Speech to the Committee for Economic Development (CEDA)
Aged Care briefing
Melbourne, 31 March 2014
**check against delivery**
Firstly can I thank CEDA for the leadership it has provided in giving a platform not just for economic policy debate, but also for social policy.
CEDA is one of the oldest and most important forums for the promotion of good policy in Australia. And I appreciate this opportunity.
Could I acknowledge our host, the State director of CEDA, Michael Camilleri.
And also the Chair of CEDA, Professor the Hon Stephen Martin. A distinguished former Speaker and frontbencher. Stephen is the example par excellence of an ongoing and non-partisan contribution to public policy in post-political life.
As a minister in this government I have three pretty easy jobs. Introducing the National Disability Scheme. Reforming aged care. And, as Manager of Government Business in the Senate, taming the upper house.
I was asked recently what being Manager of Government Business in the Senate actually meant. I answered, that I’m essentially the Senate’s answer to Christopher Pyne.
Disability is an area I shadowed from 2009 and, at my request, have continued to have carriage of in government. And I love it. Because I can’t think of another area where it’s possible to make a greater improvement to the quality of life of other Australians.
But I have also been fortunate, in Government, to have added the responsibility for ageing and aged care which I see as one of the great and sacred trusts in public life.
This bringing together of disability and ageing, under one minister, was part of the creation of a new department and the new portfolio of Social Services.
This combines the former FaHCSIA – less indigenous affairs – with ageing from Health, disability employment and working age payments from DEEWR and settlement services from Immigration to create the lead Commonwealth social policy agency.
With Kevin Andrews we are responsible for around a quarter of the Commonwealth Budget around $115 billion dollars. More than the combined budgets of New South Wales and Victoria.
For me, the stuff that is our portfolio is the core business of government. And my corner of the portfolio is the core of the core – assistance to people who face extra challenges for reasons beyond their control. This is why we have governments. This is why we pay taxes.
And disability and ageing have some similar challenges in terms of workforce demand and the inexorable move towards consumer directed care.
But there are also differences.
And the primary one is that, in the main, you can plan for getting older whereas, mostly, non-age related disability is something that you are born with or acquire in circumstances that are hard to predict.
That means a contribution, where you can, for your care is a more reasonable expectation in ageing than in disability. This, in ageing, is where the rubber hits the road.
I do hope my remarks here today can help propel the national conversation on aged care forward. Later in my speech I will outline how despite the significant changes coming into effect on 1 July, as a country we are far from finished when it comes to reform in this area.
For this to occur we need to have an honest and open discussion about what our ideal aged care system will look like, and how we get there.
An Ageing Population A great challenge to have
At the outset, let me tell you how I see the ageing portfolio and the people it serves.
Australia’s ageing population represents an asset that has yet to be fully tapped.
The 2011 census showed that over 3.7 million Australians (16%) are over 65 years; more than 420,000 people (1.9%) are over the age of 85. And by 2050 it is estimated that around 23% of the population will be 65 and over.
But the figure that most stunned me when I came into the portfolio was that there were 3,485 Centenarians in Australia. And that by 2050 there will be over 50,000 Centenarians in Australia.
The experience of an ageing population is a vast resource the nation needs. The good news is older Australians see for themselves far more active senior years whether in retirement or work.
As full time workers become more time poor, seniors will play an even more important role in running many voluntary organisations. This also provides a great mentoring opportunity for younger Australians.
We too often here about the ageing Tsunami and the challenges this heralds.
But you will never hear me couch our ageing population in such terms. It’s a resource. It’s an asset. And it’s a situation that western economies have been striving for to live longer. What a great problem to have.
Population ageing is also changing the ratio of working-age to retirement age Australians. For each older person in 2007, there were five ‘traditional’ working-age people (15-64 years) while in 2056 there will be less than three ‘traditional’ working-age people for every older person.
This change is opening up opportunities for older people to continue participating in the workforce.
To harness this national resource we need to develop a more positive attitude to ageing, to seniors and to people who face extra challenges. We should never limit older Australians through low expectations.
As a community we also need to ensure that when older Australians need more support it’s provided to ensure dignity and quality of life.
This is where my portfolio kicks in. And I must say in this area we can learn much from Australians of different heritage.
There are two major risks we face if we don’t get aged care policy right.
Firstly, we risk failing to provide quality care for older citizens who have worked so hard and contributed so much.
And secondly, we also risk doing serious damage to the Commonwealth coffers if we can’t properly target government investment in aged care.
Social Policy vs Economic Policy
As much as I hate talk of the ageing Tsunami I hate even more economic and social policy being spoken of as in conflict.
They are not alternatives. They are two sides of the same coin.
No country can sustain a good social policy without a good economic policy.
Now by the by, tomorrow will mark for me, ten years in the Australian Senate. If you could ignore that I entered the Senate on 1 April, that would be appreciated.
But before the Senate I had the privilege to work in Treasurer Costello’s office for eight years.
And it was really Peter, through his first landmark Intergenerational Report (IGR), who brought the ageing population into focus, but also sought to remove that distinction, that false dichotomy, between economic and social policy.
As the Treasurer said at the time, this “was the first long term view on the Australian economy and the challenges we face” and said ‘It was a road map to our future…”
And he put the three P’s on our economic and social agenda – Productivity, Participation and Population.
It’s sobering to read what the original report saw as our key challenges. And the same pressures exist today as they did back then.
– demographic pressures;
– funding pressures;
– financial and capital pressures for the sector;
– the need for greater choice, innovation and efficiency;
– inadequate information for older Australians, their family and carers; and
– workforce pressures.
The scope of the aged care sector is vast and, in aggregate, there are significant resources.
The aged care system comprises 1.1 percent of GDP, 2.5 percent of the Australian workforce and 3.5 per cent of government expenditure.
The Australian Government’s contribution accounts for $13.3 billion.
Consumers also make a significant contribution outside taxation to the cost of their living expenses, care and accommodation. People needing aged care paid around $4.6 billion last financial year.
Providers hold over 65,000 resident bonds with a total value of another $14.2 billion.
This is a sector totalling $32 billion.
And the aged care sector will grow almost doubling as a percentage of GDP by 2050 and the aged care workforce will need to more than double to around 827,000 by 2050.
As the ageing population grows so will the expectations of older Australians about what their lives and their care will look like.
Consumer as King
The 50+ Report released recently by COTA NSW found people over 50, not surprisingly, want to assume more control over their lives.
The image of aged care is typically all about residential care.
Many people are surprised to know that only 5 per cent of Australians aged 65 years and over live in residential aged care and that the average age on entry to residential care is around 82 years for men, and 84 years for women.
70 percent of Australians 65 and over live at home without accessing aged care and 25 percent access home support or home care.
Older Australians are not all the same.
Grouping all Australians aged 65 years and over into one category spans an age range of almost 40 years – similar to grouping Gen Y’s and Baby Boomers into one population.
Let’s remember our 85 year olds were born in the year of the Great Stockmarket Crash
– had their lives shaped by World War II;
– and grew up enduring the hardships of post war rationing.
A 65 YO was born the year Menzies regained office;
– was the first generation to grow up on television; and
– was probably front row at the Sunbury Music Festival.
One group, instilled with a work ethic borne from a period of deprivation, helped to build the post war foundation.
The other rode a period of great social and political change culminating in a more informed – a more consumer led society.
So when I’m asked what will ultimately drive reforms in this sector:
– Government policy?
– Fiscal pressures?
The key driver for reform will be consumers themselves.
The old retail maxim ‘the customer is always right’ is being discovered more and more by government and policy makers.
We should be increasingly looking to the consumer interest in policy debates.
Consumer choice drives competition. Competition isn’t code for the lowest common denominator.
Competition drives innovation. It drives new service delivery. It drives new modes of thinking.
Ultimately public and private dollars need to follow the person rather than the provider.
With information and advice from families, professionals and carers, individuals should be able to decide how to spend their dollars.
This is what we are doing in the NDIS. Aged Care should be no different.
Dollars should follow needs. Care should follow choice.
Consumers just want the same information they would seek for any other service or purchase.
The Government’s My Aged Care gateway will assist this consumer empowerment.
– information on aged care;
– support for consumers to find services in their local area; and
– referrals to assessment services and service providers.
From May 19 this year consumers will be able to find and compare the cost of accommodation from any provider though the gateway.
For Aged Care providers to grow and flourish, a ‘Consumer First’ approach; with choice and flexibility will help businesses to be competitive.
This is why bedding down the funding changes on July 1 is so important for providers, consumers and the sector as a whole.
Currently providers seek lump sum payments – accommodation bonds – from low care residents and are restricted to only capped daily payments in high care.
From July 1 restrictions on high care prices will be removed so that providers will be able to receive both lump sums and daily payments in high care and the capping on daily payments will be removed.
All residents of aged care facilities will have the choice to pay either a lump sum payment;
– a refundable accommodation deposit;
– or an equivalent daily accommodation payment;
If they elect to pay an accommodation deposit it is fully refunded when the person leaves the residential care facility.
Providers have the flexibility to set their accommodation prices at a level which will give the same income flow they currently receive.
A number of service providers have expressed concerned about the impact of some of these changes.
Particularly, that more people will elect to pay a daily payment rather than an accommodation deposit, and this will impact their viability.
KPMG modelling conducted for the Aged Care Financing Authority has predicted the reforms will have a significant positive impact for providers in aggregate, with a net increase of $3 billion in lump sums for providers in the first year.
This is about providing greater choice for consumers while ensuring a viable industry.
At the same time the supplement the Government pays for residents who need assistance to pay for their accommodation will increase from $32.58 to $52.49.
This will be paid to aged care homes that are built or significantly refurbished from 20 April 2012.
We are asking consumers who can afford to contribute to their aged care, to do so.
We are also asking providers to offer greater consumer information and choice.
Change and reform in the aged care sector has historically been difficult.
The work of the Productivity Commission served as something of a circuit breaker. I agree with the Productivity Commission on the need to strike the balance between individual responsibility, taxpayer affordability and a safety net.
The changes that have recently happened and those that will happen on 1 July were legislated before my tenure. No minister in an incoming government starts with a clean slate. If I had been minister at the time of legislating, some things may have been different.
But in the broad what is happening is a step in the right direction. I will, however, be monitoring the real world effects on providers and consumers closely.
I won’t feel defensive or proprietorial and I won’t let design elegance get in the way of adjustments being made where they might prove to be necessary.
However, we cannot have the next conversation, the next reform, until July’s changes are bedded down and lessons learnt.
The sector asked for reform, and that means changes to business strategies, to prices, to services, to the workforce.
Make no mistake, the consumer voice will be heard. There will inevitably be a rebalancing from residential care to home support and fewer low care residential settings. And some providers will look at what is their core business. Will they provide both care and accommodation or decide their strengths lie in one area.
If we don’t effectively implement these reforms now we will lose the chance for another generation.
In all this, government can be a facilitator or a frustrater through the inertia and incremental strangling by well-intentioned red tape.
We are determined to make a difference.
The move to cut red tape includes the repeal of aged care certification requirements which duplicate states and territory legislation.
Rules governing building standards are being administered by state and territory governments, which aged care providers are required to meet.
Certification duplicates the ongoing work of state and territory governments in regulating and inspecting buildings.
We have also announced a simplified accommodation pricing system for residential aged care that requires less prescriptive detail on offerings.
These are early down-payments to demonstrate that we are serious about cutting unnecessary administrative requirements.
There is more to do in red tape reduction.
Without compromising safety there are many things we can look at:
– simplifying and reducing applications;
– accreditation and inspections;
– monitoring and compliance; and
– extending approvals.
None of this however should be, or will be, at the expense of quality.
I want the sector to see quality not as a hurdle but as a differentiator, a way to promote your service to an ever more informed consumer.
The Reform Road – Unfinished Business
I hope that I have outlined for you today both the challenges and opportunities presented by the ageing population.
The reforms which come into effect on 1 July represent significant change for the aged care sector.
But they are only the first step in a much longer reform road we must all travel.
There is more work to do if we are to meet increasing demand over the next few decades within a sustainable funding framework.
Like disability, aged care enjoys a certain degree of bipartisanship on the need for reform.
After all, the 1 July changes were legislated by a Labor government and will now be implemented by a Coalition government.
I hope this means we can all contribute to an honest and productive debate about what change is needed and how it can be implemented without getting bogged down in the day-to-day political ruckus.
It’s important that we can do so, because reform of this magnitude requires long-term thinking.
I look forward to working with aged care providers, consumers and all levels of government to evaluate the impact of the 1 July changes, identify further reforms needed and then to make those reforms a reality.
We all have a stake in getting this right.
Longevity is to be celebrated.
As I said at the outset, our aged care system is world class.
Countries including China, Japan, Vietnam, and Sweden have sought Australia’s advice on aged care.
Consumer focus will yield the personal and economic benefits of independence, wellbeing and control of life and ensure a viable aged care sector.
So that Australia will remain a good place for a long life.