The government has announced a major overhaul of the beleaguered aged-care sector that provides additional funding, means-testing and greater invest in in-home care to address the slowly developing crisis in the industry.

The key elements of the package, based on the Productivity Commission’s August 2011 report and consultations with the sector by Mark Butler, the Minister for Ageing, are:

  • A big increase in support for home care, with the number of funded home-care package increasing from 60,000 a year to 100,000, designed to reduce pressure on the nursing home sector. Home care packages will be means-tested (not including the family home) but there will by payments caps. There will also be more support for carers of people with dementia.
  • A rise in government accommodation support from $32.58 to $52.84 per day for new aged-care places, to address the lack of incentives to invest in new aged-care facilities. There will also be a means test and payment caps in place.
  • Greater flexibility in payment for accommodation, including a “cooling off” period once a place is secured, to put an end to fire sales of family homes
  • An additional $1.2 billion funding for the aged-care workforce while the sector transitions to more competitive wages for staff, who are currently significantly underpaid compared to other healthcare sectors
  • As per the PC’s recommendation, a new single information gateway website, with the ultimate goal of a site that will provide tailored, localised information, including ratings and performance information about facilities.
  • Dementia to be added to the current list of National Health Priority Areas.

The announcement was strongly built around assurances from the government — despite some bizarre media commentary overnight — that family homes would be safe and indeed safer under the new arrangements, which are scheduled to start in July 2014, than under current arrangements.

Labor has known virtually since it arrived in office that the aged-care system it inherited wasn’t sustainable. Workforce issues and the lack of incentives to build new facilities were creating skill shortages and real bottlenecks for the provision of places. The growing ranks of Australians with dementia has also been placing additional pressure on a system already in serious trouble.

Butler said today there’d be a review after five years to see how issues such as the “Workforce Compact” and the forecast expansion of places was going. The government has also adopted the PC’s approach of looking at all aged care as a series of points on a spectrum of needs, rather than separate sectors, and seeking to delay people’s transition into accommodation for as long as possible by increasing home care and support for carers.

While the bulk of the heavy lifting will be done through additional funding, means-testing will be the political sensitivity for the government. But for an opposition increasingly focusing on the reality it will confront if it wins next year, the temptation to exploit the government’s stance might be tempered by the realisation that it has little choice about trying to make the aged care sector sustainable.