Australia's massive social infrastructure gap and how to fill it

12 February

James van Smeerdijk - PwC partner and Rohan Mead - Australian Unity. This article first appeared in The Australian, 12 February 2018.

Australia has a health care and aged care resourcing crisis at its doorstep. By 2025, just seven years hence, the shortfall in infrastructure to cater for our ageing population, with increasingly complex needs, threatens to swamp government budgets. Even if we could afford it, it is unlikely that the existing health and ageing sectors can be simply be scaled up to meet increasing demand in time, and more incremental policy nips and tucks, simply aren’t going to cut it. Without fundamental change, and soon, the health and ageing systems will become unaffordable and unfit for purpose. We suggest a practical approach to kick start that change.

But first the numbers, and they are daunting. A new PwC study, commissioned and supported by Australian Unity, finds that by 2025 an additional $24 billion in capital costs and an extra $13 billion in annual operating costs will be needed to meet projected gaps in residential aged care, in-home and community care and hospital beds (assuming current policy settings). Workforce shortages also loom large. For example it is estimated that we will need 180,000 more carers to cater for our ageing population and 85,000 extra nurses across the health and aged care sectors in the next seven years. After the next federal election, irrespective of who forms government, the budget forward estimates will quickly have to reflect these implications.

Lift our gaze a little further and the numbers begin to soar. The study finds that by 2040, the projected gap in capital costs would hit $57 billion, the annual operating costs shortfall would be $30 billion and the deficit of aged care workers and nurses would sit somewhere north of 500,000 people.

The shortfalls are demography-driven. By 2040, it is estimated that Australia will be home to more than 5 million people aged 70 or older. An estimated 4.6 million people will be living with circulatory system diseases and over 2.6 million people will be battling high or very high anxiety or distress. And service gaps will be pronounced between urban and regional areas.

These projections are overwhelming, but sound thinking on how to shape a different future is emerging. Last November the Productivity Commission’s landmark Shifting the Dial report concluded there was a potential saving of $140 billion over the next 20 years if a series of reforms were made to the nation’s health system. They suggested starting with changing health care funding to reward outcomes rather than activity, and with reducing duplication and waste. David Tune’s Aged Care Review, released last September, also offered sensible reform options to put the older consumer at the centre of the system and to improve the effectiveness of activities and outlays.

The PwC study similarly argues that Australia needs a practical approach to supporting innovation that will help us better meet our future needs. A key proposal is that governments, both state and federal, invest in an independent function to fund trials of new community partnerships and innovative models of care. Good ideas could be developed, tested, shared and scaled quickly. It is estimated that initial funding of $500 million will be needed to start this “innovation accelerator” and to initiate trial sites. Such a level of funding represents less than half a per cent of one year’s governmental spending on health.

To support a capacity to explore real change, this “innovation accelerator” could sit within an existing independent organisation such as the Australian Commission on Safety and Quality in Healthcare, with a view to establishing and assessing new approaches and programs that improve health care and aged care outcomes.
There is also a broadening and coalescing view around the need to support local innovation in human services delivery. The Productivity Commission offers a resonant thought with its idea for Prevention and Chronic Condition Management Funds (PCCMFs), to be based within Local Health Networks, using seed funding from government to trial outcomes-based programs.

We often hear that Australia has a world class health system, and our life expectancy is among the highest in the developed world. But we now also have the OECD’s highest number of years of life spent in ill-health (10.9), so now is not the time to sit back.

We must urgently start thinking about what lies ahead, not in decades, but in a few short years, in terms of our capacity to meet community needs. Low risk, incremental change simply won’t cut it given the numbers we face. It is incumbent on federal and state governments to lift their eyes above the political parapet, resist the easy potshot, and instead focus on policy design to support new ways of working and valuable, practical innovation to meet future needs.

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