2016-17 Budget changes to the Aged Care Funding Instrument (ACFI)

Page last updated: 17 January 2017

The Australian Government is the principal funder of aged care providing estimated funding of $17.5 billion in 2016-17 to support aged care consumers and the sector. Government spending on aged care will continue to grow over future years and is expected to reach over $21 billion by 2019-20.
The Government is committed to having an aged care system that supports older Australians while ensuring aged care expenditure is affordable and sustainable.

Due to much higher than anticipated growth in funding claims, the Government increased the estimate of its expenditure on residential aged care by a combined total of $3.8 billion to 2019-20 at the 2015-16 Mid-Year Economic and Fiscal Outlook (MYEFO) and in the 2016-17 Budget. In response to this much higher than anticipated growth, the Government announced a range of measures at MYEFO and in the 2016-17 Budget to mitigate this growth and bring it back to more sustainable levels. After these changes are implemented funding to the residential aged care sector is estimated to continue to grow in aggregate by an average 5.1 per cent per annum over the forward estimates.

The Government recently announced a revised package of aged care funding changes to the measure originally announced in the 2016-17 Budget.
The revised package responds to concerns of the sector by adjusting and removing some of the previously proposed changes to the Aged Care Funding Instrument (ACFI) relating to complex pain management. These changes will be replaced with a one year indexation pause applied across all domains of the ACFI in 2017-18 and an additional 50 per cent indexation pause for the ACFI Complex Health Care domain in 2018-19. The changes to the tool will take effect from 1 January 2017.

Further details on the revised package of measures can be found at the Department of Health’s Fact Sheet.

Rural and remote services will be supported by an increase in the viability supplement for eligible aged care providers. This is in addition to the increase in the viability supplement already announced in the Budget.

Work is underway to investigate other approaches to determining residential care funding that delivers more stable funding arrangements and the Government has been engaging with the sector for the development of this longer term reform.