The change for aged care reform

By John Connole
Wednesday, 12 September, 2012

The Australian Aged Care Bulletin speaks exclusively to Professor Hal Kendig, head of the Ageing, Work, and Health Research Unit in the Faculty of Health Sciences at the University of Sydney.

What affect has the repeated failings of governments to recognise the aged care sector’s ongoing problems had on the industry?
We have not had major reforms of aged care since the current system was put into place back in the mid-1980s. We’ve had a series of adjustments and refinements and a lot of expansions of programs, but the basic structure and all its faults have remained. The most notable fault has been the ongoing gridlock between the Commonwealth and state governments over the funding of aged care.

Throughout the nineties and the last decade, there have been some useful but small adjustments through departmental reviews. The Hogan Review back in 2004 proposed sensible directions, but at each point we’ve basically been unable to re-configure the system. So questions about who pays and determining what older people themselves get had reached a very difficult point.

It has been understandably very difficult for the industry in terms of the inability to properly fund high-level care residential in terms of bonds and another big problem for industry has been the relatively detailed regulation being read largely out of Canberra with state offices. That kind of detailed regulation, centralised, is a real problem.

So there’s a few issues; the financial gridlock between the Commonwealth and the states over who pays rather than what older people need and how they get it; and secondly, from an industry point of view, the problem with getting capital for residential care.

The Productivity Commission’s draft report into aged care [Caring For Older Australians] stated that the average accommodation bond exceeds the cost of constructing a basic new home these days. What deficiencies in the system caused such a drastic rise?
The difficulty is that we have been unable to fund the capital part of residential care sensibly because of the prohibition on bonds for high-level care. So, providers have had to shuffle money by getting bonds for low-level care, or wherever they can get money, and direct it towards high-end capital. It’s very difficult now to fund highlevel residential care, that’s why you get that difficult position in funding.

The response to that from the Productivity Commission takes a step back and doesn’t look just specifically at the money to the providers, it says we need to structure this whole thing much more sensibly, and one way it says is that we do not divide residential and community care into highlevel care or low-level care and different funding streams etc. Because whenever you divide the funding streams up into different programs, sometimes from different levels of government, you risk running into gridlock and contradictory messages and so forth.

The big opportunity now is that the Commonwealth Government will be the single funder as of 2012 for community care as well as residential care and various other care programs, so we’ll have the one funder. The good thing there is that you get away from that financial gridlock. What the Productivity Commission is saying is that a way ahead is not to say we pay for community care and residential care, but we basically pay for care and for accommodation and living costs – the unbundling of care and accommodation.

What are the risks of consolidating aged care responsibilities with the Commonwealth Government?
The biggest risk is trying to run aged care in a centralised way out of Canberra. The Commonwealth Government is very good at managing programs, but it has less experience and sensitivity to deal with actual implementation and funding and coordination of service providers. The risk would be that the Commonwealth taking over all responsibility for all of aged care, the risk would be to try and run it out of Canberra – that each residential care place or community care agency would feel that they’re being run out of Canberra correctly.

There are some responses to that and I think the Productivity Commission has taken good steps in recommending ways to manage and be responsive to the aged care system at a more local level. One of the things that it proposes is the Australian Seniors Gateway Agency, what it is saying there is it wants a new independent agency to work at the coordination and the access to care at a relatively regional level, and it wants that separate from the big funding and policy questions of Canberra, so that’s a pretty big step. The other thing it proposed is an Aged Care Regulation Commission which would handle, in addition to the regulation questions and complaints, some of the hard decisions about how you set a price for aged care. Those are two big steps that are basically set up to enable care to move ahead without a whole lot of centralised control but without compromising quality assurance and protections for older people.

Another very important point which would be important for the industry to recognise is that on the one hand there’s great value in reducing unnecessary regulation, on the other hand the Commonwealth will move ahead to enable more market competition. So, people are not going to find an easy regulated world in which they would be, say, the sole provider for a kind of service in a particular area. There will be more competition. Those providers who are doing very well in meeting consumer wishes will do better and those who are not are going to find it harder to survive.

Is this a positive step?
Definitely, because this is the main point about the Productivity Commission’s enquiry. It has to ask the question: who is the aged care system for? And you have to answer older people themselves, and carers, and the broader public interest. At the same time, the providers – their whole survival depends on their relationship with the government – so the government mainly sees the face of providers, not individual consumers. They also see the advocate organisations like National Seniors Australia, and basically the Productivity Commission is wisely recognising that in the end it’s all for the people that make use of the aged care system, and that includes the people that should but don’t. That fundamental message has to be driven home over and over again.

In your submission to the Productivity Commission you mentioned the concept of an intelligent aged care system. Can you elaborate on how this can best be achieved?
Knowledge about how to provide aged care, and even more so how to enable older people to have good levels of wellbeing and independence, can help in achieving win-win situations where older people have independence and wellbeing they wish to have and we can minimise costs to government and we can enable providers to be valued more for quality service, but we have to have knowledge about who is missing out and who is receiving it. Are the kinds of care and support we’re providing what older people themselves want or need? How effective are our current services?

The difficulty is the system is now set up necessarily on the basis of funding relationships with less attention to understanding how those services are directed toward needs and how well they are doing. I think we need applied work on research, evaluations and open information systems to enable us to bring some intelligence to our decisions and not hideaway in reports that are not released or in quality assessments that are not released. There has to be a much more transparent, public and critical learning system.

What’s the importance of giving older Australians a choice when it comes to accommodation and aged care providers?
First of all we know that how well older people do with any service, or rather with any aspect of their life, is enhanced by making a choice themselves. Informed choice and a sense of control and a sense of dignity, rather than in a worst-case – coercion. Also, choice will keep providers and regulators on their toes, if people don’t like it they can go somewhere else and the Productivity Commission set up arrangements under the Seniors Gateway Agency, under the entitlement arrangements, to enable the consumers and carers to have more of a voice.

The other way that’s happening is if you then say – providing care on the basis of assessed need and some entitlement – people don’t have to just fit within the narrow limits and boundaries of a certain program of aged care packages, all those tight regulations which basically limit choice add to the difficulty of running the system. The way to get this to work right is by responsibility and coordination of knowledge at a more local level.

How confident are you that the aged care sector, along with the federal and state governments, can unite on this front and have a real go at implementing some of the proposed reforms?
The new COAG agreement on hospital funding should provide some stability for local hospital networks and Medicare Locals, both of which should help aged care to better integrate with health services at the local and regional levels where the coordination and access has to be ensured.

I think all of us have to remember that back in the 1990s when bonds for high-level care facilities were under consideration – reform basically fell apart. I think it’s in everybody’s interest for major reforms to move ahead. I think the industry and consumer groups are much more aware of the potential gains and the risks of fragmentation and squabbling amongst ourselves. There’s been a lot of work on the National Aged Care Advocacy Lines, and we are now in a position where we can carry these reforms through. This is what the industry and consumer groups really have to focus on now, we have to maintain that level of understanding and as much solidarity as we can.

The biggest risk I think now has to do with the instability of federal politics. The Government’s on a knife’s edge and it’s involved with some very brave and important decisions. The important point is that the difficult decisions are enabled by excellent policy work, for example the excellent work showing how the wealth in older people’s homes can be used for their accommodation in ways that do not disadvantage them at all, so it will improve their quality of life and it will improve the affordability of aged care and sustainability for the decades ahead.

Older people being able to pay for the capital for care in ways that don’t disadvantage them at all means that the next generation will have the chance to see that their parents are living a better life in old age by using up some, not all, some of the wealth they have in their homes.

Professor Hal Kendig

Professor Kendig heads the Ageing, Work, and Health Research Unit in the Faculty of Health Sciences at the University of Sydney and he is a Chief Investigator on the ARC Centre of Excellence on Population Ageing Research (2011-2017). Professor Kendig has more than 180 publications. In 2003 he was awarded the Centenary Medal for ‘outstanding service to aged care and healthy ageing research’ and in 2008 he contributed to the Australia 2020 Summit.

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