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Aged care: Insights from the 2021-22 Federal Budget

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Record new investment and funding heralds the long-term intent for the aged care sector

The 2021-22 Federal Budget has signalled a new direction for the aged care system. Significant reforms have been announced and a record new investment of $17.7 billion has been committed with $119 billion total spend over the next four years.

Concurrently, the federal government outlined its response to the final report from the Royal Commission into Aged Care Quality and Safety (royal commission) under ‘five response pillars’1 which will guide reform, with further detail anticipated over the coming weeks. The sector will now need to focus on execution of this reform agenda to deliver a new aged care system that rebuilds trust and provides dignity and respect, supported by continued investment. 

With the federal government having now delivered its response to the royal commission’s final report, we discuss the key areas of reform and new funding which will shape and enable change. Aged care providers first need to understand the likely timing and implications of the package of reforms to plan their own strategic and operational response. In PwC’s Aged care beyond the royal commission series, we highlighted five key elements required to drive provider transformation which are matched by the ‘five pillars’ of the federal government’s response to the royal commission. But whether this budget heralds the start of transformation of the sector remains to be seen.

1. Prime Minister of Australia — media release, $17.7 billion to deliver once in a generation change to aged care in Australia, 11 May 2021

Pillar 1: Home care

  • Design and planning for a new and more effective in-home care program that meets assessed care needs with high-quality care ($10.8 million)
  • $6.5 billion for 80,000 additional home care packages over the next two years (40,000 released in 2021-22 and 40,000 in 2022-23) and more respite services, bringing the total number of home care packages to 275,000 by 2023 (up from 60,000 in 2015)

  • Enhanced assistance to access and navigate the aged care system through ‘Care Finders’ ($272.5 million) and $798.3 million for the 1.6 million unpaid and family carers supporting older Australians, including additional respite services for 8,400 senior Australians each year

By focussing on access to services and choice in how and where older Australians age, the 2021-22 Federal Budget builds on themes identified by the royal commission and seeks to support those choosing to age at home. While this will go some way to alleviating significant waitlists for services, and will assist with navigating the complex aged care system, government and providers must consider key issues of labour shortages and increasing demand of services which will likely continue to be challenges in the delivery of high quality home care. There are also significant opportunities in the digital space for aged care providers to elevate the quality of home care, and the monitoring and connectivity of those who choose to age at home.

Pillar 2: Residential aged care services and sustainability

  • Redesign and planning reform for aged care to ensure the delivery of appropriate and effective care, particularly for those with specific needs

  • $10 per day basic fee supplement from 1 July 2021 to support delivery of better care and services

  • Minimum front-line care minutes (200 minutes per day) in residential care homes from 1 October 2023 including a minimum 40 minutes with a registered nurse ($3.9 billion)

  • New Australian National Aged Care Classification (AN-ACC) funding model and resident classification system in 2022

  • Residential aged care places allocated to consumers instead of providers to drive choice for consumers and competition between providers ($102.1 million)

  • Independent regulation of aged care pricing and costs through expansion of the Independent Hospital Pricing Authority

The shift of license allocation from providers to consumers is a significant and potentially transformational change to the residential aged care market, emphasising consumer choice and challenging providers to step up. Immediate additional funding support will provide some relief to providers facing difficult operating conditions, while a new funding model offers the potential to address limitations of the existing model. Introduction of minimum care delivery commitments (including nursing) could improve care and experiences but will challenge providers to rethink current operating models and look to digital solutions to streamline and improve care delivery while competition for workforce intensifies.

Pillar 3: Residential aged care quality and safety – improving access to and quality of residential care

  • A star rating system to highlight quality of services and promote consumer choice 

  • Expanded role for the Aged Care Quality and Safety Commission particularly in addressing failures in care

  • Improved integration of services across the care continuum through improved access to primary care services and medication management

  • Support for improved dementia care, specialised support services and continued focus on reducing reliance on restraint

Greater transparency, accountability and advocacy to drive improvements in care and care environments will further challenge providers to deliver great care and experiences while being prepared for increasing scrutiny from the regulator. It will also require aged care providers to have the systems in place for continuous improvement and reporting which is more clearly evident to consumers and regulators. A greater integration across primary care and other health services with aged care (including through greater use of virtual health) will likely deliver better clarity, access and outcomes for consumers across the care continuum. As providers are expected to manage increasingly complex care needs of residents, particularly those living with dementia, specialised services will better equip providers and support the aged care workforce to improve capability.

Pillar 4: Workforce

  • Investment in building a future workforce through recruitment ($9.8 million), upskilling and training with 33,800 subsidised vocational education and training places, including for indigenous Australians

  • Attraction and retention of clinicians through financial support ($3,700 for full-time registered nurses and $2,700 for part-time registered nurses), scholarships and transition to practice programs for registered nurses

  • A single assessment workforce to support simplified access for older Australians accessing or progressing through the aged care system

  • Recognition and support for family and informal carers as an extension of the aged care workforce ($798.3 million)

While the powerhouse of the federal government’s reform agenda for aged care is a skilled, professional and compassionate aged care workforce, staffing will remain a fundamental issue for providers, particularly as minimum front-line carer minutes are introduced and skilled migration remains suspended. Providers should take steps to review current staffing hours and rosters to identify current and potential future deficits in time spent delivering front-line care and anticipate labour cost implications. System-based options should be considered to determine how this care time can be efficiently and accurately monitored in the future to ensure compliance with staffing obligations. Recognised as one of the major challenges for the sector, competition for talent will continue to be fierce. Anticipated significant staffing shortages in the coming years are unlikely to be remedied without action on wages and providers building attractive employee value propositions.

Pillar 5: Governance – new legislation and stronger governance

  • Establish new governance and advisory structures, including a National Aged Care Advisory Council, a Council of Elders, and Inspector-General of Aged Care

  • Improve access to quality aged care services for consumers in regional, rural and remote areas, including Aboriginal and Torres Strait Islander peoples and special needs groups

  • Improve rural and regional stewardship of aged care, with Department of Health aged care officers embedded within eight of the 31 Primary Health Network regions

  • Drafting of a new aged care Act to enshrine the federal government’s reforms in legislation by mid-2023

The announced governance reforms offer the potential to establish the architecture of a new aged care system centred on respect, care and dignity — as envisaged by the royal commission's final report. At a practical level, heightened governance, risk and compliance requirements are expected to cascade to provider organisations. With greater accountability for boards and senior executives emerging, providers should investigate digital solutions to provide confidence of systematised compliance. Further detail will be needed to understand the practical implications of changes to regulation and governance in delivering quality care for consumers, providers and workforce alike. Providers caring for groups with special needs, alongside those in rural locations, stand to benefit from significant investments in supporting these services. Further support for developing specialised services to provide aged care for Aboriginal and Torres Strait Islander peoples is welcomed and will assist in the development of specialised services in key locations and communities.

Aged care providers can now start taking action

The federal government’s ‘five year — five pillars’ implementation plan provides an early, high-level view for providers on the timing of the reforms program. If transformation of the aged care system is to be achieved, budget commitments and the reform pillars are only the beginning. Whether older Australians — and our aged care system — are any better off, depends on how these new commitments are translated into action and sustained change. Government, providers and the community will need to work in partnership to make the most of this not-to-be-missed opportunity.

While the journey ahead is likely to be long for the aged care sector, ultimately, aged care providers must take action now, planning strategically and implementing what is critical to ensure the right path is taken. This would include making strategic choices on where and how to play; executing mergers & acquisitions or partnerships as appropriate; and, improving core business performance to ensure a sustainable business. Successful transformation will require aged care providers to seize the opportunities to reform around high quality and safe care which is human-centred, insight-driven and digitally-enabled and built on strong governance foundations, ensuring Australians can age with dignity and respect.

Contact us

Richard Ainley

Richard Ainley

Partner, Health & Wellbeing, PwC Australia

Tel: +61 408 146 897

Kerryn Dillon

Kerryn Dillon

Director, Advisory, PwC Australia