Sep 22, 2020

The road to ruin: how two decades of government mismanagement devastated Australia’s aged care system

The crisis enveloping Australia’s aged care system is a direct result of the government’s mismanagement, and should come as no surprise considering the reforms that have been inflicted on the system over the past two decades.

Social affairs journalist Rick Morton has meticulously detailed government decisions affecting aged care going back to the 1990s when John Howard introduced the Aged Care Act. His two-part series can be read in full in The Saturday Paper.

“We should not be surprised”

Mr Morton opens with a quote from counsel assisting the Royal Commission into Aged Care Quality and Safety, Peter Rozen QC. “The aged-care system we have in 2020 is not a system that is failing… It is the system operating as it was designed to operate. We should not be surprised at the results,” he said.

The Aged Care Act 1997 effectively privatised the aged care system. One of the first things to go was qualified as staff.

Staff ripped from aged care

Before the changes, around one-third of all care in nursing homes had to be performed by a registered nurse, 58.5 per cent had to be performed by an assistant in nursing, 8 per cent by allied health and 1 per cent by the director of nursing.

But the 345-page Act only includes the words ‘staff’ and ‘employees’ three times each, Mr Morton writes. Rather than ratios, the bill only requires providers “maintain an adequate number of appropriately skilled staff to ensure that the care needs of care recipients are met”.

“The abandonment of minimum staffing requirements had private equity firms and American corporates salivating,” Mr Morton writes. “Suddenly, frail older Australians had become big business.”

Before 1997, a typical nursing home was funded to receive 308 RN hours. A decade later, that number had fallen to only 198, Mr Morton writes.

The year after the Act was passed into law, in 1998, the requirement that one RN had to be on duty at all times was dropped too.

As anyone who follows the sector knows, one of the biggest problems in the aged care sector is the lack of highly trained RNs and ENs on the staff of aged care homes.

In 2003, there were 16,265 RNs working in Australian nursing homes, making up 21.4 per cent of direct care employees. Despite the fact resident numbers have risen strongly, by 2016, there were only 14,564 RNs employed in the sector providing care, the equivalent of less than 15 per cent of staff.

The percentage of ENs providing care fell by almost 2,000, equating to a drop from  14.4 per cent to 9.3 per cent of all employees.

On the other hand, the number of personal care workers employed rose by 26,000 between 2003 and 2016, or from 56.5 per cent of the direct-care workforce to 71.5 per cent.

PCWs are “low-paid and low-skilled… often migrants who are given little or no support and face language barriers in the workplace”, Mr Morton explains.

Poor by world standards

In research for the royal commission, Professor Kathy Eagar, from the University of Wollongong, found nursing home residents in Australia receive only 180 minutes of care per day, one of the lowest rates in the world. 

A 37 per cent increase in staffing would be required to bring this number to between 242 and 264 minutes per day, the rate considered good practice, Ms Eagar found.

Her research also determined that the care time of registered nurses and enrolled nurses would have to increase by by 265 per cent for Australian nursing homes to meet the legislated standards for state-run homes in Victoria.

RADs had money flowing

In 2012, the Labor government brought in another round of reforms. 

Government backed, interest-free ‘refundable accommodation deposits’ were introduced, with the alternative of paying a daily rate. 

Providers can invest these funds, for example in property or infrastructure, and use the profits. 

Only the original amount of the RAD is returned to the resident when they die. 

RADs are guaranteed by the government, meaning the government will pay them out if the provider goes bust.

“The money flowed”, Mr Morton writes.

The average value of accommodation bonds in 2012-13 was $229,000 per resident. Last year, that figures had risen to $318,000.

A ‘light touch’ approach to accreditation

A 2019 background paper commissioned by the royal commission, noted that the 1997 Act saw “a relaxation of previous regulatory requirements, such as tight financial acquittal requirements, and their replacement by a ‘lighter-touch’ accreditation approach”.

The requirement for aged-care providers to prove a portion of their funding was spent on direct care was removed, despite a senate community affairs references committee report warning at the time that “any system that claims to be concerned about the quality of care in nursing homes must ensure that public money provided for nursing care is spent for this purpose”. 

The other problem with the system’s opacity is that large aged care providers can use investment vehicles to move funds around their business, Mr Morton writes.

For example, they can use RADs to purchase a property that is then owned by an investment vehicle, and rent is paid – to a large extent from government funds – to that vehicle from another entity within the organisation. 

We saw an example of this perfectly legal but ethically questionable use of government funds earlier in the year, when it was revealed that St Basil’s Homes for the Aged in Melbourne’s Fawker was paying millions in above-market rent to a separate but related legal entity. St Basil’s Fawkner suffered one of Australia’s most devastating COVID-19 outbreaks that saw 44 residents die.

Current government has brought aged care “to its knees”

In 2013, Tony Abbott became prime minister and a series of decisions tightened the screws on the sector.

Pay rises for care workers and registered nurses were cancelled. Aged care was moved from the Department of Health to the new Department of Social Services, a decision that was reversed only a few years later. The Dementia and Severe Behaviours Supplement was canned and replaced with the much cheaper Severe Behaviour Response Teams.

And then in 2015, newly appointed treasurer, Scott Morrison, froze indexation for the Aged Care Funding Instrument. He made a similar decision the following year. Savings from these cuts were directed back to the government, rather than remaining within the aged care budget, making them particularly damaging. 

Previous funding cuts had at least seen funds retained within aged care. The money simply “vanished” from aged care, Mr Morton writes.

Mr Morrison’s changes “brought the sector to its knees”, writes Mr Morton, quoting an RN with 30 years’ experience in the sector.

Pyramid scheme could come tumbling down

Mr Morton says Australia’s aged care system is effectively a pyramid system. Consumers pay for RADs, which the provider returns when they die. So long as new money keeps rolling in, everything will be alright.

But with 50 providers expected to leave the industry this year, and a further 89 heading for “severe financial distress”, the system is teetering. The government would be liable for the $5.3 billion in RADs these homes would eventually have to repay, Mr Morton explains.

Mr Morton points out that there is a conflict of interest written into the system.

The government’s care regulator, the Aged Care Quality and Safety Commission, is responsible for monitoring the performance of aged care providers, but the government cannot afford to see providers fail.

Unwinding reforms that have “gutted” the sector

Mr Morton is calling on the government to introduce reforms now, not to wait until after the royal commission has handed down its findings in February 2021. 

“To fix aged care, the royal commission will have to unwind two decades of government policy that has gutted and privatised the sector, promoted profits over the wellbeing of residents and tried, above all else, to ensure that the cost of caring for a rising number of elderly Australians would not affect the government’s bottom line,” he writes.

The problems in the aged care sector were already well established when COVID-19 hit Australian shores in February. Dozens of providers, both in the city and in rural areas, were already on the cusp of collapse. No doubt the situation is far worse now.

The pandemic could not have come at a more perilous time.

There are some reforms that would be relatively easy for the government to implement now, for example, introducing staff ratios and increasing the number of home care packages to reduce waiting lists.

But the government announced the royal commission anticipating “bruising” findings about providers. The forensic detailing of its own handling of the problems must be deeply troubling, and there appears to be little appetite for change right now.

For deeper reform, it might be better to wait until after the royal commission hands down its findings. Its examination of the sector has been so forensic and its debate on solutions so extensive, its thinking on what aged care might look like in the future should surely be part of any reforms.

Images: DGL images, iStock.

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  1. Thank you for posting Rick Morton’s article on the disasters in Australia’s aged care as it provides ammunition for the campaign that a friend and I have embarked upon to target our MPs and the Ministers responsible in our new government!


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