THE HON MARK BUTLER MP Minister for Mental Health and Ageing Minister for Housing & Homelessness Minister for Social Inclusion Minister Assisting the Prime Minister on Mental Health Reform

Speech delivered at CEDA (Committee for Economic Development of Australia) conference: 2013 Aged Care Review

3 April 2013 Adelaide

[Acknowledgements excluded]

It's a great pleasure again to speak at a CEDA function about aged care. I've spoken at a couple of these over the last 12 or 18 months I think as we've been preparing our aged care reform package. And I do want to take the opportunity to give a quick update about where we are, particularly with some of the major elements of the package.

Before I do that, I want to address the question of ageing. This is a word that's entering the political and policy lexicon as a major driver of national politics, a major driver of national politics here in Australia. But also increasingly, as you look at particularly Europe as European countries, most recently Cyprus, get into significant fiscal and economic difficulties, right at the core of their troubles, I think is a question of their degree of management of demographic ageing; some of the spending and revenue implications, particularly, of demographic ageing.

Like pretty much every developed country Australia is going through an extraordinary demographic tilt at the moment. Two years ago in 2011 the first of the baby boomers turned 65, the age which for a hundred years now we've recognised at least as the male entitlement age for the pension.

Just to give that some perspective, five or six years ago on average about 40,000 Australians reached 65 every year. From 2011, that jumped up to 140,000 and will remain in the area of 120 to 140,000 for the next 20 years. So, every year now about 100,000 people additional to the very long term average of the recent decades - are reaching pension entitlement age.

You don't have to be a Rhodes Scholar mathematician to work out the spending and the revenue implications if people follow the traditional path at 65; to move out of work, earning wages and paying income taxation, and on to the aged pension as the vast bulk of over-65s traditionally have done.

But what is happening is that more and more people as they reach 65 are not doing that. What we've seen over the last decade is extraordinary growth in the number of people in their 60s - and 70s for that matter, but most notably their 60s - choosing to continue to remain in the workforce.

Partly that is due to a big hit that they had taken to their retirement incomes in 2008 and for the following couple of years after the GFC. But what we're seeing in our research is that people increasingly in their 60s are indicating that they want to stay in the workforce.

COTA, the Council on the Ageing, did some research recently that indicated that as many as 60% of people approaching sixty-five want to stay working beyond sixty-five. Their capacity to do that is another question which I'll come to in a sec, but that level of willingness is quite a signal change to the traditional path Australians have taken as they reach their 60s.

If you have a look at the last decade, the Australian workforce has grown by about 20 or 25 per cent, about 2.5 million over that period. The number of Australian women in their 60s working has grown by 200 per cent as opposed to the overall growth of 25 per cent. The number of men working in their 60s has grown by about 130 per cent.

So the growth in the workforce that we've seen continue over the last decade has been disproportionately contributed to by people, particularly the early baby boomers, reaching that pension age and choosing instead to stay in the workforce.

Now, matching those expectations or those desires with reality in Australian workplaces is a significant challenge. We still have, I think, quite an endemic culture of age discrimination in Australian work places. And that is not a discrimination that kicks in at 65. Research shows that discrimination is starting to kick in as early as 45.

But we all know that you can't simply legislate away from Canberra or even North Terrace, a very deeply rooted culture like that. It's going to take very significant community effort to change that culture and to make Australian workplaces more welcoming to the wisdom, the experience and the skills that older Australians are able to contribute.

The Human Rights Commission did some research they published a year or two ago that showed that the average mature age worker in Australia is worth about $2,000 extra per year to their workplace compared to their younger equivalents because they have lower levels of absenteeism and they had higher levels of retention, leaving aside all the extra skills, experience and wisdom that they've accumulated over a long life time of work.

Those numbers I talked about, the jump from about 40,000 a year to about 140,000 a year turning 65 means that for the first time in Australia's history there are more people turning pension age than there are turning working age.

Without immigration and without that increased workforce participation of people in their 60s, we would have a shrinking workforce in Australia; something that began to afflict Japan in the mid-1990s, which, they haven't been able to shake since, and a very significant reason why Japan has been in numerous periods of recession during that period of time.

I do want to take the opportunity to give a quick report on where we are with our Living Longer, Living Better reform package. This is a package I have spoken about at a couple of CEDA lunches before, so I'm not going to talk about the reasons for bringing that package in or the process, the very, I think, deliberative process that we followed in developing that policy that was released in April last year. It was a process very much driven firstly by the Productivity Commission that did a very comprehensive inquiry, draft and final reports over a couple of years. But also the sector itself, providers, consumer groups, aged care unions, clinicians groups, came together in a way I've never seen before under the rubric of the National Aged Care Alliance, and said to the Government and to the Parliament, really with one voice, what the major building blocks of aged care reform should be. I have to say from the position of being a parliamentarian and minister, that is so much easier to deal with than the sort of position I think we've seen in the aged care sector in the past in 1997, and to a lesser degree in 2004 when the sector did not speak with one voice about what those major building blocks of reform should be.

So since April last year when we released the Living Longer, Living Better reforms, we've been working pretty furiously at implementation, and I want to talk about some major milestones that we've got to over that period of time. The first, and frankly, the politically most controversial aspect of reform over the last two decades has been changing the system for accommodation charging - what was called in the political lexicon "high-care bonds" in 1997; abolishing the distinction between low-care and high-care places that would allow a single system of charging that reflected the cost of capital, or the return on investment which aged care providers require to continue to build new aged care facilities.

We have decided once and for all to abolish that old distinction between high and low-care, and to create a far more flexible system of accommodation charging that I think works for providers and also for consumers. As a matter of process, we have - effectively kicked this question off to a new body called the Aged Care Financing Authority, that is made of up provider and consumer reps, but also of very significant finance sector reps. The deputy CEO of the National Australia Bank is a member of the financing authority, some independent directors, but also someone from the equity finance sector; a very significant group of people who for the first time will transparently provide advice to the sector, and then to the Minister about how those financing reforms should roll out.

Where we have got to on this is, as many of you know, that I've published a determination before Christmas that would see the new aged care accommodation charging arrangements work like this: there will be three tiers of charge that are able to be levied. The first, which will not require any process, will be up to $50 a day or about $240,000 in a lump sum.

The second tier will require some self-reporting or self-disclosure by the provider about the way in which a second tier of charge is justified, and that will be between about $50 and $85 a day, or a lump sum equivalent of $240,000 to I think $406,000. And then a third tier which will require preapproval again based on conditions, that will be over $85 a day or over $406,000.

This third tier is currently not a significant percentage of the bonds held in the aged care sector, but it very clearly came through the community, that they wanted a more transparent idea of the connection between the value of what they were being charged and the quantum. We're in the process of finalising draft guidelines about that second and third tier, and we'll be going out to the sector very shortly to consult with them about that.

We've also for the first time given, effectively, a cooling off period for consumers to have a very clear choice about whether they pay those charges on a periodic basis, or a lump sum basis, or what I suspect will happen in many markets in Australia, a hybrid approach, which will see people pay a lower bond and a daily charge that supplements that, which is effectively the system we currently have with retention payments.

This will be much more flexible. It will allow people to draw down on their lump sums not only to contribute to the cost of their accommodation, but potentially to pay for additional amenities and services as well. And I'm confident it will work much better both for providers and consumers than the current system.

The last thing that people may have caught up on since I have introduced the bills into Parliament, that we've done in this area, is we've decided to shelve the recommendation the Productivity Commission made that we require providers to take out insurance on their bond holdings as well, which I think as we drilled down into that recommendation a little more deeply, we found quite significant problems not only for providers but because the cost would be passed onto consumers.

The second milestone I particularly want to talk about is the new system of home care packages. We've made a number of changes here which will take effect on 1 July. They are firstly that we're introducing four new levels of care package that I think will allow people more seamlessly to move through the system as their care needs progress. We've made them - all the new packages - consumer directed care packages for the first time.

This will not be a revelation to many providers in South Australia, because I think South Australian providers really have been the drivers of the consumer directed care model around the country, and we rely very much in the design of the packages that will operate from 1 July on many of the things that we've learned from the pilots that have been conducted here in South Australia by a number of the providers I know are represented here at lunch.

So this is a very exciting initiative I think. More packages, packages that are designed to meet more variable needs of people, and packages that for the first time will truly be consumer directed. So this is something I'm very excited about and I know the sector, whether you're providers or consumer reps, are very excited about as well.

I can't tell you exactly what the results of the ACAR, the Aged Care Approvals Round, have been. We're working through literally tens of thousands of applications now, but in the past several years we've tended to get 10 or 12 applications for every package we've put into the market. That was exceeded by a very significant factor again in this event. So you'll get a sense of the enthusiasm, I think, with which providers have embraced this new system of home care packages.

The third thing I quickly wanted to mention was a renewed focus on dementia. Dementia, I think, will be one of the most significant health challenges for this century. The prevalence numbers are truly startling. The numbers will double every 20 years until we make very serious inroads into our understanding of the condition and our ability, if not to cure it entirely, then at least to defer it by some years.

What we've tried to do is really lift the profile of dementia in the broader community, in the health sector, acute care sector, primary care sector and aged care sector as well. This has been greatly assisted by Alzheimer's Australia putting Ita Buttrose on as their national president, one of the great communicators in Australia, and I think we've made some very significant inroads in a short time to put dementia on the first page of the list of things that health professionals and aged care professionals are having to deal with.

There are a range of elements in the Living Longer, Living Better package that we're currently working on, particularly with Alzheimer's Australia to roll-out. They're not particular to aged care entirely. They also deal with the way in which people with dementia are cared for in the hospital system and in primary care, particularly around diagnosis times, but I think they are going to make a very significant change to the lives of the 310,000 or so Australians who are currently living with dementia and to their families.

I've also talked to a number of you about the workforce elements of the package, which were rolled out now some weeks ago. The package in its essence, the conditions that are required of providers and the idea of a workforce supplement, reflects exactly the provisions of the NACA Blueprint that were given to me, to the Opposition and to the Greens Party in about February last year; a blueprint that was endorsed by the peak provider organisations and many of the larger providers themselves.

I think people recognise that, in thinking about aged care policy, the challenge of getting workers with the right qualifications in the right numbers into this sector is probably the thing that keeps you awake most at night. The labour supply that we're going to require in the future is again truly startling. We currently have about 350,000 people in the sector. In the next few decades we're going to need almost a million to the point where one in twenty workers in Australia will be an aged care worker, and if we don't deal with some of these supply problems we have - it's not just about wages, but significantly about wages - then we really are going to struggle, I think, in the future.

The last thing I want talk about, I guess, is process. As many of you know, I introduced legislation to Parliament a few weeks ago. We will get back to that when we get into sitting in May and I'm still very confident we're going to be able to get that legislation through before Parliament rises in June.

This is important particularly for the commencement of a range of things on 1 July, notably around the planned care packages. So, that process is still very much underway. In the meantime, as many of you will have picked up, there is a Senate Inquiry that will start in that period between now and the Budget session in May, and I think the Senate Inquiry has already opened submissions.

There are a range of other things I haven't been able to touch on that we are continuing to work on. There is a very significant part of the package directed at trying to mainstream the idea of advanced care planning, not just in aged care settings but in broader primary care and community settings; getting end of life care or palliative care capacity, again in aged care settings but in broader community settings as well, something that I'm very passionate and excited about us being able to do.

There are a range of other programs in the package that are in the process of being called for and assessed by the Department; better connections between primary care and hospital care and aged care settings, just to name one.

In closing, though, can I thank the many people in this room who have worked very hard for a long time on a number of elements of these reforms, have given great support to the Government, to the Productivity Commission, to the National Aged Care Alliance, in the process of doing some hard work. It doesn't always mean that everyone gets everything that they want, but hopefully means that as a sector with quite diverse interests we recognise that this package does set us up to have a very high quality, responsive and person-centred aged care system for the 21st Century.

It's really been a great process, I think, a process of which the sector should be very, very proud. I thank CEDA for giving me another opportunity to talk about it at today's lunch. Thank you very much.