We knew the Australian aged care industry needed more funding, new research just proved it

New research conducted by the University of Queensland and prepared for the Royal Commission uses data to prove, what we’ve all known for a long time, Australia needs more funding for aged care.

The research draws on the most comprehensive set of data ever harnessed for a study on residential aged care in Australia. It suggests that a minimum of $621m is required, per year, to deliver current “best quality” levels. To improve overall quality would cost around $3.2 billion per year.

The Royal Commissioners, the Honourable Tony Pagone QC and Ms Lynelle Briggs AO, say that the research suggests that higher funding is needed for residential aged care if it is to meet basic standards, and even more will be required for reform to achieve high-quality care in Australia.

“Australians expect that all are entitled to the best quality level of care in aged care homes. Additional funding will be needed to enable providers to meet those expectations consistently.”

Analysing the report

The research is heavy reading for those of us who didn’t do so well in maths. Terms like flexible log function and stochastic frontier analysis (in the first paragraph alone) will dissuade many from going any further. 

To better understand the findings, we look into the key factors that determined the results. These are best quality level, the composite quality index and the three quality levels researchers clustered care facilities into. 

We also look at what constitutes a small-sized home model, and with the financial calculations based on cost efficiency, we look at what this means in the context of residential aged care and how it determines the estimates of future costs. 

Best quality level

Best quality level is used as the benchmark in the report for the level of care we should be targeting. It is based on care levels that are currently being offered in Australia and was determined by categorising homes into three categories as defined by the Composite Quality Index (see below). 

Eleven per cent of care homes fell into the highest level, deemed to provide the best level of care currently available in Australia. Seventy-eight per cent were included in the middle level and 11% were allocated to the bottom.

The top 11% of homes are considered the best quality level.

The Composite Quality Index

The composite quality index was developed especially for this project. It combined seven quality indicators: customer experience ratings, reported issues, accreditation standards not met and the prescription of four high-risk medicines (sedatives, antipsychotics, opioids and antibiotics). This was the basis for allocating facilities into the three quality levels.

The three quality levels

For the purposes of the study, residential aged care facilities across Australia were clustered into three quality groups. 

Q1 (11% of care homes), those considered best quality level, had a lower use of high-risk medicines, met accreditation standards, had fewer issues and complaints and higher customer experience ratings.

Q2 (78% of care homes) generally met accreditation standards, had a moderate customer experience rating score, potential sub-optimal use of high-risk medicines and a low number of complaints and issues.

Q3 (11% of care homes) were considered to be providers with a poorer quality of care. They had lower experience ratings, had failed to meet accreditation standards and received a higher number of complaints. 

The small-sized home model

The correlation between the size and the quality of homes was strong. Small homes did well, large homes less so. The best quality group (Q1 above) contained 41% of homes with 1-15 beds, only 17% of homes with 41-60 beds and just 5% of homes with 61-120 beds. 

Government and not-for-profit homes also performed better with 24% of government-owned homes making Q1, and 13% of not-for-profit homes. In the lower quality group (Q3), for-profit providers represented a higher proportion of facilities than their relative share in the sector.

Inefficiency and what it means for costing

The researchers determined aged care is relatively cost efficient compared to other healthcare sectors such as hospitals. The sector achieves an average [total cost] efficiency of around 0.88, while the cost efficiency associated with direct care is 0.91 (hospitals have a cost efficiency of 0.83). 

What this means, is that current funding is being spent well and there is little opportunity to decrease costs from existing levels. Researchers have assumed that the cost per resident bed can not be reduced by any significance.

So what does it all mean (the maths)

Unsurprisingly the cost per resident bed for those homes that fall into Q1 is higher than for those that fall into Q3. The cost for the improved level of care offered by smaller homes is even higher.

If we are to assume that if Q3 homes increased their funding to Q1 levels, care would also increase to Q1 levels, the additional funding required to deliver Q1 care across Australia would be around $621 million per year. 

If all homes were to operate at Q1 quality level, and they delivered a small-sized model of home, the increased spending would be $3.23 billion per year.

Just the status quo

The report makes it very clear that these are the amounts that need to be spent if we are to aspire to quality levels that already exist within the current residential aged care system. Should we aspire to achieve more and deliver a better quality of care in the future, funding needs to be increased dramatically.

In addition researchers note that although there is currently no data in Australia to test the hypotheses, a focus on quality improvement, rather than cost reductions, may have more extensive benefits. These include better quality of life and better care that minimises hospitalisations, spending on high-risk medicines, reducing workplace injuries and accidents in aged care. 

Now that we’ve done the maths, can we finally work on better funding to ensure better care for older Australians?

Read more about smaller, village-style aged care homes.

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  1. A lot more could be said about the Aged Care Industry but I have confined my comments to a few points. Absolutely agree that more funding is needed to attract higher qualified care staff. Currently most operators are spending well in excess of 100% of care funding on wages, which is before all other day to day on costs.
    A gaping hole in all findings date is the cost of capital and indeed the ability to repay the financial institutions.
    Finally, the state owned and operated facilities have been highlighted as being some of the better care providers, maybe if it were disclosed that they are able to draw on the state nursing pools along with subsidising their income loss with state revenue, things might be a little different should those be taken away.

  2. Just another study that says more money is needed in Aged Care.

    What “heroic” assumptions. If they truly believe a model that says only 11% of service providers are sub standard it is hard to believe they have anything correct.

    Before taxpayer’s give service provider’s more money we need more truth, more transparency, more accountability of Directors and senior managers and the senior managers in the Regulators to try living in the facilities they have ignored for years.

  3. I’m sorry but seriously? ?? That level of funding is $8.50 per resident per day. The RC had research done and the Grattan Institute did their own and both came up with billions required – the RC also found government fiscal neglect and financial abuse (the non PC way of describing what successive governments have done) has lead to a shortage of circa $9bn per annum. People and care needs are not mathematical models.


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