Federal Budget 2021-22: aged care - Fiscal & Monetary Policy

Aged care was one of the centrepieces of the 2020-21 Federal Budget, with the Federal Government promising that the Budget would be 'responding in full' to the findings of the Royal Commission into Aged Care Quality and Safety.

The Royal Commission's final report was released in March 2021 and contained 148 recommendations to overhaul Australia's aged care system. The Royal Commission found that a 'profound shift is required in which the people receiving care are placed at the centre of a new aged care system' and that our current aged care system 'does not need renovations, it needs a rebuild'.

While the Budget stated that the government will deploy a record $17.7 billion to address a number of systemic problems identified by the Royal Commission, there will be debate about whether the government's plans will be an expensive renovation to the existing system or whether it will be the complete rebuild that the Royal Commission had been looking for.

As part of its budget announcements, the government also released details about the extent to which the government's announced reforms addressed each of the specific recommendations in the Royal Commission's final report.

Five key pillars of reform

The government announced five key pillars to reform the delivery of aged care services in Australia over a five-year period. These pillars are:

Home care: including an additional 80,000 home care packages, additional support for informal carers and increased respite care funding.
Residential aged care services and sustainability: including an additional government-funded Basic Daily Fee Supplement of $10 per resident per day to deliver better care, services and food; ensuring average care time of at least 200 minutes per resident per day (including 40 minutes each day with a registered nurse); and other measures to deliver services reform and funding sustainability.
Residential aged care quality and safety: including improving access to GP-led care and other health services; empowering consumer choice through greater transparency (including a star rating system for providers); and implementing other improvements in quality and safety.
Workforce: including establishing a dedicated assessment workforce to assist elderly Australians entering in-home care or residential care; creating additional training places for personal care workers to attain qualifications; and providing funding to grow, train and upskill the aged care workforce.
Governance: including targeted support for First Nations and special needs groups and the proposed introduction of a new Aged Care Act in 2023.

New laws impacting aged care operators

A number of the government's reforms will involve new laws and will change the way that many aged care operators run their business. For example, from 1 July 2022, residential care providers will be required to report and publish care staffing minutes for each facility on the MyAgedCare website, and they will also be required to report to residents and their families on care delivered.

The government says that the new Aged Care Act to be introduced in 2023 will underpin fundamental and generational reform across aged care, replacing the current Aged Care Act 1997. It is expected that the new Act will:

legislate the five key pillars of reform described above;
establish provisions for eligibility for care, funding arrangements and regulatory powers;
impose minimum liquidity requirements and capital adequacy requirements on approved aged care providers;
include requirements for approved providers relating to digital technology and records; and
support greater choice and control for senior Australians over the care and services they receive, and establish stronger aged care provider and worker regulations to better protect aged care recipients from mistreatment, neglect and harm.

The changes also include discontinuing the current Aged Care Approvals Round and bed licence process and instead allocating packages directly to consumers from July 2024.

A new National Aged Care Advisory Council will be established from 1 July 2021 to provide expert advice to the government on implementation of the reforms and other key matters relating to the aged care sector.

Other implications for the aged care sector

The proposed reforms are likely to further accelerate a number of trends we have seen over the past decade in the aged care sector. In particular:

Increased recipient choice and funding support is likely to result in improved offerings from aged care operators and may enable them to better diversify revenue streams.
The reforms may drive further consolidation between aged care providers, with smaller players struggling to keep up with additional regulatory and reporting obligations, and larger players enjoying substantial scale benefits from investments in technology, efficient administration systems, lower procurement costs and more flexible staffing rosters.
Continued growth of the in-home care sector of the aged care market, due to increased government funding, increased demand by recipients to be cared for in their home environment and technological advances enabling health services to be delivered remotely.
Increased interest from offshore investors in the Australian aged care sector, given the government's financial commitment to the sector and increased clarity about the future regulatory environment.

Only time, and future aged care budgets, will tell whether the Government is genuinely committed to delivering the 'once in a generation' reform it has promised. While there is no doubt that the aged care commitments in the Budget are very significant, we can expect considerable debate about whether the reforms and funding fall short of what is necessary to address the systemic issues exposed by the Royal Commission.

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