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Economist discusses his 2004 report on aged care.

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Monday, 15 May 2006


FRAN KELLY:  Treasurer described last week’s budget as an investment for the future but those working in the aged care sector take a different point of view. They say that Budget took a very short-term approach to the future of our senior citizens: the Budget focused on improving staff skills and security for nursing home residents. What the aged care sector is critical of though is the lack of any major investment in the industry’s long-term sustainability.


In the past two budgets, the federal government has allocated funding in response to the 2004 Hogan pricing review into aged care. That review recommended major changes, including the introduction of a voucher system for services, nursing home bonds, and the auctioning of beds. Warren Hogan is the author of that report and he’ll address a forum in Canberra today which is organised by the National Aged Care Industry Council. He’s an Adjunct Professor in the School of Finance and Economics at the University of Technology in Sydney and he joins us this morning from Canberra.


Warren Hogan, good morning.


WARREN HOGAN:  Good morning.


FRAN KELLY:  Warren, you’re not happy with the measures for aged care in the Budget. What’s wrong with them?


WARREN HOGAN:  Well, it’s not so much what’s in the Budget but the issues really are the strategic provisions in terms of the growth of this industry because the essential focus one has to have is the enormous increase in the proportion of the elderly in the population over the next few decades and it’s really quite hard upon us in the next few years. So the critical feature is really to get investment in the growth of capacity in residential and community aged care facilities.


FRAN KELLY:  And that’s in line with some of the recommendations you made in 2004 but those recommendations have not yet been adopted. Is that the problem?


WARREN HOGAN:  Well, the issue’s strictly that. It’s a question of the commitment to a changed strategy and the issue of how it’s going to be funded. Those are the quite critical issues.


FRAN KELLY:  One of the suggestions you made was nursing home bonds. I thought we already had accommodation bonds for nursing homes?


WARREN HOGAN:  We have accommodation bonds in low care, which is the old hostels, and the high care is divided. In the standard nursing home, ordinary high care, you do not have accommodation bonds. But in extra service high care, you can have it and that is where the extra service is provided in response to the ability of people to pay for it. It is really quite ironic that governments are in a position where those people who have the assets can actually pay for extra service high care by providing accommodation bonds but the people who cannot particularly—the concessional and pensioners and part pensioners—don’t get that support. So of course, basically, there is not the incentive to build the capacity in ordinary high care as there is in every other facility.


FRAN KELLY:  So if you followed your suggestion though and allowed accommodation bonds in the high care, would you end up with what people blithely dismiss as a two-tier level of care? You know, one standard of nursing homes for the rich and a lower standard—and of course we hear some horrible stories about some nursing homes—for the poor.


WARREN HOGAN:  No, not at all. In fact, the proposal to have accommodation bonds in ordinary high care is in fact a reverse of that. At the present time, you’ve got that element of discrimination, so what one is wanting is to get rid of that.


FRAN KELLY:  You’re arguing these days—post 2004—for no government involvement in the process of establishing vying for beds and working out the funding systems. What do you mean? How could you leave it to the market and make sure everyone is protected?


WARREN HOGAN:  Well, at the present time, you have a system which is not providing enough beds for those people in need. You have a queuing problem with those who are sick in residential aged care, hence the allocation system is not working effectively. It is totally opaque. Nobody knows how the decisions are made and that is certainly open to serious question.


And our auction system, which is what I’ve recommended from the report , actually of course takes funds out of the aged care sector when you’re wanting to put as many funds into it as possible. So it’s much wiser to actually leave the decisions to those people—the boards and management of a facility—so that they can actually build the things. And then as far as funding goes, well, the funding should be attached to the users of facilities. They can go to the aged care provider and say: this is what we’ve been provided for by government support; what have you to offer? In that way, you strengthen the position of the users of these services, unlike the present situation, where they’re utterly beholden to what takes place.


FRAN KELLY:  Okay, Warren, thank you very much joining us.


WARREN HOGAN:  Thank you very much.


FRAN KELLY:  It’s an area, of course, where we need everyone’s ideas, especially as we look to our aging future. That’s economist Warren Hogan, author of the 2004 review into aged care.