. However, this has occurred in an environment of financial neglect of the aged care sector, where the costs of delivering care have increased much faster than pricing and subsidies. In 2022, aged care providers are on average losing between $21 and $28 per resident day (Stewart Brown, Sep 2022; Aged care financial snapshot, Sep 2022). This forces providers into impossible decisions about how their homes remain viable.

It was heartening to see both the Coalition government and Labor opposition in 2021 commit to aged care reform and funding improvements – the key responses being:

1. Introduction of mandatory care minutes;

2. Introduction of 24/7 RN in every aged care home; and

3. Reform of aged care funding.

The mandatory minutes regime increases total care minutes to 200 per resident day and registered nursing minutes to 40 per resident day, from a long-time sector average of 180-185 minutes. Present RN staffing in aged care homes varies, as many homes supplement RNs with enrolled nurses for 40 combined minutes whilst RN minutes 15-20 per resident day. This type of agile staffing is required in Australia which is estimated to be short 12,000 Registered Nurses, increasing to 20,000-40,000 by 2025 (McKinsey 2021).

A sustainable solution for Australian aged care needs to

1. Acknowledge there are a variety of ways to deliver quality care.

2. Ensure providers remain viable by matching subsidy to the cost of care

3. Deregulate pricing

I have suggested to the Minister for Aged Care that consideration should be given to permitting enrolled nurses to form part of the mandatory RN minutes, given ENs can perform a large portion of RN responsibilities. As it stands providers are required to increase RN staffing by 50% or more where these workers simply do not exist, while ENs will be phased out of the aged care sector because this classification is not financially viable whilst meeting the RN mandate.

The care subsidy for providers has been increased by $20 per resident day to fund the mandatory staffing minutes. Stewart Brown has assessed that providers are not adequately compensated for delivering these mandatory minutes, adding a further loss of $6 per resident day, so that losses will be approaching $30 per resident day post-October 2023. This is clearly a serious and imminent risk that will compound the pressure on a system already experiencing home closures and requires immediate recalibration.

Finally, the Minister for Aged Care has stated that the Commonwealth is only responsible for funding the care portion of residential aged care – not hotel and accommodation. This is incorrect from the outset because the government provides accommodation supplements for supported residents.

Notwithstanding, pricing must be deregulated for providers to set a commercial rate of return and invest in modern accommodation. I suggest the three most effective ways to deregulate pricing is:

· remove price control on the basic daily fee for unsupported residents;

· permit providers to specify the form of accommodation payment to be paid, removing this discretion from the resident; and

· elimination of the arbitrary $550,000 accommodation payment cap and associated red tape for approval.

I appreciate that there is a multitude of aspects to the aged care sector that are not currently working for residents and are the subject of recommendations from the Royal Commission. However, I hold the view that without ensuring the viability of aged care homes, the reform mission cannot be achieved. With 70% of aged care homes running at a loss, there is no scope for investment or renewal of the sector.


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