The Government today released the Productivity Commission Report on Nursing Home Subsidies. The report endorses the Government's intention to move towards uniform national subsidies for residential aged care.

The report raises a number of issues that the Government will consult on, and make a decision about, in coming months.

However, the Government has already categorically ruled out any changes to resident fees and charges as a result of the report.

"The report supports the Government's objective of a funding structure based on a standard rate across Australia, with supplements for higher-cost rural and remote areas.

"Let's remember that the state-by-state funding structure now in place is Labor's system. The current system, a legacy of Labor mismanagement, is the system that gave Queensland providers the lowest subsidy rate of all States. The Coalition has been left with the responsibility to fix it.

"The Labor Party entrenched a funding system that locked in out-of-date cost differences between states. We, on the other hand, looked at the evidence and accordingly decided to move towards a national subsidy. The report vindicates this decision.

"The Government is moving to uniform national subsidies via a mechanism called coalescence*. The issue of coalescence is not about residents' fees but about how $3 billion in taxpayers' funding is distributed to 3,000 residential care facilities across Australia to care for 135,000 Australians in need of care," Mrs Bishop said.

"The Government currently provides additional funding for the special needs of service providers in rural and remote areas. It will ensure that structures are designed for fair distribution of funding to provide the residential care that is needed by a small, but extremely important, minority of older Australians".

"Our focus is on individuals and their need for quality care. Providers are the means of delivering that care.

"Nursing homes are receiving substantially more income under the Coalition's reforms than they ever did under Labor" said Mrs Bishop.

In 1997-98, the Howard Government spent over $3.6 billion on aged and community care. The outlay in 1998-99 is budgeted to grow strongly by 4.2% to $3.8 billion. In 1995-96, the Labor Government under Finance Minister Kim Beazley spent only $2.4 billion on residential aged care alone. The outlay by the Coalition Government in 1998-99 is budgeted to be $2.9 billion.

Not surprisingly, the report found that there was no evidence of a "funding crisis" in the industry. The report states:

" … the substantial prices paid for bed licences do not sit comfortably with the view that there is a funding crisis in the sector. Similarly, the Commission notes that many homes, private-for-profit and non-profit alike, are producing operating surpluses under current subsidy levels, even in the lowest subsidy state of Queensland." (Productivity Commission Inquiry Report: Nursing Home Subsidies, p. 92-93).

The Commission's report does not address management practices or accountability in the industry, i.e. how well providers use taxpayers' money in providing care and services for individuals.

"We should not lose sight of the need for further improvement here. I'm pleased to see the peak industry organisations responding to the challenge and that we have been able to assist them to do so," Minister Bishop said.

"This Government acknowledges its responsibility to the future of residential aged care services. Labor left us with a care system in decline, with 10,000 places short of the identified need that they promised to meet. We have turned the tide on this decline and will exceed the benchmark.

"My focus remains on individual older Australians and in ensuring that they enjoy quality care and quality of life," Mrs Bishop said.

* Coalescence is the move toward a uniform or standard funding regime for subsidies paid by the Government to nursing home owners.

Prior to implementation of the Aged Care Act 1997 (on 1 October 1997), recurrent subsidies for hostels and the infrastructure component of funding for nursing homes were paid on the basis of uniform national rates, while subsidies for nursing and personal care in nursing homes were paid on state-specific rates.

Under the new Act, funding for hostels and nursing homes was combined and these state-specific rates were to gradually move, or coalesce, to uniform national rates over seven years.

The Government decided on coalescence because it brings funding into line with relative costs and will make the aged care funding system simpler, more effective and fairer in the long term.

Media Contact:
David Learmonth (02) 6277 7280, 0419 637 434.