The aged care industry’s peak bodies say that inadequate government funding is putting the industry’s ability to deliver appropriate care at risk, after a new report reveals growing numbers of aged care facilities are under financial stress.

A new report by StewartBrown reveals that nearly half of aged care facilities in Australia – 43.1 per cent – reported a loss in the nine months to 31 March.

The result is a deterioration from 41.3 per cent that reported losses for the six months to December 2017, and only 31 per cent that reported a loss in the 2017 financial year.

Profitability was worst in remote and regional areas, where 57.9 per cent of facilities recorded a loss.

Increased indexation rates won’t help

The Government’s new indexation rates for subsidies are welcome, but they do little to help the sustainability of the “significant numbers” of aged care providers that are experiencing financial stress, says Aged & Community Services Australia.

The new rates are an increase of 1.4 per cent in the ACFI’s ‘Activities of Daily Living’ and ‘Behaviour’ domains, and 0.7 per cent increase in the ‘Complex Health Care’ domain. The rise follows an indexation freeze in all domains in the 2017-18 financial year.

“There has been a growing trend of residential aged care providers making a loss, particularly those in remote and rural areas,” said Pat Sparrow, CEO of ACSA.

“There were a range of budget initiatives to provide financial support but overall they still don’t address the issue of the deteriorating financial health of providers,” she said.

Ms Sparrow said StewartBrown attributed the industry’s worsening financial performance to the combination of the ACFI freeze in 2017-18, amendments to ACFI from January 2017, and the rising costs of direct care.

“StewartBrown data has found there has been an increase in care labour costs of 4 per cent since June 2017 with over half of this attributed to additional costs and hours worked in both care management and allied health staffing.

“The StewartBrown data also shows there are declining results for Home Care Package providers making level 1 and 2 HCPS very marginal and today’s indexation announcement of 1.4 per cent just does not keep up with increasing costs of care delivery.

“We need a serious overhaul of the financing approach to aged care so that the costs of care can be met. This can only be achieved through a combination of taxpayer funding and individual contributions from those who can afford it.

“That is why a funding model – based on real delivery costs – needs to be developed. This would result in additional funding which could then be indexed appropriately to keep pace with inevitable cost increases.

“Estimates suggest Australia will need another 83,500 beds over the next 10 years to meet the rising demand, and with over 100,000 people waiting for home care packages now, funding needs to be addressed as part of a longer-term sustainability strategy.

“ACSA will continue strongly advocating for appropriate funding and an adequate mechanism for annual indexation,” Ms Sparrow said.

Ability to deliver care at “serious risk”

The Chief Executive Officer of Leading Age Services Australia, Sean Rooney, backed up Ms Sparrow’s call for changes to government funding in aged care.

Mr Rooney said the new rates show the Turnbull Government is “oblivious to the true cost of providing care to older Australians.”

“The majority of residential aged care facilities are experiencing significant and sustained financial stress due to funding cuts by successive governments, combined with rising operating costs and growing acuity and complexity of residents’ needs,” Mr Rooney said.

“The coming year’s aged care subsidies with an indexation rise of just 1.4 per cent are totally inadequate. This rise does not even come close to the consumer price index for health, which has been estimated to be over 4 per cent and comes on top of successive minimum wage rises of 3 per cent and 3.5 per cent in July 2017 and July 2018.

“Our industry’s ability to deliver accessible, affordable, quality care and services to older Australians is at serious risk. This situation is even more dire in rural and regional areas where access to staff and higher operating costs are further compounding financial stress.”

Mr Rooney said this indexation rise is only a third of what is required for aged care providers to keep up with rising costs, let alone expand their services to meet rapidly growing demand.

“Despite ongoing data and evidence from industry experts and recent independent reviews finding that Australia’s aged care system is under-funded, there is no plan to address this situation,” Mr Rooney said.

“Recognising the true costs of delivering age services and providing realistic funding is the only way we can guarantee a sustainable age services industry that meets the needs of all older Australians.”

LASA is calling for an immediate 4 per cent funding indexation increase, the equivalent of about $470 million across the sector.

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