‘Let the market sort it out’ – a provider’s insight on funding reform

An aged care provider says the reason facilities are closing is due to the government's inadequate funding model.

Over 60 per cent of Australian residential aged care homes have been losing money, forcing them to shut their doors while leaving many older Australians in precarious situations.

Aged Care Insite spoke with the founder of aged care provider Kirby Consulting Group Cameron Kirby, who blamed closures on the sector's unsustainable framework.

"Aged care is in a state of crisis and has been for a long time," Kirby says.

"Many providers are in a position where they're not allowed to charge residents more to meet the facility's costs. And the government isn't funding them enough to cover those costs either.

"If you can't afford to pay for staff because you're not getting funded enough and the government's not letting you charge more, a perfect storm is happening."

StewartBrown's survey from December 2021 showed that providers are losing revenue of $10.31 per bed per day regardless of the $10 daily supplement fee.

In response, the 2022-23 Federal Budget introduced a new funding scheme, the AN-ACC, that will commence in September.

Instead of the current $188.60 funding per resident, the AN-ACC starts from $216.80, leading up to $225 per bed.

Although Kirby welcomes the raise in funding, he says it's also "death by a thousand cuts". 

"The government is funding a gap but it's not sufficient for older facilities to earn enough money to get by.

"It would be much easier if the government would say: ’We're going to fund you for a certain amount, and then you're free to charge what you can get and let the market sort it out’," he says.

"The government still has excellent safety nets available to people that can't afford residential aged care."

If a future resident has assets below $178.839, they are considered either a partially supported or a fully supported person.

Daily fees depend on whether a future resident is partially or fully supported. 

For example, a fully supported resident only pays the Basic Daily Care Fee, currently $54.69 a day.

"The government lets you charge a basic daily care fee and an additional services fee, but the provider still needs to identify those services," Kirby says. 

"And in doing that, they're basically saying to providers: ’You can't charge what you need to charge for you to meet your cost.’

"If the government would let providers charge what they want but would continue to pay for supported residents, that'd solve many of the problems."

Kirby is urging the government to rethink the aged care sector as a whole instead of successive administrations making minor adjustments.

"The aged care system has been tampered with so much that it's lost its way," he says.

The current Aged Care Act was introduced in 1997 and is the overarching legislation that states the responsibilities and rules the government must follow in the sector.

The Royal Commission's report called for a new act by July 2023, highlighting the urgent need to reform aged care legislation "to integrate long-term support and care for older people". 

"The royal commission has made a series of recommendations. Some of them are good, and some are flawed, in my view," Kirby says.

"The government has adopted some of those things, but it's still not funding aged care to the level it needs. 

"But what's even worse is that government may not be fully aware of this either."

A new Aged Care Act has been in the planning since March last year.

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