Modern Australian Magazine

It's hard to make money in aged care, and that's part of the problem

  • Written by Rafal Chomik, Senior Research Fellow, ARC Centre of Excellence in Population Ageing Research (CEPAR), UNSW
It's hard to make money in aged care, and that's part of the problem

Prime Minister Scott Morrison announced a Royal Commission into Aged Care Quality and Safety on Sunday, responding to concerns about the sector one day before an ABC Four Corners program which was to air them.

Aged care is where the challenges of population ageing are most apparent and where policy choices have direct impact on the lives of Australians.

So, it’s not surprising that the system is under increasing scrutiny. Various reviews have looked at different aspects of aged care since 2011 when major reforms were first ushered in, including into quality, public financing, workforce, and the overall progress of reforms.

The outcomes all point to similar conclusions. Responding to the needs of older, often vulnerable, Australians is an extremely complex business. But it is also one in which making money is tough. The danger is that a combination of cost pressures, profit incentives, and inadequate oversight encourage or force providers to cut corners.

How providers make money

Most funding for aged care comes from government. Direct government expenditure on the overall system was about A$17 billion in 2016-17, with A$12 billion going to residential care.

The users of residential care topped this up with A$4.5 billion of their own money, via regulated fees that are capped for users who pass a generous means test.

Read more: Essential reading to get your head around Australia's aged care crisis

But costs of care are high. Providers spend more than A$11 billion on staff, yet those staff aren’t highly paid. This is in part because they are mainly females, who face an unremitting gender pay gap.

The pause that hurt

The Aged Care Financing Authority reports that profits are climbing over the long term but are precarious year-to-year.

The residential industry saw profits fall by 4% to 5% in 2016-17, partly because of a pause and then a scaling back of the indexation of government funding.

Although one quarter of residential care providers made losses in 2016-17, two thirds continued to record profits.

Bigger centres

The tighter funding was justified as a measure to drive efficiency, but it provided further impetus to the longer term trend of big providers to merging with or taking over the small ones. While the number of care places has climbed 8% in four years, the number of providers has shrunk 13%.

One reason why unprofitable providers remain in the market is because they are, by definition, not-for-profit. So the system relies heavily on good will. While still dominant, they have lost share to private, for-profit providers, some of which have the advantage of economies of scale or capital ownership structures that allow them to pay less tax.

While some of those listed on the Australian Securities Exchange saw drops in their share prices in recent years, the sharp declines when the Royal Commission was announced may reflect investor concern about the risk of greater scrutiny of the relationship between their profits and quality of care.

Uncertain quality

It will be open to the Royal Commission to examine how these trends are affecting the quality of care.

The government influences the quality of care in other ways that might attract the interest of the Royal Commission. It sets standards and helps design the incentives that discipline the market.

The standards cover indicators including management, the health and personal care of residents, resident lifestyle, and resident safety. They have been enforced by initial accreditation, subsequent re-accreditation, self-reporting, the examination of complaints and (until recently) pre-announced visits.

In 2017 the government announced a move to unannounced visits after evidence suggesting that some were “staged” in order to present the centre “in the best possible light”.

In July 2018 the government began charging for unannounced visits, raising what it expects to be A$10 million a year.

It’s hard to switch

Consumers can themselves apply market pressure on poor performers, and it is increasingly possible through a move to so-called consumer directed care, where care recipients or their carers are given a budget and the ability to decide how to spend it. If one provider turns out to deliver poor services, they can switch and spend their money elsewhere.

But the transaction cost of switching can be high. The process isn’t easy for users experiencing cognitive decline and there’s not always another centre or service to switch to.

Next steps

The Royal Commission will expose much. For providers, it will be an opportunity to examine their operations to ensure that efficiencies and profits don’t come at the cost of quality. For government, it will be a chance to examine how its funding mechanism, regulations, enforcement and market design are working out in practice.

Authors: Rafal Chomik, Senior Research Fellow, ARC Centre of Excellence in Population Ageing Research (CEPAR), UNSW

Read more http://theconversation.com/its-hard-to-make-money-in-aged-care-and-thats-part-of-the-problem-103339

Innovative Solar Conduit Solutions: Why Solarflex Stands Out

When it comes to solar installations, efficiency, safety, and regulatory compliance are essential — particularly when tight schedules and diverse en...

Loaded Potato Snacks: Perfectly Crispy French Fries and Air-Fried Hash Browns

Are you craving a crunchy, flavorful potato snack that goes beyond the usual French fries? Let me introduce you to two of my favorite recipes: Loade...

Bulk Liquid Storage Tanks: Essential Solutions for Modern Industry

In industries where managing large quantities of liquids is a daily requirement, bulk liquid storage tanks play a vital role. These tanks are desi...

Bistro Blinds for Seasonal Changes: Adapting Your Outdoor Space

Bistro blinds are outdoor designs that can be adapted for seasonal changes. They warm up the environment by making it wind-free, wet-free, and sun...

Advantages of Using Digital Printing Services

The demand for quick, efficient, and high-quality printing solutions has seen remarkable growth in our modern, fast-paced world. This increasing nee...

Benefits of Professional Strata Management

Navigating the complexities of strata management can be a daunting endeavor for any strata property owner or committee member. Strata management inv...

The Hidden Benefits of Bundling Utilities with Moving Services

Moving can feel overwhelming with so many things to juggle. Hiring a moving company in Brisbane helps make it easier, but did you know you can make it...

Family Mediation: The Path to Resolution, Healing, and Lasting Solutions

In an era where family challenges are often met with emotional and financial strain, family mediation has quietly gained traction as a life-changing...

Surprise Party Ideas That Will Leave Your Guests Speechless

Throwing a surprise party is one of the most exciting ways to celebrate a special occasion. The thrill of keeping it a secret combined with the joy ...

“North of the River” Vs “Over the Bridge” – What’s in Brisbane’s ongoing North Vs South Feuds?

Greater Brisbane Australia’s largest capital city by land area, coming in at 15,824 square kilometers, and ranks number three worldwide. It has Au...

Income Stream Integration: 7 Ways to Earn Money Through Your Website

Whether you sell Vietnamese coffee, review Japanese gadgets, or rent Melbourne self storage, your website is more than just an online presence—it...

Top 10 Benefits of Practicing Taekwondo for All Ages

Taekwondo is more than just a martial art; it’s a way of life that offers profound physical, mental, and emotional benefits. Whether you're a chil...

Holidays & Travel

Surprise Party Ideas That Will Leave Your Guests Speechless

Throwing a surprise party is one of the most exciting ways to celebrate a special occasion. The thrill of keeping it a secret combined with the joy of watching the...

The Most Scenic Sailing Destinations in Australia and New Zealand

Australia and New Zealand are home to some of the world’s most breathtaking sailing destinations. With vast coastlines, pristine waters, and diverse landscapes, these countries offer incredible opportunities for sailors...

A Guide to Finding Caravans for Sale for Your Australian Road Trip

From the rugged Outback to stunning coastal drives, there's no better way to explore Australia than in a home on wheels. If you're considering joining the caravan community, you're likely...

Must-Have Outdoor Gear for Your Next Trip

 Introduction Getting ready for your next outdoor adventure but not sure what gear makes the cut? Selecting quality equipment optimized for the conditions helps ensure fun and safety during backcountry trips...

5 Innovative Caravan Accessories to Enhance Your Travel Experience

Caravanning offers a unique and liberating way to explore the world around us. Whether you're a seasoned traveler or embarking on your first adventure, having the right accessories can significantly...

Conventional Tent or Roof Top Tent? Which Is Better for Camping in Australia?

For camping in Australia, it depends on factors like terrain and climate. A roof top tent is sturdy in rugged areas and elevates you above ground risks. In flat places like parks...

Choosing the Best Boat Seats: A Comprehensive Guide for Water Enthusiasts

Boat seats are not just about providing comfort during your time on the water; they can significantly impact your overall boating experience. Whether you're cruising leisurely, fishing, or engaging in...

Tips for Enjoying Hunter Valley Wine Tours

The Hunter Valley, nestled in New South Wales, Australia, is renowned for its picturesque vineyards and exquisite wines. A wine tour through this region promises a delightful experience for enthusiasts...

Melbourne to Sydney Flights: A Comprehensive Travel Guide

Sydney has a unique charm and plenty of free tourist attractions. There are many fun outdoor activities, with several tourist spots, making Sydney a popular destination for many people. For...

Fashion & Beauty

How Sydney Lab Diamonds Are Revolutionizing Engagement Rings?

Are you wondering if Sydney lab diamonds are as good as natural ones? Or are they revolutionizing the engagement rings?—  If so, then you have landed at the right place...

Shop Stylish Printed Scrubs: Find Your Perfect Workwear Today

Introduction Step into the world of healthcare fashion with our curated collection of swish Printed scrubs. Designed to mix comfort with personality, our diminutives review workwear, offering healthcare professionals a chance...

Comfort & Style: Discover Top Nursing Shoes | Shop Now!

 Introduction  In the fast- paced world of healthcare, where every step counts, changing the perfect brace of nursing shoes is consummate. nurses, frequently on their bases for long hours, bear footwear...

Top 5 Things to Look for in an Organic Skincare Label

Choosing the right skincare product can feel like navigating a labyrinth of ingredients and dubious health claims. If you are one to prefer natural, organic items, this process becomes even...

Australian Onesie Trends: The Ultimate Comfort Fashion Statement!

The Australian onesie has become an iconic symbol of comfort and quirky fashion down under. Originating as a simple garment for infants, the onesie has transcended age groups, evolving into...

Elevating Style And Comfort: The Timeless Appeal Of Women's Dress Shorts

In the realm of fashion, versatility reigns supreme. Women across the globe have long sought garments that seamlessly blend style with comfort, and in this quest, dress shorts emerge as...