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Number crunch

According to COTA, the budget is a mixed bag for aged-care providers and a challenge for older Australians.By Ian Yates.

Overall, older Australians have fared poorly in the 2014 federal Budget, with hits to the age pension the major concern, plus the introduction of co-payments for health care, and changes to aged care flagged. Aged-care providers have fared better than some other sectors, but there, too, COTA Australia sees significant issues ahead.

Home care

COTA welcomes confirmation that the bulk of the current aged-care reform package will continue intact. This is a vitally important commitment to the ongoing reform of care and support of older Australians. The decision to bring forward community aged-care packages over the next couple of years will help address the existing extreme shortage of care for people in their own homes, although there is no increase in the overall number of level 3 and level 4 packages, which is sorely needed.

However, we also have some concerns. The biggest is the projected cut to the rate of real growth in the Commonwealth home support programme, from 6 per cent a year to 3.5 per cent after 1 July 2018.

The services that sit at the core of this programme provide the first line of support for most older people. Research has shown such services to be highly effective in assisting people to continue living at home and to participate in their community for longer, a stated strategic objective for both this and the previous government. It seems retrograde to reduce the real value of a program that saves government funding by reducing the demand on more expensive programs such as home-care packages, residential care and tertiary health services.


We are worried that the axing of the aged care payroll tax supplement to for-profit residential care providers will see them either having to pass on more than $650 million in additional costs to consumers in higher accommodation charges, or alternatively to cut back on staff and services. This cut was not foreshadowed, and not even scaled in over several years.

We believe that giving aged-care providers the $1.5 billion aged care workforce supplement over five years without directing it to workforce initiatives will do nothing to support the development of that workforce. This appears counterproductive, when workforce issues – including recruitment, retention and training – have been identified by all parts of the sector as one of the most profound challenges in the provision of timely, appropriate and high quality aged care right now, let alone in a future that holds only an increase in demand for services as our community ages and lives longer.

However, we welcome the fact that the supplement has been redirected to community care providers as well as residential care. We also applaud the 20 per cent increase in the viability supplement for rural and remote providers, which should help support older people staying in their communities as they age, rather than having to move to larger centres.

Age pension

In regard to the age pension we acknowledge that the age pension measures – with the exception of the rise in the eligibility age to 70 – are not due to be introduced until 2017. This concession came after strong pressure from COTA about the PM’s pre-election promise not to make changes to the age pension.

COTA is opposed to the change of indexation of the age pension slated to be implemented from September 2017. COTA and others – including the coalition – campaigned hard in 2007 and 2008 to get the pension increase and indexation improvements announced in the 2009 Budget, which finally preserved the real value of the pension.

Moving to a CPI-only indexation takes us back decades, to before the Whitlam era. After 2017 it will lead to a real and growing decrease in the value of the pension. The CPI does not reflect the spending patterns of older people, and decoupling the pension from average wages means pensioners will fall behind community living standards.

This projected reduction to the pension will also impact aged-care providers, as the resident contribution of 85 per cent of the pension is at the core of current residential-care funding. The reduction in the pension and therefore aged-care funding will be, in current money, $30 per week after four years, $135 per week by 2030 and an estimated one third of the pension in 30 years. Big dollars for providers!

The combination of freezing the eligibility thresholds for the income and assets test with lowering the deeming thresholds for assets will mean a number of people will move from a full to a part pension, and others will lose entitlement to any part pension. Exactly how this will impact on both older people and aged-care funding is yet to be fully analysed.


The introduction of patient contributions for GP visits, pathology and diagnostics, to which COTA is opposed, will not only add to living costs for older Australians. The evidence shows that the introduction of such a fee for everyone, including concessional patients, will lead to people not seeking medical attention early and not getting the treatment they need in a timely manner. Most health advocacy groups and health professionals are also opposed to this measure and again we see a tension between the accepted fact that supporting people to access frontline services reduces demand on more expensive acute and tertiary services and the creation of a fiscal barrier to the access of those cheaper frontline services.

This is compounded by increasing costs for PBS items, to $5 (or 80¢ for concession card holders), and an increase in the PBS safety net threshold. COTA is opposed to the changes to the PBS. We already have evidence that around 1 in 12 people do not always fill prescriptions because they cannot afford to.

For people with chronic and complex conditions that require regular GP visits, and need pathology and multiple medications, the additional fees could have serious financial implications. Not all older people are concession cards holders, and will bear the full cost of these measures.

It is a distinct possibility that as a result of the co-payment and the changes to the PBS, community and home care providers will be facing an increase in complex or chronic health issues in people they support, with the resultant stress this places on the aged care workforce and service provision.

Already we are seeing media featuring GPs who say they will have to charge the fee when they visit residential aged care facilities and facilities saying they will need to pass those costs on to consumers. To some consumers, who have the ability to cover this cost, this may not be a significant issue or for the provider of their services. However, fully funded consumers on the age pension would struggle to meet the additional cost, leaving the aged-care provider with a significant dilemma. And when combined with the changes to indexation, the removal of the aged care payroll tax supplement and the additional charges associated with PBS items, the challenges in residential care associated with this Budget will be significant.

One of the things we have seen in all aspects of this Budget is a lack of modelling of how apparently unconnected measures impact on specific population groups or sectors. This is especially clear in aged care, where there are significant negative implications for aged-care providers – and, subsequently, consumers accessing services – from a number of Budget measures that are already directly impacting on consumers’ standards of living and access to healthcare.

Ian Yates is chief executive of COTA Australia.

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