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Just weeks before massive aged-care reforms are due to take effect, providers are still lobbying for changes to their oversight, and accommodation costs are already rising. By Rick Morton.
How providers benefit from the aged-care overhaul
The biggest reforms in aged care since John Howard’s 1997 changes will take effect in less than two months, unlocking even more investment capital for providers from an accommodation bonds market worth billions. That’s despite recommendations from the royal commission to scrap this arrangement because the sector had become too reliant on the property-led funding at the expense of care.
Moreover, the powerful provider lobby is still pushing back on key elements of urgently needed oversight for the sector. More than 700 pages of rules and financial infrastructure that underpin the rewritten Aged Care Act passed late last year are yet to be finalised ahead of the July 1 start date.
“We are highly concerned that, with less than two months to go, issues risk going unaddressed and thus unintended consequences are probable, if not likely,” the peak body for providers, Ageing Australia, said on Wednesday in its submission to the latest tranche of rules released by the Department of Health and Aged Care for consultation.
“We have provided extensive feedback, much of which indicates substantial barriers to successful implementation of components of the rules … We also note there are sections of the rules that are yet to be drafted.”
One of those undrafted rules covers the qualifications or criteria that will apply to “quality auditors” sent to assess whether a service can be registered.
Ageing Australia chief executive Tom Symondson used the Albanese ministry reshuffle on Monday to push the provider case for a “plan B” on implementation.
“We’re running out of runway for the July 1 deadline, yet aged-care providers still don’t have all the necessary information to prepare for these significant reforms,” he said in a statement.
“We wholeheartedly support the new Act and the charter of rights for older people, but it’s becoming clearer by the day that we won’t be ready to implement every program due to the sheer scale of change.”
The new law is already two years late – missing the royal commission’s deadline of mid 2023 – and substantial changes to it have been made in the drawn-out process.
Providers, via the Coalition, managed to water down the original exposure draft of the new act last year. The original had proposed up to five years’ jail time for registered providers, or their responsible persons, who failed in a duty to avoid “adverse effects to the health and safety of individuals to whom the provider is delivering funded aged care services”. This was cut in the final bill.
Fines for the same offences, including those that result in death or serious injury, have been halved from almost $3 million to just below $1.6 million.
As the Labor government sought to boost the mandatory number of care minutes and registered nurse time – including the requirement that one be on site at a nursing home 24/7 – at facilities, it also had to correct years of neglect in the system that started under the Tony Abbott prime ministership. That neglect continued when Scott Morrison became treasurer and bluntly raided the direct-care subsidy for “budget repair”.
To do this, the new law contains key provisions specifically designed to boost the “viability” of the privatised aged-care market for both non-profit and for-profit providers. Some of these changes have already taken effect.
One significant change has already led to substantial increases in the price of rooms in aged-care facilities.
On January 1 this year, the maximum accommodation bond – known as the refundable accommodation deposit – that can be charged by a service without needing prior approval from the Independent Health and Aged Care Pricing Authority (IHACPA) was lifted for the first time in a decade from $550,000 to $750,000 – a figure that will now be indexed each year.
“[T]he Aged Care Taskforce identified an urgent need to improve the financial sustainability of residential aged-care accommodation,” the department’s assistant secretary Susan Trainor said during an online briefing about the changes in early April. She noted that in the previous financial year, “46 per cent of providers made a loss on their accommodation”.
She cited an expected $56 billion shortfall of investment in building new rooms and upgrading existing rooms in aged-care facilities by 2050 under the current funding settings. “To address this, the new Aged Care Act will implement reforms to strengthen provider viability while ensuring residents have clear, fair and sustainable accommodation payment options,” she said.
“This reform is a change to the point at which additional regulatory approval is required for providers, rather than an increased cost for any individual in care.”
Within a month, however, 40 aged-care services had already increased their highest room price to the new $750,000 ceiling for the deposit, and 170 had raised it above the previous $550,000 ceiling. According to aged-care advisers Mirus Australia, 1100 other services also increased their room prices.
An industry event hosted by Mirus featured discussions with four aged-care provider representatives about how they are “maximising non-care revenue” under the new aged-care reforms.
Uniting NSW.ACT operations support manager Joel Murray told the briefing that the provider, which has more than 5700 nursing home beds, has pivoted to trying to “maximise the yield, within reason” of accommodation.
“So the yield element of accommodation is where we’re considering now,” he said in the briefing uploaded online at the end of February.
“Obviously we have supported things such as the IHACPA cap lifting from $550,000 to $750,000 and the market seems to be ready for it … we haven’t seen a lot of pushback, even though we’re circling it on double-digits price growth year on year.”
From July, in addition to holding more than $40 billion in refundable accommodation deposits, the interest from which has traditionally been used to fund capital development, aged-care providers will be able to keep 2 per cent of the value every year for five years, from every person who has paid a bond and entered care after that date.
The distortionary effects of the various payment options will only grow under the new laws.
Under aged-care financing arrangements, consumers can pay a lump sum deposit to fund their non-care costs – all clinical and nursing care is funded by the Australian government – or a daily accommodation payment. If they have poor financial means, the government pays an accommodation supplement on their behalf.
It is a better option financially for the aged-care client to hand over a lump sum because it gets refunded at the end of care to them or their estate, minus the new 2 per cent retention fee. A person who makes daily accommodation payments never gets this money back, and pays a lot more per year than a provider could make from a refundable accommodation deposit. Industry accountants StewartBrown analysed the settings and found that an average bond of $500,000 works out to a daily accommodation payment of $109.59.
The maximum accommodation supplement paid by the government to providers to support those lacking financial means is only $69.79 a day.
“This creates a clear financial divide based on residents’ initial wealth and investment capabilities,” the analysis, released in March, says of the settings.
“This difference [between full fee and accommodation supplement] will further increase with higher accommodation prices.”
While the federal government has acknowledged this is a growing source of inequity, and potentially encourages aged-care providers not to take supported residents, it has only committed to review accommodation pricing after the new laws take effect and no later than July 1 next year.
Uniting NSW.ACT’s Joel Murray said his service provides supported places above the industry average because it is a non-profit, but the gap between the “haves and have-nots” will increase.
“How are we going to invest in our sites, not only to make sure that our residents and clients are getting the best care but that we’re hitting a price point within the market that makes sense, because, as we said, we’re seeing not a lot of pushback,” he told the Mirus webinar.
“We believe this is driven in large part by the ballooning of median house price. People are coming in with significant liquid capital, or, bluntly, they’re not coming in with very much at all.” He noted that the government supplements “have simply not kept pace”.
Provider pushback on moves to increase scrutiny of the sector persists, despite significant wins on funding. Providers have recorded their greatest operating surpluses in years as the base unit price for care went up late last year in advance of new care-minute targets and registered nurse requirements.
In keeping with other recommendations of the Aged Care Quality and Safety Royal Commission, which reported in March 2021, the rules now being drafted for the new Aged Care Act include additional oversight of the aged-care market, with requirements to advise of any changes to company legal or business structures and to maintain a minimum liquidity standard to ensure viability.
Ageing Australia’s response to the most recent rules consultation draft – these alone were 208 pages – details its lack of enthusiasm for increased powers of the aged-care regulator, the Aged Care Quality and Safety Commissioner, and requirements to advise of changing revenue streams.
“This provides the Commissioner with very wide powers,” Ageing Australia wrote in response to a provision that would allow the body to investigate reportable incidents as the commissioner thinks fit.
“There must be sufficient procedural fairness afforded to providers who are involved in such inquiries. Requests for information and documents etc should be reasonable and within sufficient timeframes.”
Draft rules and legislative instruments have yet to be tabled in the parliament, and the Department of Health and Aged Care has not yet finalised its consultation of all tranches or released feedback.
One exemplar of the cost of dysfunction became clear early this year. In December, the department announced contracts worth about $1.5 billion to 20 private and non-profit organisations to run the new single-assessment system for aged-care entry. That service amalgamates the home-care assessments privatised by the Coalition and the state-based aged-care assessment teams the Coalition tried but failed to outsource following fierce opposition.
Within months, the department realised the new Aged Care Act was so complex and the requirements so onerous it had to amend the contracts to “reflect the additional effort required for assessors to learn and implement new system processes, including working with new digital solutions”.
The cost of that additional effort was $20 million, for just 14 assessment providers.
In reform this big and this delicate, much remains to be settled. A new minister, Sam Rae, now has carriage of the decisions.
This article was first published in the print edition of The Saturday Paper on May 17, 2025 as "How aged-care providers win".
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