Aged Care Funding, Reform and Innovation

The Assistant Minister for Health and Aged Care, The Hon Ken Wyatt AM, MP spoke at the AventEdge Aged Care Funding, Reform and Innovation Conference on 11 November 2016.

Page last updated: 11 November 2016

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11 November 2016

Aged care sits in a broader health system.

The Government has an ambitious health reform agenda. Streamlining and integrating the system to preserve its strengths, ensuring that it is sustainable and responsive and puts the needs of individuals at the centre of care. To preserve and strengthen our universal health care system, to ensure resources are allocated to those that need it - and that it meets the needs of individuals and communities in the future as their needs and expectations change.

There are reforms across primary care (Health Care Homes) and the management of chronic and complex conditions, strengthening rural and remote health, the role of pharmacies, streamlining the PBS, devolving health service decision-making out to the regions (Primary Health Networks), and mental health and suicide prevention trials, just to name a few.

Aged Care is a very important part of this reform process. Sustainable, equitable, integrated – this is the goal across all areas of our health system, and for aged care. Consumer-centred. People-centred. Choices. Flexibility.

In fact, this reflects how ageing has changed. Ageing has never been a more active, empowered experience – with older people making wonderful contributions to their communities for many years after retirement, being independent, self-sufficient and involved. And ‘aged care’ is about caring for people when they become frail, or if they get ill, and need support and convalescence, or if they need support around the home. It is about being there when people need support.

But it needs to respond to our changing perception of ageing. We need a quality system in place that is flexible enough to accommodate people’s different needs as they arise. We have a really exciting agenda in train to provide increased control and choice for older people.

Underlying drivers for change

We know we have a growing number of older people – which affects the amount the Government needs to spend on aged care. We know life expectancy of our older people is increasing. Life will be from 0-105, or even 0-110!

It’s very clear that over the next 40 years as the population grows and ages we will have fewer people of traditional working age compared with the very young and the elderly. The proportion of the population participating in the workforce will decline as a result, and a lower proportion of people working means lower economic growth potential. This demographic shift is a major driver of what informs our aged care policy, practice and reform in Australia.

It is imperative that we create a sustainable aged care system that can provide care to those numbers of older people into the future. A system that both taxpayers and consumers can afford.

In addition to these fiscal challenges, we also have a generational shift in attitudes to aged care. As baby boomers age they will bring very different expectations of service delivery, of health systems and of aged care. Just as they have done all through their lives, these older people will want to remain in charge of decisions about their care.

Consumer Centred Approach

The Productivity Commission recognised this and central to their vision for aged care was an aged care system built around the consumer. Moving from a mindset of “doing for” to “doing with”. Strategies to reframe ageing as a positive experience with continued opportunities and possibilities.

What is the role of consumers, their families, carers, providers and government in achieving quality of care and quality of life for older people?
Before the creation of the My Aged Care website and contact centre back in 2013, information on aged care – both residential and in-home services – was difficult to access. People struggled to obtain information relevant to their unique circumstances. A lack of clear and easily accessible information, coupled with the complexity of the aged care system, meant that consumers often had to rely on service providers to get information about aged care.

With its expansion in 2015, My Aged Care is well on its way to functioning as the ‘virtual marketplace’. It provides new avenues for aged care providers to market what they offer to all potential clients, as well as offering tools to receive and manage referrals. This marketplace will be essential as aged care moves to become more consumer-focused.

In February 2017 we will take this even further, and Home Care packages will no longer be allocated to providers, but to consumers, who will be free to move their package to a provider of their choice.


Traditionally, when Government talks about quality they are really referring to safety or minimum standards. These are critical in aged care, but not sufficient. In the future, we want a system where consumers can chose among services based on sound, robust quality information so that choice drives quality improvement. We will continue to have discussions with consumers and the sector to ensure our approach better meets the expectations of people seeking aged care services.

Choice has limitations – it must be supported

What I am hearing loud and clear is that an increased focus on choice for consumers only works when there are options available. In rural and remote communities, choice can be limited, but the February 2017 reforms should help increase choice in home care. I recognise that for disadvantaged consumers, the current direction of aged care reform might appear challenging. But it also offers them opportunities they might not have had before – the opportunity to choose a provider and the opportunity to choose the services they receive if they receive home care.

As you will be aware the next Aged Care Approval Round recently closed. We have created 10,000 residential aged care places and 475 Short Term Restorative Care places that are available for allocation through the 2016-17 ACAR. Up to $64 Million in capital grants under the Rural, Regional and Other Special Needs Building Fund will be offered as part of this ACAR. I’m pleased that these grants will aim to encourage greater investment in areas of high need, with $11.5 million earmarked to support access to residential aged care for older people from culturally and linguistically (CALD) diverse communities.

We’re also working to improve the Aged Care Approvals Round – with home care places no longer allocated under the ACAR and a state-based allocation approach tested for residential aged care places. Specific targeting of geographic locations, special needs groups and key issues will still apply. The allocation of new places will seek to achieve a balance in the provision of services between metropolitan, regional, rural and remote areas.

Aged Care funding - Aged Care Funding Instrument

I know you’re eager to talk to me about the Aged Care Funding Instrument (ACFI), and the measures the Government announced to seek to mitigate the higher than anticipated growth in expenditure in residential care.

In terms of aged care funding, I think it is important to start with a discussion of the facts. The Government will provide estimated funding of $17.5 billion in 2016-17 to support aged care consumers and the sector. This funding is growing, not reducing, and expected to reach over $21 billion by 2019-20. Aged care funding is in fact growing at a faster rate than the rest of the health sector. At the last Budget and MYEFO the Government actually increased its estimated outlays on residential care by a combined total of $3.8 billion to 2019-20, reflecting significantly higher growth above trend in funding claims.

As a responsible fiscal manager the Government did have to take action to mitigate the impact of this much higher than anticipated growth through MYEFO and the Budget. The net impact was that Government still increased its estimates by $1.8 billion in net terms to 2019-20. That is a $1.8B increase over and above the growth in Government spending previously planned. Even after the MYEFO and Budget changes, funding to the residential care sector continues to grow and will grow in aggregate by 5.1 per cent per annum on average to 2019-2020. The Government is committed to an aged care system that supports older people while ensuring aged care expenditure is affordable and sustainable for taxpayers.

I have met with many representatives from the sector about the ACFI changes and the Department has held discussions with key stakeholders (through the Aged Care Sector Committee and the ACFI Expenditure Working Group) on the changes. As I have said a number of times, I’m happy to discuss alternative options for changes to ACFI so long as they still deliver the budget savings.

Going forward, both the Government and the sector are keen for a system which provides stable funding arrangements. Accordingly, work is underway to investigate other approaches to determining residential care funding. The Government is engaging with the sector on the development of this longer term reform.

As part of this work the Department has engaged the University of Wollongong to undertake an international review of alternative long-term aged care (or similar) assessment, classification and funding models and provide options for consideration for future use in Australia.It is anticipated the University of Wollongong will provide the Department with a report on this work in early 2017.

Innovation and reform into the future

I’m keen to hear your ideas, your innovation. I’m interested in looking at beyond the challenge of the immediate. We have profound demographic changes driving us. I want to focus on listening to the concerns of providers, consumers and carers and looking at how we can do things differently. I’m interested in what’s happening overseas – in Japan, and the Netherlands. About dementia in the community. If there are good models, share them with us.

The Roadmap provides a very positive vision for aged care in Australia. It provides a framework for us to consider our future reform - providing us with the basis for effective policy discussions as we move toward a system, less regulated, more consumer-focussed with a stronger presence in the community. It sets out - in one coherent framework – the Sector Committee’s views on short, medium and long-term goals and needs for the sector. I can assure you that I will be actively engaging with the vision as we consider the next tranche of reforms for aged care.

The Aged Care Legislated Review of the changes to aged care announced in 2012 has also commenced. The Review is an important step in assessing how the reforms have shaped the aged care system, and where we could make further changes and I note that submissions are currently open for you to share your views and experiences. Details are available from the Department of Health website, and close on Sunday 4 December.

Continuous improvement is important. That we are learning, developing the strengths in the system, making adjustments, and being accountable and I look forward to working with all of you on this.

Government role is changing

The essence of our reforms is that the government’s role is changing – we don’t ‘own’ or ‘control’ the system. Government will always have a role, for example, through My Aged Care which is bringing clients and services together to work closely to make sure care is there when it is most needed. As we move towards a market-based, consumer driven system, it will be the partnership between all the stakeholders that will deliver a diverse and responsive industry.

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