Aged Care perspective of the 2023 Federal Budget

Budget Initiative

BDO Comments

$309.9 million over five years to implement the recommendations from the Royal Commission to strengthen the regulation of the aged care:

• $139.9 million over four years to enhance the Star Rating system
• $72.3 million for a new, stronger Aged Care Regulatory Framework
• $59.5 million over five years for the ICT to establish a national worker screening and registration scheme
• $25.3 million to assist the Aged Care Quality and Safety Commission to deliver its audit and compliance program
• $12.9 million over two years for the development, monitoring and enforcement of food and nutritional standards.

Most of the funding in this category will not directly flow through to approved providers. Approved providers should however ensure that they are across the implications of these initiatives on their organisation and advocate as appropriate. Some considerations include:

1. Ensuring that the star rating system is fair and that there is a process to appeal false or inaccurate ratings (Google reviews has a similar process).
2. Ensuring that the national worker and screening and registration scheme does not become such a barrier that it reduces workforce participation in an already tight labour market.
   This is an expansion of the $3.6 million set aside for a new national registration scheme for personal care workers in the 2022 Budget. It is unclear if the registration scheme will be limited only to personal care workers.
3. Ensuring compliance with any new standards (e.g. food and nutrition).

Budget Initiative

BDO Comments

The Government will provide additional funding of $591.3 million over two years from 2022–23 to continue the Government’s response to COVID-19 in aged care.

This funding will flow directly to approved providers. Providers should ensure that they understand their full entitlements.

Budget Initiative

BDO Comments

$515.0 million over five years from 2022–23 to fund the outcome of the Fair Work Commission’s decision on the Aged Care Work Value Case and $10.9 billion over five years to meet the cost of the Aged Care Work Value Case.

The decision was to increase award wages by 15% from 30 June 2023 for many aged care workers including registered nurses, enrolled nurses, assistants in nursing, personal care workers, home care workers, recreational activity officers, and some head chefs and cooks. Funding includes:

• Residential Aged Care funding increase $8.5 billion over four years
• Home Care Packages program subsidy increase $2.2 billion over four years
• $311.2 million for a new grant program for Commonwealth Home Support Programme providers to cover the cost of the increase in award wages
• $98.7 million for a new grant program to fund historical leave provisions for Commonwealth-funded aged care providers
• $58.9 million for a targeted indexation boost to funding for the Indigenous Employment Initiative, Multi-Purpose Service Program, National Aboriginal and Torres Strait Islander Flexible Aged Care Program, and Trusted Indigenous Facilitators program
• $6.7 million for a transition grant to provide temporary viability support for residential aged care providers
• $2.0 million for a transition grant to cover any potential shortfall for care recipients under the Home Care Packages Program
• $37.4 million in implementation costs for the Department of Health and Aged Care and Services Australia.

This equates to a 15% increase in the award wages for staff. The Government had indicated in the October 2022 Budget it would fund the increase recommended by the Fair Work Commission but had not stipulated the amount.

The wage increase does not apply to all workers. Roles mentioned in the budget include registered nurses, enrolled nurses, assistants in nursing, personal care workers, home care workers, recreational activity officers, and some head chefs and cooks. Service providers should consider resulting impact on their organisational culture.

It will be interesting to see what impact this 15% increase has on attraction and retention of staff. Previous analysis by Treasury had indicated a 25% increase in wages could result in a 5-10% uplift in workforce supply. It is unlikely that modelling was linear, so the impact may not be directly proportional.

We understand that AN-ACC funding will be increased by 17.6% to account for the 15% increase and inflation of 2.6%. Recent CPI Index inflation rates have been a lot higher than 2.6% so this will affect the impact of the increase.

There are various related increases for home care service providers and it will be important for providers to be across all timings and methods of receiving such funding. Two new grants have been referenced in the budget to fund the increase in award wages and historical leave provisions for service providers.

Budget Initiative

BDO Comments

$338.7 million over four years from 2023–24 to improve the in-home aged care system including:

• $166.8 million for an additional 9,500 Home Care Packages
• $73.1 million to support the ICT changes necessary to enable the new Support at Home Program (program postponed to 1 July 2025)
• $71.5 million over four years to develop efficient unit prices annually for the Support at Home Program
• $15.7 million over two years to establish a single aged care assessment system, including the establishment of a First Nations assessment workforce
• $10.9 million to trial a new assistive technologies loan program in two states and territories
• $0.7 million to establish the Aged Care Sustainability Taskforce to advise Government on a high quality and sustainable aged care system
• $0.1 million for an Independent Implementation Readiness Assessment of the aged care reforms.

Approximately half the funding in this category will not directly flow through to approved providers. Approved providers should however ensure that they are across the implications of these initiatives on their organisation and advocate as appropriate.

Budget Initiative

BDO Comments

$827.2 million over five years to continue to improve the delivery of aged care services and respond to the Royal Commission, including:

• $487.0 million over four years (and $133.6 million ongoing) for the Disability Support for Older Australians Program
• $112.0 million over four years to introduce a new General Practice in Aged Care incentive payment
• $98.7 million over two years for a new Market Adjustment Program and to provide business advisory services to improve the viability of the residential aged care sector
• $81.9 million over three years to develop and implement a new Aged Care Act to support aged care sector reform and undertake discovery and design of associated ICT system changes
• $41.3 million over four years to build a new place assignment system, allowing older Australians to select their residential aged care provider
• $6.3 million over five years for the Independent Health and Aged Care Pricing Authority to deliver its functions.

It is great to see investment in critical improvement areas identified by the Royal Commission. It is uncertain whether this is sufficient investment, but approved providers should engage with all these initiatives fully as it may influence future funding decisions. Some noteworthy considerations include:

• It is worth testing whether the scope of the business advisory support can be tailored to something specific that each provider needs rather than a generic overarching service
• The place assignment system where older Australians can select their provider may have a significant business impact – providers who are familiar with how that system will work will be better placed to take advantage of it and grow their market share.

Budget Initiative

BDO Comments

$77.3 million over four years including:

• $52.1 million over two years to increase funding in very remote communities
• $8.1 million over three years to support providers to transition to new accountability measures and obligations
• $7.6 million over two years to fund capacity building of Aboriginal Community Controlled Organisations
• $4.1 million over four years to fund mandatory cultural awareness training for staff
• $3.8 million to support project and program assurance
• $1.7 million to appoint an interim First Nations Aged Care Commissioner

It was pleasing to see funding specifically allocated for Aboriginal and Torres Strait Islander people and that the vast majority of this funding has been allocated for direct benefit of people from those communities including increased funding in very remote communities, capacity building of organisations, and cultural awareness training for staff.

One of the critiques of the Aged Care Royal Commission was that it did not adequately address the needs of Culturally and Linguistically Diverse people – the success of the impact of initiatives for Aboriginal and Torres Strait Islander people may inform how to cater to those other disadvantaged communities in future.

Budget Initiative

BDO Comments

$15.2 million over two years to support the establishment of the Y Careers Agency to provide young people with employment opportunities in the care economy, including the early childhood education and care, disability and aged care sectors.

In a tight workforce environment providers should take every opportunity to engage with sources of potential workers. Establishing relationships with the Y Careers Agency early may provide competitive advantages.

The Government will temporarily reduce the residential aged care provision ratio from 78.0 places to 60.1 places per 1,000 people aged over 70 years. The reduction in the ratio reflects the increasing preference of older Australians to remain in their homes.

This may impact demand for residential aged care services, though it is unlikely the government would have taken this step without the evidence to support it.

$7.3 million over three years on initiatives to further reduce the number of people under the age of 65 living in residential aged care.

This is a recommendation of the Royal Commission.

The work hour cap for international student visa holders will be reinstated from 1 July 2023, following its removal during the COVID-19 pandemic. International students working in the aged care sector will be exempt from the 48 hour per fortnight work limit until 31 December 2023.

Providers should prepare themselves for the change from January 2024.