Position Paper. May Crunch Time. for residential aged care funding. Working for a fair, just and sustainable society

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1 Position Paper May 2010 Crunch Time for residential aged care funding Working for a fair, just and sustainable society

2 Contents Defining residential aged care 3 The challenges 6 Impacts for older people 9 Our response 10 UnitingCare Queensland is the health and community service provider of the Uniting Church and supports more than people throughout Queensland every day of the year. With over staff and volunteers in more than 400 geographic locations across the state, it is one of Australia s largest non-profit health and community service providers. Through Blue Care and the Wesley Mission Brisbane, UnitingCare delivers quality and compassionate care to more than people in residential aged care facilities each year and seeks to influence social policy and funding so that people receive the care and support they need to live their lives with dignity. 2 Our Values: Compassion Respect Justice Working Together Leading through Learning

3 It s crunch time for residential aged care funding. The number of aged care places is already insufficient. Critically, the number of older Queenslanders is increasing rapidly, creating urgent need for additional aged care places. Due to the lack of places, many people remain in hospital much longer than is needed because they can t get an appropriate aged care place, or accept an option that is less than ideal and maybe far from their home and community. The residential aged care industry is facing major challenges: declining viability, insufficient capital funding and faulty funding indexation. If these issues are not addressed, there will not be sufficient residential aged care places available, the care people receive will suffer, and the quality of their lives will be considerably impacted. Facilities in rural and remote areas will be forced to close, with flow on effects for whole communities. UnitingCare Queensland believes the Australian Government must act urgently to implement significant reform to aged care policy and funding. Defining residential aged care The Australian Institute of Health and Welfare (AIHW) in its publication Older Australia at a Glance 2007 defines permanent residential aged care as providing accommodation and care services to people who are no longer able to support themselves or be supported by others in their own homes. It further states that Facilities provide suitable accommodation and related services (such as laundry, meals and cleaning) and personal care services (such as assistance with the activities of daily living). Nursing care and specialised equipment are provided to residents requiring such assistance. Residential respite gives short-term care in aged care facilities on a planned or emergency basis 1. Resident profile In 2003, although only around five per cent of all older people lived in aged care accommodation, this increased to 31 per cent among those aged 85 years and over (one per cent of people years, seven per cent of people years, 31 per cent of people aged 85 or over) 2. By June 2009 there were operational aged care beds in Australia 3 and the AIHW s June 2008 statistics indicate that 29 per cent were aged over 90 years 4. This figure will continue to grow, as by 2050 the number of people aged over 85 is predicted to reach 1.8 million 5. It is well documented that the rate of poor health and disability increases as the population ages. The AIHW (2007c) records that profound or severe limitation of core daily activities is strongly age-related, affecting around 12 per cent of year olds and increasing to 58 per cent of people aged 85 years and over, in The increase in dementia diagnoses within this age group adds to the complexity of providing sufficient suitable residential aged care. The uneven distribution of older Australians and especially those suffering from dementia is highlighted in the graph on the following page with Queensland far ahead of the national average predicted growth. 1 AIHW Residential Aged Care in Australia June AIHW analysis of ABS Survey of Disability, Ageing and Carers Confidentialised Unit Record File 3 DOHA Report on the Operation of the Aged Care Act A30/$File/ROACA09.pdf 4 AIHW 2009c 5 ABS 2008k. Our Values: Compassion Respect Justice Working Together Leading through Learning 3

4 especially those suffering from dementia is highlighted in the graph below with Queensland fa ahead of the national average predicted growth. Projected increases in aged population and people with dementia for Australia and Queensland 1995 to 2041 Projected increases in Aged population and people with dementia for Australia and Queensland 1995 to % 350% 358% 300% 250% 253% 254% % increase 200% 150% 166% 100% 50% 0% Population aged 65+ People with dementia Dementia Australia Queensland Australia Queensland Within Queensland there have emerged pockets where the ageing population trends and correspondingly the demand for residential aged care will be higher as indicated in the graph below. 4 Our Values: Compassion Respect Justice Working Together Leading through Learning

5 Within Queensland pockets have emerged where the ageing population trends and correspondingly the demand for residential aged care will be higher, as indicated in the graph below. Top ten Local Government Areas - percentage population growth aged 85+ Top Ten LGAs-% Population Growth aged % 74.23% 70% 60% 71.03% 69.46% 68.61% 67.84% 62.21% 62.12% 61.17% 60.57% % Growth 50% 40% 30% 41.98% 20% 10% 0% Pine Pine Rivers Rivers (S) (S) Caboolture Caboolture (S) (S) Hervey Hervey Bay Bay (C) (C) Caloundra Caloundra (C) (C) Maroochy Maroochy (S) (S) Redland Redland (S) (S) Gold Gold Coast Coast (C) (C) LGA LGA - - Local Government Area Cairns Cairns (C) (C) Ipswich Ipswich (C) (C) Brisbane Brisbane (C) (C) Growth 85+ % Growth 85+ % Queensland % Australia % Queensland 57.36% The Challenges Australia 52.90% A number of factors are contributing to the lack of viability of Residential Aged Care. Declining viability Our Values: Compassion Respect Justice Working Together Leading through Learning The marked decline in the viability of residential aged care since 1997 is evident in the following illustration from the Stewart Brown Aged Care Financial Performance Survey (June 2009) which depicts the movement in the net trading results of high and low care facilities ove 5

6 The challenges Several factors are contributing to the lack of viability of residential aged care. Declining viability The marked decline in the viability of residential aged care since 1997 is evident in the following illustration from the Stewart Brown Aged Care Financial Performance Survey (June 2009), which depicts the movement in the net trading results of high and low care facilities over time. Net operating results over time Dollars Dollars per per occupied occupied bed bed day day Bands 1 and 2 result Bands 3 and 5 result NB Bands 1 & 2 represent high care and Bands 3 to 5 represent low care. Bands 1 and 2 represent high care and Bands 3 to 5 represent low care. The Ageing Agenda quoted accounting group Bentleys initial findings from its 2009 National Aged Care Financial Survey as indicating average profits have dropped below five per cent and the return on assets has fallen below two per cent. Insufficient capital funding A report commissioned by the Aged Care Industry Council (ACIC) estimates the total value o capital funding that will be available for high care placements into the future predicts a capit funding shortfall of $5.7 billion between 2008 and (Price Waterhouse Coopers 2007) 6 Our Values: Compassion Respect Justice Working Together Leading through Learning

7 The Australian Ageing Agenda quoted accounting group Bentleys initial findings from its 2009 National Aged Care Financial Survey as indicating average profits have dropped below five per cent and the return on assets has fallen below two per cent. Insufficient capital funding A report commissioned by the Aged Care Industry Council (ACIC) that estimates the total value of capital funding available for high care placements into the future, predicts a capital funding shortfall of $5.7 billion between 2008 and 2020 (PricewaterhouseCoopers 2007) 6. The Australian Government provides accommodation supplements or allows accommodation charges to a maximum of $26.88 per resident per day ($9 811 annually), which is sufficient to fund approximately $ of the cost to build a residential bed. Blue Care s most recent quantity surveyor s estimate for a proposed new residential aged care service is $ per bed (excluding land). Faulty funding indexation Recurrent subsidies are indexed using the Commonwealth Own Purpose Outlays (COPO) tool which has for many years failed to keep pace with increased costs of operating residential aged care facilities. Cost increases in wages, utility charges, insurance premiums and accreditation and compliance are at least double the indexed increase of the COPO, as illustrated by the Stewart Brown and Companies data on the next page. The introduction of the temporary annual Conditional Adjustment Payment (CAP) was an attempt to rectify this shortfall, however this payment has not been guaranteed to continue. 6 Our Values: Compassion Respect Justice Working Together Leading through Learning 7

8 Income and care costs cumulative movement compared to CPI - all facilities 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Jun-05 Jun-06 Jun-07 Jun-08 Current Survey Operating income (all facilities) Care costs (all facilities) CPI These challenges have been recognised in the recently completed Australian Gove commissioned reports by National Health and Hospital Reform Commission June 2 Senate Enquiry into Residential and Community Aged Care in Australia April Productivity Commission s Research Paper into Trends in Aged Care Services Sep Unfortunately the need for significant reform remains. Impacts for Older People 8 Our Values: Compassion Respect Justice Working Together Leading through Learning UnitingCare Queensland believes all older people should be able to lead full and m lives of their choosing, and, where necessary, to have access to excellent, caring re support that meets their needs, regardless of who they are and where they live.

9 These challenges have been recognised in the recently completed Australian Government commissioned reports by the National Health and Hospital Reform Commission (June 2009) 7 and the Senate Enquiry into Residential and Community Aged Care in Australia (April 2009) 8, and the Productivity Commission s research paper into Trends in Aged Care Services (September 2008) 9. Unfortunately the need for significant reform remains. Impacts for older people UnitingCare Queensland believes all older people should be able to lead full and meaningful lives in a manner of their choosing and where necessary, to have access to excellent, caring residential support that meets their needs, regardless of who they are and where they live. People already find it a challenge to find places in appropriate facilities. If financial pressures continue to increase for providers, additional residential aged care facilities are less likely to be built. Therefore care that is available will become less individually focused. It is more likely that residents will have to share rooms and be grouped for efficiency purposes, rather than being supported in having their individual needs and preferences met in their own room. Staff will have less personal contact with residents, a trend which is already occurring. In addition to this, budgetary levels will restrict assistance to people in their pursuit of recreation and lifestyle activities. This will impact considerably on the quality of life experienced by residents. With continuing staff shortages quality of care will tend to suffer. Less profitable services including those in rural and remote locations are likely to close, with negative flow-on effects for those communities. UnitingCare Queensland believes it is essential that people have real and viable choices available to them - care in the community or in an aged care facility, and choice of aged care facility and aged care provider. Frequently people have no choice but to accept an option that is less than ideal, or to struggle on in very difficult and unsuitable circumstances. People unable to access suitable residential aged care places will continue to occupy costly hospital beds. This places increased pressure on the health system and can be a detrimental and unsuitable experience for people who do not need to be in hospital. 7 National Health and Hospitals Reform Commission, "A Healthier Future for All Australians: Final Report June 2009." 8 Standing Committee on Finance and Public Administration, "Residential and Community Aged Care in Australia." 9 Productivity Commission, "Trends in Aged Care Services: Some Implications." Our Values: Compassion Respect Justice Working Together Leading through Learning 9

10 Our response The three principles recommended by UnitingCare s National Advisory Committee on Ageing for any reform agenda are: The need to ensure that the quality of care and quality of life experienced by older people in aged care are of a high standard The need to ensure access to quality care in remote and regional areas The need to ensure access to quality care for older people who are socially and economically disadvantaged. With these principles in mind, UnitingCare Queensland believes the Australian Government must act urgently to implement significant reform to aged care policy and funding. UnitingCare Queensland calls on the Australian Government to implement the recommendations made by its commissioned enquiries by the NHHRC, the Productivity Commission and Senate, placing a priority on: 1. Improving viability of residential aged care by: b. Introducing an indexed funding model that reflects true operating costs and also the higher costs associated with providing services in regional and remote communities c. Providing flexible price and payment options including unbundling the care and accommodation services d. Removing the distinction between high and low care and allowing bonds or similar financing options to be charged for all care levels. 2. Developing a robust system to ensure both access and choice for the financially disadvantaged in residential aged care facilities 3. Implementing workforce reforms, including improved remuneration and career progression and increased funding for professional nursing positions to ensure wage and conditions parity with like positions in the state hospital system 4. Reducing the burden of regulation and shifting the focus toward the encouragement of best practice 5. Increasing access to information, data, advice and advocacy to assist people in making meaningful choices about the services and supports they choose. 10 Our Values: Compassion Respect Justice Working Together Leading through Learning

11 We work together to... reach out to people in need speak out for fairness and justice care with compassion, innovation and wisdom Our Values: Compassion Respect Justice Working Together Leading through Learning

12 UnitingCare Queensland Level North Quay Brisbane QLD 4000 GPO Box 45 Brisbane QLD UnitingCare Centre for Social Justice p: (07) f: (07) uc.socialjustice@ucareqld.com.au TM