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Provider subsidies to be tested.

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Warwick Smith, MP

Minister for Family Services * Federal Member for Bass


1 July 1998




Federal Family Services Minister Warwick Smith today announced that an evaluation of the relative funding subsid ies provided to nursing home providers throughout Australia is to be conducted by the Productivity Commission.


“This review is another step towards repairing the damage inflicted upon our aged care industry through 13 years of Labor neglect. Unlike the Labor Party, the Coalition continues to listen and act in the best interests of aged care recipients. The Government’s goal remains the provision of quality, sustainable aged care,” Mr Smith said.


“It is necessary to consider whether it is appropriate to have differing subsidy rates across Australia; do these relative rates have implications for the quality of care; and is there justification for the differential rates which presently exist?”


The comprehensive review will be conducted by the independent Productivity Commission over a six month period and a full public report will be issued following the commission’s work.


“The Government gives the commitment to all Australians that it will consider and respond to whatever the Productivity Commission finds,” Mr Smith said.


Aged care subsidies provided by Australian taxpayers for the 132,000 Australians in aged care facilities will this year exceed $3 billion.


“This review is another example of the Coalition doing what Labor never would—giving an important Australian industry a fair go,” Mr Smith said.


Contact:  John Wilson, 02 6277 7240, 0412 437 317.





Nursing home subsidy rates currently differ across States and Territories, with a large component based on historical variations in wage rates for nursing and personal care staff.


The Aged Care Structural Reform Package, announced in the August 1996 Budget, included a process of "coalescence", under which the different nursing home subsidy rates in States and Territories would gradually move to national rates over a period of 7 years, commencing from 1 July 1998.


The Government has now decided to delay the implementation of the coalescence process, pending a review by the Productivity Commission into differential subsidy rates. The Review will examine whether the proposed coalescence should proceed or whether it should be replaced by an alternative structure. The Inquiry should examine the current and alternative funding methodologies and report inter alia on:


* relative costs between States and Territories of providing nursing home care, with an emphasis on the relative wage costs of nursing and personal care staff;


* trends in wage costs and likely fut ure directions;


* the extent to which, if any, subsidies for nursing home care should vary by State and Territory; and


* if differential subsidies are considered appropriate, possible methodologies for maintaining appropriate relativities over time.


The Inquiry should make recommendations on the appropriate funding methodology and take account of the views of the sector. The report should be completed within three months of commissioning of the inquiry.