It was a narrow escape, a damnably close run thing. It looked, briefly, like the press gallery was going to have to actually devote time to analysing a complex area of policy that resisted simplistic polarised reporting. Editors and producers were mortified that their journalists might concentrate on policy rather than personalities.

Luckily, the prospect of having to assess the government’s aged care package was averted by Peter Slipper, and we got to wallow in allegations of s-xual harassment and dissections of the implications of a Speaker standing aside for a minority government.

Which is a shame, because getting aged care right is one of the most difficult policy challenges facing us and Labor appears to have taken a significant step towards doing just that. Along with the Future of Financial Advice reforms, aged care is likely to be the most significant reform package Labor undertakes this year.

Aged care is one of Australia’s many hybrid industries: sectors with a significant or even dominant role for the private sector (in this case, both for-profit and not-for-profit), but which fundamentally depend on government regulation or funding, or both. Reform becomes a matter of translating government funding and regulation into market price signals.

But overlaid on its hybrid nature is the intense politics of aged care: there are few issues that generate stronger concern in the community than how we manage and finance the care of our elderly relatives who can no longer live independently. That’s one of the reasons the issue has been reviewed so often over the past decade, including last year by the Productivity Commission. And it’s an issue set to increase significantly as the population ages and baby boomers enter their twilight years.

The Commonwealth’s funding on residential aged care alone has increased by 46% since 2006, to $7 billion last year. And in that time, the health and caring sector of the workforce has become Australia’s biggest employer, and after mining its fastest-growing. Getting aged care right has major fiscal and economic implications.

Currently the price signals in aged care are wrong. There simply isn’t enough government funding available to make investment by private providers in new aged care facilities worthwhile, and there are limited options for extracting more funding from consumers. And the price signals in the workforce are wrong: aged care nursing pays less than nursing in other health sectors. The result is the sector struggles to attract staff and retain good ones.

The result is what happens when demand outstrips supply and pricing can’t adjust: queuing. That’s why it’s so hard to secure a nursing home spot and why families have to make rushed decisions about their circumstances for fear of missing out.

The government’s reforms treat the symptoms and the illness, if you like, of the undersupply: by massively increasing funding for home care packages, it hopes to reduce pressure on existing nursing home places, by keeping people in their own homes for longer. It is also providing (a little) more support for carers and quite a bit more support for people caring for dementia sufferers. Dementia will now become a national health priority, along with a range of chronic diseases and cancer, that inflict major costs on our health system.

And it is significantly increasing funding for nursing home places, to dramatically lift the incentive to build new aged care facilities. It is also investing over a billion dollars in trying to improve the attractiveness of aged care nursing remuneration, while the sector works out how to achieve a long-term solution to its workforce needs.

But to supplement public funding, the government will also tap the one other source of funding available: consumers. Means testing will be introduced for home care packages and residential care funding, albeit with expenditure caps, and with the family home exempted from the means test. As Tony Abbott rushed to point out on Friday, that means some people entering aged care facilities, or their families, will pay more than they would currently. In fact, that’s the entire point. There’s no magic pudding. Either the government pays for it or consumers do, and in particularly consumers who have a greater capacity to pay.

It’s also investing in a new one-stop information gateway to make it easier for people to obtain relevant information about local options available to them, with the intention that eventually you’ll be able to see performance information such as complaints data about each institution. It’s the extension of the MySchool approach to aged care — it is already being extended to hospitals via the government’s health reforms — with the intention that people should be able to obtain objective data about services they use before making a decision about them.

The aged care sector has been on an unsustainable footing for years — one of the reasons it had been reviewed so often. The crisis point was reached on Labor’s watch. To the government’s credit, it has taken a major step in the right direction, and consulted the sector widely before moving. It could have gone further — for example, by including the family home in the means test — but that would have entailed significant political risk. And in an environment where the media’s interest in good policy is at the lowest point ever, it’s understandable that it shied away from doing so.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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