Elections stall reform. Two years ago Treasurer Peter Costello released the Intergenerational Report outlining the costs of an ageing Australia and calling for a funding shift away from the public purse. This year he delivered an aged care budget focused on the bread and butter costs of delivering services through public subsidies. Almost as an aside the government published the findings of a $7 million inquiry into the pricing of residential aged care services. In a far reaching analysis it calls for greater deregulation, stronger market forces and increased user charges. Such mixed signals lead one to wonder whether the Commonwealth is pulling back from shouldering its share of the cost of aged care.
The Federal Budget response to the aged care crisis was driven primarily by the proximity of the election. It became imperative for the Howard Government to fund its way back into the hearts of older Australians. With a departure from its previous ‘slow drip’ formula, the government delivered a funding package of $2.2 billion over five years. It concentrated on the two hot political issues—the construction and running costs of aged care homes. In both instances public investment is substantial and the politics savvy.
The government went into this year’s budget preparation hounded by all quarters over the erosion of its care funding subsidy, its lack of action on capital funding and the declining prospects of the aged care workforce. Research indicated that the running costs of homes outstripped the subsidy by around $250 million a year. The homes protested that they lacked an ongoing capital funding stream. Nurses complained of inadequate wages and strained working conditions. In all a recipe for a crisis and fertile ground on which the Opposition could capitalise. The pressure to invest more public money was overwhelming.
With one eye to its future outlays, the government spent to alleviate the short term angst whilst safeguarding any exposure to long term entitlements. The upshot is an immediate capital injection of $636 million for the next two years. This should stimulate investment and kick start stalled construction. It does not, however, provide an ongoing adequate capital stream for the medium term. By implication the government retains the option of extending user fees and lump sum payments to cover accommodation costs.
This uncertainty will need deft political management. The aged care industry is serious business. Significant commercial risk is borne across the sector. Church and corporate organisations alike