The looming crisis means Fresh Zealand must rethink how it funds aged care

Latest motions submitted to parliament Health Commission makes one thing clear: Fresh Zealand’s aged care sector is facing a crisis.

This crisis is focused on the funding and staffing of aged care homes (ARCs) and home care and support services.

But the government doesn’t have to look far to solve the problem. Australia has changed the way it funds the sector, calling on wealthier members of society to pay a fairer share of the costs.

Fresh Zealanders in nursing homes

Last year, an estimated 32,000 people lived in residential aged care. The government’s means-tested residential care grant covers most of the cost of care for those who qualify – about 63% of ARC residents.

The ARC subsidy eligibility threshold is total assets of NZ$284,636 or less for a couple aged 65 or over. Fresh Zealand Superannuation, the universal age pension, pays the rest and provides a modest weekly expenses allowance.

Those with assets above the threshold pay for their own care, increasingly in “care apartments.” These beds, available only to those who can afford the cost, reduce what is available to subsidized residents, which creates equity issues.

In 2022/23 Health NZ contributed $1.352 billion to ARC providers. Resident fees contributed a further $1.1 billion.

During the same period, about 80,000 people over age 65 with social service records or chronic health conditions used home support services (at a cost of $2 billion). These services included personal care, cooking, cleaning and respite care. Personal care services were not income or asset tested.

Elderly care overview

In July 2023, Health NZ launched Funding Review and models of elderly care services.

The aim of the review is to make recommendations that will ensure equitable access and outcomes for older people across Fresh Zealand, while balancing the need to implement a cost-effective system.

The first phase of the review was completed in tardy December 2023. report Five key issues were identified and there were no surprises:

• residential care services for older people and home and social support services are underfunded
• the financing models used to distribute funds to the sector are not suited to the intended purpose
• there are material ethnic inequalities in access to eldercare services
• the aged care sector continues to face significant staffing pressures
• Aged care issues are more solemn in regional and rural Fresh Zealand.

Phase two involves developing recommendations for service and financing models that will lead to a more integrated model of care, proficient exploit of resources, and regulatory and financing systems that are fit for purpose.

Despite the government claiming $1.4 billion in savings under Health NZ, Seniors Minister Casey Costello says the government we do not intend to cut spending on elderly care.

A recent survey found that 56% of respondents’ ARC establishments made a net loss in the 2022/23 financial year.

Insufficient funding has caused some nursing home providers to reduce the number of ARC beds in their facilities. Many smaller providers have closed beds or shuttered their doors for good.

In addition, an acute shortage of registered nurses will see more than 1,000 beds closed permanently and 1,200 closed temporarily in 2023. It is no wonder that Health NZ estimates a shortfall of 12,000 residential care beds over eight years.

But underfunding the sector is clearly a false economy. The cost of hospital-level care in ARC facilities is less than a quarter of the cost of a bed day in a public hospital medical ward.

As Aged Care Commissioner Carolyn Cooper says in her statement: last report:

A key problem is the lack of a specific strategy and planning that takes into account the health needs of an ageing population.

Common crisis

The aged care crisis is not confined to Fresh Zealand.

The Australian government has just completed sector overview and adopted 23 recommendations of the Task Force on Care for the Elderly.

One of the more significant changes is the requirement for wealthier people to contribute more to overall costs, rather than relying on taxpayer subsidies.

The urgency of this change comes from the fact that more than half of all residential aged care facilities in Australia are not financially viable. Providers need sufficient revenue to cover the costs of providing services. Every facility that closes reduces the availability of residential aged care for the elderly.

The Australian Government will continue to cover 100% of the cost of clinical care services, while increased means-testing arrangements for daily living costs and non-clinical care will ensure that people with assets are able to self-fund their care.

Taxpayer funding will ensure that people without assets have access to the care they need.

These changes will improve the financial health of healthcare facilities and also improve intergenerational equity by reducing the burden on taxpayers.

An impossible burden

Fresh Zealand could learn from Australia. NZ Statistics It is predicted that by 2028 the percentage of people aged 65+ will reach 20% of the population. Within four years, there could be 30 people aged 65+ for every 100 people aged 15–64.

Older people are recurrent users of health services, and most care and support for older people is currently funded by taxpayers. Without a change in the funding model, working-age citizens will face an increasingly weighty burden.

The sector review must ensure that wealthier users of aged care services contribute adequately. Intergenerational equity must be considered in any redesign of aged care provision.