New analysis finds care funding has been quietly covering aged care homes’ losses on accommodation. With care now priced at cost, that safety net is disappearing.
Some of the money the Government pays aged care homes to care for residents has been quietly covering losses on the buildings they live in. New analysis warns that arrangement can’t last.
The paper from data and advisory firm Mirus Australia, Residential aged care subsidy and cost, 2017–2025, tracks nine years of sector data. It finds that homes make money on care but lose money on accommodation and day-to-day living costs. The care margin is what has been keeping many of them afloat.
The Department of Health, Disability and Ageing’s latest sector financial report shows the pattern clearly. In 2024–25, homes made $22.34 per resident per day on care. They lost $9.19 on accommodation and $7.55 on everyday living.
But that care margin was never designed to pay for buildings. The Independent Health and Aged Care Pricing Authority (IHACPA) prices care at cost, with no profit margin and nothing for accommodation.
“That’s a reasonable design for care pricing,” Mirus Head of Data and Insights Tyler Fisher said in a statement.
“But it means the margin that has been covering accommodation losses was never part of the design, and providers can’t plan on it lasting. Accommodation needs to be funded on its own terms.”
Mirus’ analysis, based mainly on its own benchmark sample of around 90,000 beds, shows how fragile that margin has been.
In 2017, the gap between the average daily subsidy homes received and the cost of care was 40.2% of the subsidy. By 2022, it had shrunk to just 11.3%. It took the introduction of AN-ACC and the Fair Work wage decisions to restore it to 29.1% by 2025. Adjusted for inflation, it is only now back where it was nine years ago.
The latest pricing decision suggests it is narrowing again. The 2026–27 AN-ACC price rose 2.55% to $303.19 per resident per day. StewartBrown has calculated that is $7.72 short of current costs, about $282,000 a year for a 100-bed home.
The accommodation losses come largely from the Commonwealth’s accommodation supplement. This is the daily payment that covers a bed for residents who can’t afford to pay for their own room.
Between 2017 and 2025, the maximum supplement rose from $55 to $70 a day, an increase of 27.3%. That was slightly below inflation of 28.3%. Over the same period, the cost of care rose 111.4% and the national median house price rose 85%, which drives what land and buildings cost.
At $70 a day, Mirus calculates the supplement supports a bed worth between $365,000 and $465,000. A new bed now costs more than $600,000 to build. Had the supplement kept pace with house prices since 2017, it would be $101.75 a day.
Mr Fisher said homes with a high share of residents on the supplement are the most exposed if the care margin keeps shrinking.
“They are the most exposed group in the sector, and it is not close,” he told HelloCare.
He said Mirus’ data shows providers have not yet responded by taking fewer supported residents, with the ratio holding steady.
For residents, he said, the shortfall never shows up as a bill. It shows up in other ways.
“It arrives as fewer options. Fewer new homes being built in the places where people on a pension actually live, longer waits, older buildings. The person is shielded from the price and exposed to the consequence.”
The building pipeline is already under strain. Ageing Australia has reported that more than 3,600 planned residential places are shelved or at risk.
The paper credits the Government’s May 2026 response to the Accommodation Pricing Review as the first change in a decade to tackle accommodation funding directly. The changes are:
Mr Fisher said an existing home above 60% supported residents would reach $97.30 a day by 2028. That is still around 24% short of where a house-price benchmark would be. A new home at the same ratio would reach $127.30 with the capital subsidy, roughly level with the benchmark.
“However, we’re not seeing new builds in high-supported areas, and only about one home in five sits above 60 per cent supported,” he said.
Mirus has proposed five changes. They include indexing the supplement to construction costs or property values rather than inflation, and reporting and funding care and accommodation separately so that each is judged on its own merits.
Asked whether that amounts to more Government money, Mr Fisher said: “That it is. But the argument assumes the alternative is free, and it is not.”
“The Commonwealth is already paying in beds that were not built, in hospital beds occupied by people waiting for a residential place, and in a capital bill that does not go away because it was deferred.”
The paper also puts some of the responsibility on providers. StewartBrown data shows a gap of $95.66 per bed per day between the best- and worst-performing quarter of homes. That is about three times the accommodation shortfall Mirus identifies.
“A home that is delivering more care minutes and losing money on care does not have a care problem. It has a cost-per-minute problem,” Mr Fisher said. “That is ours to fix.”
