Aged care providers respond to the Federal Budget: the ‘White Knight’ the sector was waiting for

Tuesday’s Federal Budget has been met with a mixed response from residential and home care providers and experts – hear what Cameron Holland, Lou Pascuzzi, Yvonne Timson, Jason Howie, Jason Eldering and Frank Price had to say.

Cameron Holland, Chief Executive Officer of NZ-owned Ryman Healthcare – 79,000 beds needed in the next five to 10 years

“In general, it’s a very positive step forward overall,” said Cameron, citing the 15% wage increase and the Aged Care Labour Agreements. “However, in the medium to long term, the sustainability for providers is still not great, largely because the losses being made in the non-care areas like hotel services. There’s still no word on deregulation in that area so I think that’s still to come. “There’s also no mention around funding incentives or innovation pools for the continued investment in the aged care sector which is desperately required because we need 79,000 beds built in the next five to 10 years just to meet the demand we know about, let alone the million new people over 85 that will be with us within the next 30 years.” “[I do see] that this Government is very much interested in solving these problems,” said Cameron, pointing to the recent research commissioned by the Government on consumer contributions. “[We need to] come up with a meaningful answer around long-term funding where the residents are contributing to more of their daily living expenses and accommodation. “There must be a safety net – but even if all those one million people don’t end up in aged care, there’s still quite significant demand, which means we must be building new places for them that are age-appropriate to live. “We have a cohort that’s sitting on quite a lot of assets with no ability to use them so what I’m looking for over the next 18 months will be answers around how we stimulate the creation of new accommodation models.”

Lou Pascuzzi, Chief Executive Officer and Managing Director of Melbourne-based provider TLC Healthcare – not the ‘White Knight’ Budget that the residential care sector was waiting for

“This is a safe, politically driven budget,” said Lou. “It provides no material reform [and the] increasing future budget deficits and debt over the ensuing four years with no real structural change is worrying.”

While Lou welcomes the full funding of the 15% wage rise, he pointed to the fact that the initiative is not legislated as an issue.

“[With] no enforceability or accountability measures, many aged care providers have taken a position whereby the total entitlement will not be passed through, rather directing some of the funds to their own ‘budget repair’. At TLC – we have committed to passing through the entire benefit,” he stated. “The balance of funding seemingly equates to a COPE indexation increase of 3% to 4% on July 1, which will support EBA Wage increases, and other operational cost increases driven by inflation and interest rate rises, coupled with a heightened contribution to care service provision. “A new regulatory model and prudential framework, which will be reflected in the new Aged Care Act – will deliver likely increased Prudential requirements; administrative burden and compliance costs,” he added. “As a result of the above, this unfortunately is not the ‘White Knight’ budget the Residential Aged Care Industry had hoped for and will not provide the remedy required by the circa 70% of aged care providers operating at a loss.”

Yvonne Timson, Chief Executive Officer of WA home care and disability provider Community Vision – six-month delay in funding on costs of 15% wage rise will impact cash flows

As a home care provider, Yvonne was pleased with the 12-month delay to Support at Home in terms of helping the Government consult more widely on the reform and allowing providers to better support consumers in the transition.

“That was a positive acknowledgement that they weren’t ready, and the sector wasn’t ready with the amount of information and change that was being pushed,” she said.

She also acknowledged the 15% wage rise, but pointing out that the payment for the on costs and leave liabilities won’t start until 31 December 2023 – leaving operators to manage their cash flows for six months until the increase in costs is covered.

“There will be the providers who may not have had time to invest in their systems to accurately be able to measure their unit costs or their outgoings so there will be some who struggle.” Yvonne added that providers understanding their cost bases will be critical to working with the Independent Pricing Authority on the cost settings and roles including care management. “If we will be involved with the Government and have these consultations, we can give them accurate information, not just sit there and have that cap in hand saying, ‘we need more money’.”

Jason Howie, Partner – Strategy & Corporate Governance at aged care consultancy Pride Living Group – “another year of lost opportunity”

While the former CEO of KinCare has welcomed the increase in Home Care packages (HCPs), given the build-up in expectation around the Budget providing more clarity on the reform journey, he labelled Tuesday’s announcement “underwhelming”.

“I believe it will be a net positive for all stakeholders, providing more time for organisations to prepare. This will only be of benefit however if the Australian Government uses the additional time to provide more lead time in their announcements. “We need to be conscious that the delay will create continuing financial uncertainty across the industry, which will make significant investment difficult in activities such as consolidation or the development of Human Capital. It is therefore another year of lost opportunity in moving the industry forward.”

Jason believes that the 15% pay rise will make the industry more competitive when recruiting staff from other industries.

“[However] the structure of the legislation around Home Care Packages will make this difficult for organisations to implement, as they require positive consent from consumers for increases of this value. This could lead to a result where prices need to increase by more than the wage cost, as it will be likely that not all consumers will agree to an increase of that value. “The Government could make this process more efficient by enacting legislation to support organisations increasing their prices to cover this cost increase as a one-off. “The roll forward of the CHSP contracts to 2025 will need to consider this wage increase also to avoid the challenges created with the retention bonuses where they were paid only for hours delivered on the HCP program. This created both an administrative and communication challenge for organisations.”

Frank Price, Chief Executive Officer of Royal Freemasons’ Benevolent Institution (RFBI)

A long-time advocate for workforce change in the sector, Frank understandably commended the extension of current arrangements for international students.

“I think the Budget is the best one I can remember for aged care and for a portion of our workforce and the Federal Government should be recognised for this,” he said. “There are still some unknowns that need further clarification;The AN-ACC increase of 17.6% is meant to cover both the 15% Fair Work increase and indexation. What I do not yet know is how much of this increase is for the Fair Work increase? I need to know what is left over to cover such costs as pay increases for the rest of our workforce and the growing costs of food, power bills etc.The fast tracking of overseas staff and the industry Labour Agreement. This was a recommendation made to Minister Butler and before him Minister Colbeck by me on behalf of many providers so am obviously happy that it has been introduced – just need clarity on its application, especially as I have about 50 international nurses about to receive a visa and I have another 70 odd that are already in the country and are now asking about this two-year fast track. No doubt the details will be out soon.“Ultimately, the effect of the Budget on RFBI will depend on how much of the total aged care spend gets to the provider rather than workforce, consultants or other departments and this is not yet clear to me. Will it cover CPI? Will I be able to offer appropriate pay increases to lifestyle officers, catering staff, maintenance and admin people and have something left over to cover the increased electricity and gas bills and increased food costs? People much smarter than me will no doubt be able to answer that question in the coming days.”

Jason Eldering, Chief Executive Officer of Southern Cross Care Queensland: “We can’t forget the bush”

Jason Eldering, CEO of Not For Profit operator Southern Cross Care Queensland (SCCQ), said the budget “is a step in the right direction” but it does not go far enough for rural and remote communities.

Of SCCQ’s 13 aged care homes, eight are in rural and remote areas, where staffing and housing are major problems – though he acknowledged these are issues in metropolitan areas too. SCCQ also has five retirement communities and delivers home care services in Queensland. Jason welcomes the Government’s commitment to fund an additional 9,500 Home Care Packages (HCPs), but staff shortages in rural and remote communities means delivering those services is going to be “a real issue”. SCCQ has opted to buy housing for staff in regional areas, so severe is the accommodation shortage.

“The Government’s done a great job, but I think we would say, we can’t forget rural and remote communities,” Jason said.

Jason would like to see the Government gain a deeper understanding of the issues operators face in the bush and welcomes the taskforce looking at increased consumer contributions.