Change in aged care places to cost more

The aged care reforms outlined in the National Health and Hospitals Reform Commission’s (NHHRC) recent report could end up costing $1.4 billion more than current projections by 2033, according to a report of the overall cost of the proposals, undertaken by the Australian Institute of Health and Welfare (AIHW).

The AIHW projection model placed no limit on the number of aged care places. It assumed that places would increase according to need and demography.

The model’s expenditure estimates implied an increase in the number of high care places between 2012–13 and 2022–23 of 38% and an increase between 2022–33 and 2032–33 of 44%.

The NHHRC recommends that the allocation of subsidised residential aged care and other aged care places increases proportionally with the growth in the population 85 years and over. This would increase the number of funded places by about 37% from 2012–13 to 2022–23 and by about 51% from 2022–33 to 2032–33.

The NHHRC proposal would save some expenditure as compared to the health and aged care projection model in the period 2012–13 to 2022–23 as the growth for funded places under the NHHRC proposal would be less than the projection model.

However for the period 2022–23 to 2032–33 the NHHRC proposal would result in more allocation to residential aged care expenditure than the expenditure projection model estimates.

This extra allocation to residential aged care will not necessarily be completely used, so the estimated higher cost of the NHHRC proposals of $1.4 billion in 2032–33 is an upper limit.

In 2022–23 the annual savings of the NHHRC proposals would be $519 million, but by 2032–33, the NHHRC proposals would be costing $1.4 billion more than the projection model estimates, assuming that the extra allocation to residential aged care expenditure implied by the NHHRC proposals is used.

The AIHW report is available at http://www.aihw.gov.au