Labor’s October Budget was good news for aged care—but the hard questions of funding the Support at Home program remain. Here are two ideas for cost-sharing models.

Australia’s aged care sector will receive a much needed investment of $3.9 billion across the next two to four years, as announced in the October 2022-23 Budget. This investment delivers on many of the promises made by the new Labor Government to address the recommendations made in the Final Report of the Royal Commission into Aged Care Quality and Safety.

The funding allocated in the October Budget will support the implementation of reforms to both residential and in-home aged care, as well as improvements in sector-wide regulation and administration. At the centre of the measures is the provision of $2.5 billion to uplift the amount of care provided in aged care homes to an average of 215 minutes of care per day for each resident by October 2024 and to ensure that all aged care homes have a registered nurse on site at all times.

A further, though as yet unfunded, commitment made in the Budget is to fund any increase to aged care worker award wages that result from the Aged Care Work Value Case currently before the Fair Work Commission.

In-home care reform

The October Budget includes $23.1 million to support the implementation of the new Support at Home program. This funding will provide for:

• a trial of the new aged care assessment tool;
• a costing study by the (new) Independent Health and Aged Care Pricing Authority; and
• a new Service List Advisory Body to advise on services that should be subsidised.

The new program will take effect from 1 July 2024 and will replace the patchwork of three existing programs which currently provide subsidised aged care services to older Australians in their homes and communities: the Commonwealth Home Support Programme (CHSP), Home Care Packages (HCP) and the Short-Term Restorative Care (STRC) program.

Existing programs have been criticised for their inconsistent delivery of services, inequity in the treatment of different elderly cohorts and the charging of different fees.

The new program is intended to provide timely access to effective and efficiently delivered services over which older Australians have choice and control.

What is changing?

A key reform will be a new Integrated Assessment process which will provide a single, simplified pathway for access to subsidised aged care services for all older Australians in need.

Independent assessors will work with older Australians to generate Individualised Support Plans which will list the monthly services for which they are eligible. There will be some ability to “swap” services within each category, within a quarterly budget.

Aged care providers will also be able to offer some additional short-term support to older Australians without the need for costly and time-consuming reassessment, in order to flexibly respond to the changing needs of their clients over time.

The Support at Home model will give older Australians greater freedom to choose who provides their care and services, with the option to engage multiple providers for the different types of services that they are assessed as needing.

Many older Australians will welcome the ability to manage their own care plans.

Who will be accountable?

Our analysis suggests, however, that this reform will bring with it issues of responsibility and accountability when the initial care planning process by assessors is separated from ongoing care management and the delivery of those plans by providers.

Effective accountability can only occur when each function has a clear and controllable role and set of responsibilities. Where there is a risk that these roles and responsibilities become misaligned, it becomes more difficult for clients to hold individual providers accountable for the standard of service they receive and for the care outcomes that result.

The role and accountability of “care partners”, who will be responsible for clinical oversight and the safeguarding of older Australians in their care, is a focus for ongoing discussion and consultation in the Support at Home program design.

Who will pay for the new program?

In a recent commentary on the proposed design of Support at Home, our team at the UTS Ageing Research Collaborative observed that no discussion had yet taken place about who would pay for the new program.

Around 90 per cent of in-home aged care program costs are currently borne by taxpayers. This is not sustainable.

Our paper proposes a series of options for how the cost of in-home care could be more equitably shared between taxpayers and those clients who have the financial capacity to make a reasonable contribution.

Under one option, a published fixed price for each service would be funded through a small minimum contribution to be paid by all clients, tapering up to a capped maximum level of contribution for each item that would be paid by well-off clients. The public subsidy would fund the balance and would still meet the majority of the costs. This option also provides the ability to differentiate levels of client contributions and public subsidies for different service types.

Our paper noted that this option is particularly aligned with the principles of client contributions according to capacity to pay. This approach is also implicit in the most recent guidance issued by the Department of Health and Aged Care, which observes that the use of fixed prices would remove the ability of providers to compete on price and instead incentivise competition on the basis of innovation and quality.

Under a second option, the price of services would instead take the form of recommendations, and the level of public subsidy would be fixed. Older Australians with the least financial capacity would be protected by fixed contributions, but providers would have some flexibility to charge other clients a greater amount. Such a system would have some alignment with Medicare Benefits where there is a fixed government payment, bulk billing for many patients and a discretionary gap fee for others.

Both options warrant further research and consideration. Transparent and timely publication of the advice provided by the new Independent Hospital and Aged Care Pricing Authority will enable scrutiny of the pricing and funding model as its development continues.

While the design of the Support at Home program is ongoing and subject to further consultation, it is crucial that we get these reforms right in the first instance to ensure a smooth transition to the new arrangements for older Australians and the providers of these services. This applies especially to accountability and responsibilities of the various roles of assessment, care management and service provision, and to achieving more equitable contributions between older Australians and taxpayers.

Poor design choices risk compromising community acceptance of the reforms and the sustainability of the aged care system overall.

Dr Rachael Lewis is a Lecturer at the UNSW Business School and founding member of the UTS Ageing Research Collaborative (UARC). She conducts research into the role of management accounting in shaping managerial cognition and the development of expertise. Her PhD research examined the use of performance measurement and other management systems in an aged care setting.

Professor Michael Woods is Professor of Health Economics at the UTS Centre for Health Economics Research and Evaluation, focusing on aged care. He was a former Deputy Chair of the Productivity Commission and has held appointments to government boards, health and aged care policy reviews, multilateral development agencies and foreign government reform programs.

Image credit: Enrykun