Government Policy since 1997 has been for a free market in aged care.  It set the framework for this in the 1997 aged care act. Aged care has steadily become more market focused since that time.  That process received a big boost in 2014 when a large amount of additional funding was made available to support this.  International evidence, recent local evidence and the large number of reports in the press reporting disturbing events in nursing homes raise major concerns about the policy decisions that have been made. 


Productivity Commission: The 2010 Productivity Commission supported the continued development of a free market aged care system strongly - in spite of submissions from community and other groups including Aged Care Crisis and its members.  They ignored submissions emphasising the vulnerability of the aged receiving care and the risks that they ran.  The recommendations included the move to Consumer Directed Care (CDC).  The report was essentially what the industry wanted.

These strategies were introduced by the labour government as the Living Longer Living Better reforms. The program was set out. Some of these policies have merit but their implementation as an unregulated marketplace puts consumers at risk.  The Abbott government gave this considerable impetus in the 2014 budget and have supported the big companies. Considerable additional funding was made available, much of it by increasing the amount that users of the system contribute as bonds or in fees.

Increased profitability: This money has increased profitability and enabled the large for profit groups to prosper and to list on the share market. It is not clear how much has gone to improve care as there is no transparency or accountability for how the money is spent.  Company reports indicate that the big market listed groups are treating sicker residents but at the same time reducing the costs of staff, so it is unlikely that it is going to improved staffing.  Leaked industry reports indicate that skills levels are also being corroded with registered nurses being replaced with less trained carers.

Solving the aged bulge with the worst providers: International studies and recent local studies show that the large for-profit providers particularly market listed and private equity groups understaff and provide inferior care when compared with not-for-profit face based and community providers.

Disadvantaging the best providers: In addition, the for-profit providers have a competitive advantage over not-for-profit providers in raising funds from lenders and from the share market. They also focussed on the wealthy and are building palatial luxury aged care facilities which attract large bonds and so support their growth and market dominance. To compete in this market and try to maintain some market share, the not-for-profits are having to concentrate on luxury homes as well, which several are doing.

The result of this is that government are attempting to meet the aged care bulge by supporting and using the types of provider groups that are known to provide inferior care and who take more money from the system. We are developing a two tiered system where the middle class  and the poor are being left our.  They are likely to have difficulty finding facilities and acceptable care. They may struggle to pay their share. These are the criticisms that lie behind this page.

Consequences of government aged care policy:
Research at University of Technology Sydney

This slider section looks at research into developments in aged care, related to government policy.

Richard Baldwin, Lyn Chenoweth and Marie dela Rama, a group of researchers at the University of Technology have warned of a maldistribution of services and a lack of choice for many because of the government's policies in aged care. This could also have consequences for the care they receive and their quality of life.

This is the second paper they have written about the increasing number of for-profit operators (whom they have found perform less well than the not-for-profit operators). As in their previous paper they are urging a vigorous debate in the community about the direction that aged care is currently taking. A review of the article is on Australian Ageing Agenda here.

The original article is titled: Residential Aged Care Policy in Australia - Are We Learning from Evidence? in the Australian Journal of Public Administration. Their earlier article Quality failures in residential aged care in Australia evaluates the performance of aged care providers in Australia. Their public comments about this are in a report "For-profit providers more likely to be sanctioned" on the Australian Aged Care Agenda website.

- - - - it (Australian Government) appears to be indifferent to other structural factors.- - - -

Neither the previous, nor the current, Australian Government has indicated a preference on the future mix of service providers, the growth of large providers, or the size of facilities. This suggests that policy makers, even in the light of the available evidence, have enabled these trends to continue through their silence, or are at least comfortable with the direction in which the industry is headed.

- - - - there had been little community debate on what is preferred. There is clearly a need to obtain more evidence on the impact structural change will have on the quality of care and the performance of the industry. There is also a clear need for wider community debate on the future shape of the residential aged care industry in Australia.

Source: Residential Aged Care Policy in Australia - Are We Learning from Evidence? - Baldwin R et al Australian Journal of Public Administration, vol. 00, no. 0, pp. 1-14

In an excellent opinion piece on pages 20 and 21 of the May-June edition of Australian Ageing Agenda, Richard Baldwin who did this work, again emphasises the lack of information about the quality of aged care in Australia and the absence of any plans to really collect this information.

In this paper, he looks at the way the Australian government's policy is likely to play out with more large for-profit operators, larger facilities, greater focus on profitability, lower numbers and skills of staff, greater use of agency staff and greater competition. 

He looks at the available information from studies in Australia and internationally that indicate that each of these are associated with poorer quality of care.  He indicates that in Australia the benefits of competition are assumed to be self-evident, but research indicates that greater competition may reduce prices but at the expense of quality which is compromised.

For instance, in a paper published in 2009, Vikram Comondore and colleagues reviewed 82 studies of residential aged care services and found only three favoured for-profit service providers, while 40 studies favoured not-for-profit services – in relation to more and higher quality staffing and lower pressure ulcer prevalence.

Rather than providing evidence to support the contention that as competition increases so too does quality, the research has in fact found the opposite; studies in 2004 and 2009 found evidence showing that as competition increased, quality overall decreased.

Source: Unfolding changes warrant greater scrutiny by Richard Baldwin in Australian Ageing Agenda May-June 2015 pages 20-21

The emphasis of the paper is on the need to collect sufficient information to monitor the impact of policy as it is introduced, something that is not being done and that has not been incorporated into the proposed changes.  He repeats this message in another article below.

Industry observers have suggested that the for-profit sector is better placed than the not-for-profit sector to take advantage of the current and expected future market based reforms. Hence for-profit providers can be expected to continue to expand as a proportion of the sector.

This distribution of services (between rural and metropolitan) suggests insufficient competition across large parts of Australia to enable a market based system to operate effectively. Consequently, we may see the emergence of a two tiered system in Australian aged care based on economic and geographical factors

USA studies have found that homes owned by the largest aged care providers (those with 10,000 beds or more) tended to have higher failure rates of regulatory compliance per home and these violations tended to be more serious than those of smaller organisations. Larger organisations have also been found to focus on profit maximisation, rather than on quality outcomes, and to provide lower nursing staff to resident ratios than do smaller providers

This debate should be around the community’s acceptance of the trade-offs to be made between choice, cost and quality.

There is also a need for wider community debate on whether the Australian community is comfortable with policies that will allow, and even encourage, for-profit operators to emerge as the dominant type of aged care providers.

Source: The Future of Aged Care in Australia: A Call for Evidence Based Policy - The Policy Space, 22 Sep 2015

Baldwin is stressing the consequences of current aged care policy.  These are:

  • an inequitable system based on location
  • an aged care system consisting of ever larger aged care corporations and larger nursing homes. Evidence clearly shows that both are strongly associated with poorer staffing and worse care. In other words government policy is putting a strong negative pressure on care and this is not in the interests of Australia or of its elderly citizens.

Very similar information was already available in 1997 when the current aged care system was set up.  I was researching health and aged care at the time and personally sent politicians of all parties a large amount of information and summarised the evidence for them in a covering note.  None of that was acknowledged or debated publicly.  Instead, both parties scored points by focussing on hip pocket issues like selling the family home.  The aged care system we have is a consequence of this and as Baldwin has shown it is likely to get worse - much worse if that is possible.

The Policy Space is an independent political forum.  In the article quoted above and also linked to below, Richard Baldwin explores these issues again and asserts “These findings suggests that changes to the structure of the aged care industry could have an impact on future quality and therefore should be the topic of wide public debate.”  That is what this web  site is attempting. 

A study from the USA in late 2014 adds to Baldwins arguments.  It showed that private equity owned businesses performed even more poorly than the big for-profit aged care chains, and the longer they owned the business the worse the care became.. 

(Added December 2015)

Vulnerability: Carol Bennett the new CEO of Alzheimers Australia is being much more outspoken than her predecessors. She is not only being outspoken about the absence of data in aged care but is also stressing the vulnerability of consumers and the limits of markets in achieving social objectives - giving consumers choice did not mean that they would get it. There was concern about “how a more market-based system would operate in practice”.

She uses their success in health care to advocate for Quality Indicators, but that is not a valid reason for claiming that they will be effective in aged care if introduced in the same way. Doctors have ethical and professional reasons for supporting QI’s and protecting them. In aged care markets, QI’s have been rorted. There are strong pressures to game the system. Big companies sometimes accuse their competitors of doing so. Nursing homes do not have a powerful group ready and able to control corporate market excesses. Hospitals do.

Bennett comes from a marketplace background and I think she should start thinking about community solutions because the solutions she advocates have not been reliable. A community solutions has a greater chance of success.

Absence of data: In a radio interview advocating a national debate about the state of aged care as the sector moved from a welfare style system to one that is market driven, both Richard Baldwin and Carol Bennett, the new CEO of Alzheimers Australia were interviewed. Bennet indicated that quality of care was one of the biggest gaping holes because we don’t have “a single measure of quality” and without accurate data about care you cannot have choices. She could not understand why this was so. Baldwin supported her comments. Lynda Saltarelli from aged care added to that by stressing the importance of information about staffing because deficiencies in staffing were causing failures in care. Deregulation by government would see a greater role played by for-profit corporations which Bladwin had shown more often understaffed.

The political response to evidence: Politics has become the art of successfully selling and applying ideology. In order to accomplish this inconvenient evidence, reason and common sense are relegated to the depths of conscientiousness. A number of psychological strategies are used to accomplish this.

Mark Butler, the recent federal labour minister for ageing was the person who initiated the Productivity Commission and followed on to develop the 2014 marketplace “reforms” euphemistically called the “Living longer living better” reforms

Butler has written a book in which he is optimistic about the benefits of our longevity. It is interesting to see him talking about consumers who “have cognitive impairment when they're making these decisions (about choices)” in the same sentence as he advocates the importance of ensuring “that older people have access to good consumer information”.  The absence of information was somethimg he ignored while he was in power and could have done something about. He fails to tell us how the cognitively impaired will comprehend and use that information.  This is the weakness in his argument, the one he chose to ignore when he sold these aged care “reforms” to the public.

This is a good example of “compartmentalisation” a psychological process used by those who maintain an ideology in the face of evidence. I write more about this and its contribution to the paradigm paralysis in our political system on my own blog.

What are the prospects of our new liberal government paying any attention to the evidence accumulated by Baldwin and the logic of Bennett?. They will only do so when forced to do so by a public that engages with the issues?

The shift from a welfare service to a market: Nowhere is the shift in focus and thinking from citizens and the actual care they need to the market - succeeding and surviving in it - more apparent than in the papers given to the ACSA forum in Victoria on 30th October.

The bulk of the papers were given by large business groups including accounting firms, business consulting and support firms specialising in market strategies, marketing firms specialising in creating a brand, in marketing and in selling aged care products. The few government and not-for-profit providers who spoke did not deviate from the market themes of takeovers, finances, costs, profits, market strategies, viability, selling services to consumers etc.

A table shown by Ansell Strategic, who specialise in “strategies for the leaders of aged care organisations”, showed that only 3 of the top 10 (largest) aged care providers are now not-for-profit.  This illustrates how much the sector has changed.

There is no doubt about the primary concerns of the industry, and where the resources, energies and strategies of the aged care providers are focussed and where all the extra money we believed was going to care is going. These businesses making presentations are all offering market services to the industry and this was an opportunity for them to display their wares. Their services will not come cheap.

We citizens thought that the extra money devoted to the Living longer living better package was to improve our care. We wondered why the big corporations' reports to shareholders showed that they were making more money by treating sicker residents yet spending less on staff. We wondered why consumers were complaining about the large sums taken in fees by the providers from the packages of money allocated to them under Consumer Directed Care (CDC).  They found themselves paying more out of their pockets yet getting less care than they had under the old system. Now we realise its all about efficiency - marketplace efficiency - the goal of our government!

We believe that we need to design a system that provides care and not one that has an insatiable appetite for easy money and needs to have ever more money thrown to it to keep it alive.  We should stop throwing money at a failed system and go back to the drawing board to design one that uses our money to provide care.

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The industry response

The large profit focused groups that have listed on the share market will be worried by this research and the large number of articles that Richard Baldwin is writing. Politicians will be questioning. They will also be worried that the community is stirring and that they are losing credibility.

The large for profit groups, primarily those that have listed on the share market are “are spearheading an advocacy group to push the Turnbull government to continue bipartisan reform”

The Aged Care Guild, which is made up of nine of the largest private aged-care providers, has been “loosely” around for a few years but officially launched this week with the announcement that Mr O’Reilly, the former chief of the Energy Retailers Association of Australia, had taken the top role.

He said a priority was to work with the government ahead of a review, to start next year, of the Living Longer Living Better aged-care legislation. “The 2013 reforms helped to kick-start what has been a strong growth phase in the industry,” Mr O’Reilly said.

The aged-care reforms were largely based on the 2011 Productivity Commission report, Caring for Older Australians.

He said that the review of the legislation was a stocktake on how it was going, adding that the guild did not see a need for radical change. “We think the broad framework is positive for the industry but what we need to avoid is unforeseen external shocks,” Mr O’Reilly said.

The guild’s members — Allity, Arcare Aged Care, Blue Cross, Bupa Aged Care, Estia Health, Japara Healthcare, McKenzie Aged Care, Opal Aged Care and Regis Healthcare — provide about 34,000 residential aged-care beds, providing care for about 18 per cent of older people in residential care. Collectively, the members of the guild hold $3.8 billion of the $15bn bond pool and have been the largest builders and acquirers of beds in the industry over the past six years.

Source: Aged care unites to push for further reform THE AUSTRALIAN 16 Oct 2015 (NB Link blocked by Pay Wall)

The new Turnbull government is adopting a more balanced view of the market and is actually listening to what citizens want.  It must be increasingly clear to these big companies that an increasing number of citizens are very disturbed at the direction in which this group are taking aged care. As you read these extracts please look at the patterns of thinking that are revealed and at what their focus is. Has it got anything to do with care and what sort of culture develops in a sector and companies that think like this? Is it what we want for aged care?

Inaugural chief executive officer Cameron O’Reilly said the body’s formation was a recognition of the importance of investment in the aged care sector, to meet both the challenges and opportunities that an aging population presents.

Source: Care providers team up to establish ‘Aged Care Guild’ Aged Care Insite 16 Oct 2015

Large for-profit aged care providers are keen to avoid any further “unforeseen policy shocks” that could upset investment in the sector, says the newly appointed CEO of the Aged Care Guild, Cameron O’Reilly.

The Living Longer Living Better reforms had unleashed a new wave of private capital into the sector, and investors in aged care did not want unexpected policy changes that could set back the growth plans residential operators needed to meet, said Mr O’Reilly.

Mr O’Reilly said the board had decided earlier this year to appoint a permanent secretariat to increase the guild’s engagement with decision makers.

However, as several of the guild members had grown to a large scale and become public companies they faced greater scrutiny and a view emerged of the need for “a voice for the multi-site, private operators who have significant growth plans to have their specific needs and challenges understood by government.”

“I think it has enormous potential. On a world scale it’s a well-regarded industry and I want to play a smart part in helping to see it grow, prosper and deliver a great service to residents,” he said.

Source: Snap decisions could ‘derail’ sector growth, warns guild chief Australian Ageing Agenda 21 Oct 2015

The problem for these big companies and for the aged care sector is that the share market is unpredictable and responds to anything adverse, whether its government action to protect the elderly or a backlash from the community.  It is not robust or stable and the big question is whether something so vulnerable and so important to an increasing numbers of elderly citizens should be exposed to this risk.

When the market is in trouble the frail aged in our country are the victims. Do we really want the sort of aged care system these enthusiastic businessmen are creating?

A new book: Mark Butler was Minister of Health under labour. He was the architect of the 2010/11 Productivity Commission and the “Living Well Living Longer” reforms that are fueling the rapid consolidation and corporatisation of aged care - the profits that the guild members are so worried about. While he claims to be driven by consultations with seniors, these were certainly low key.  He probably heard what they were worried about. He then worked closely with the industry dominated body NACA, but did they give them the sort of aged care system they wanted?  I have no doubt that they think so, but was that based on logic and fact or on belief.

Ageing Agenda interviewed him about his new book “Advanced Australia: The Politics of Ageing.” Butler is positive about ageing and rejects the gloomy view of economists. We need to remember that it was as a result of his support that we are getting the share market dominated profit driven aged care system we have. Both labour and the coalition see markets as the solution. It is important therefore that we have a market that works, one with an effective customer and we should not expect government to do that.

In a new book, former minister for ageing Mark Butler challenges common misconceptions on the ageing population – from how treasury reports on the economic ‘burden’ to the role of media and entertainment. He speaks to AAA about changing minds, lobbying government and the need for leadership.

One of the key reasons why previous attempts for reform failed, such as those initiated by John Howard in 1997, was that the sector “spoke with too many voices” and ultimately the Living Longer Living Better measures succeeded due to the collaborative work stakeholders undertook within the National Aged Care Alliance. “I think if Howard had gotten that, he may well have got through aged care reform 15 years earlier,” he says.

Source: From doomsday to triumph: changing our view on ageing Australian Ageing Agenda 21 October 2015

But Who will benefit from this policy? An article on the public policy site The Pulse points out that “the reality for a majority will be ongoing dependence on the aged pension and insufficient government or non-profit places to accommodate them.”  As they indicate these large for profit groups are enthusiastically building massive luxury nursing homes and collecting million dollar bonds from the wealthy.

Many of the not-for-profit providers including Mecaware and Baptistcare are having to emulate them in order to compete. All of this is contributing to the two tiered system that Baldwin and his co-workers have indicated current policy is creating. The large number of battlers who don’t have this sort of money are likely to be left without the beds and the support they need. 

The savings that they have made over the years and the plans they have made to support their children and grandchildren will be taken if they are among the unlucky who suffer a stroke or dementia and so need the sort of care for which they have to make large contributions.  The suicide rate in the elderly is already higher than any other group. Some may feel that the quality of life offered is not worth the sacrifice.  Not everyone might enjoy the rosy life for seniors that Butler envisages. 

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Relevance to my analysis and proposals

My analysis in Part 5: Background of Community Aged Care Hub, is based on my experience in medicine over 50 years, my broad study of health and aged care corporatisation over nearly 20 years and a social theory approach using several paradigms developed over years when I was involved in or examining cultural conflict.

My analysis indicates that Baldwin's concerns are well founded, that the major problems in the sector are largely if not primarily due to current policies and that there is a high probability that the proposed changes to aged care will compound the problems we have and result in a further deterioration of care.  Baldwin's study and the studies he refers to in his publications document the scientific evidence that supports the assessments that I have made.

These web pages and the  proposed community hub described in Part 2: A big change to aged care, is intended to meet two of Baldwin's primary objectives - informed community debate and accurate data collection. In addition it is intended to create a broad knowledgeable community group which will change the social dynamics and introduce consumer/customer pressures into the system.

This is intended to mitigate the adverse consequences of these policies and support the desired improvement in standards and quality of life - ie make them work.   In addition, it provides a broad community forum at the coalface of care from which to generate changes in policy based on accurate information and if necessary formulate new approaches and new policies - then trial them before they are applied as policy.

Please read Baldwin's opinion piece.  It is an important insight based on sceintific study and his own direct experience of the aged care system.  He brings together the information we do have, acknowledging that it falls a long way short of what we need to have.

Baldwins PhD thesis The future of residential aged care in Australia; a mixed methods analysis of the relationship between policy, structure and the provision of care can be downloaded.

ACSA, the organisation representing not for profits has published several articles about Baldwin's findings. The only one I found from LASA, the organisation that claims to represent both for profit and not for profit organisations is titled "Residential Aged Care".  It is on page 54 of their Autumn 2015 digital publication "Fusion".  In my view, it fails to adequately examine the issues.

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We can summarise the two very different points of view on this page.

On the one hand, we have those who see what they believe. On the other hand, you have those who believe what they see and take the trouble to look to see what is happening.

In Part 5, I will write more about why so many of us see what we believe and why we are under such pressure to do that. I also explain why seeing what we beleive so often puts all of us at risk.

Unfortunately most of what happens in aged care is not visible and we only get glimpses so its easy to see what we believe. The proposed Aged Care Community Hub's prime objective is not to make major changes in the system but to collect the sort of information that will enable all of us to see so that we can reliably believe what we see.  It also seeks to make sure this market works because far too many don't think it is working and don't experience ageing in it in the way that Butler believes.  When we all have the information we need and when we can talk about it sensibly then we can move forward.

Until we have a system that actually looks at what is happening the best we can do is to listen to those who do see because they are there. These are the staff and the resident’s families.  Many of them don't seem to see this system as optimistically as Butler does.  The links on the page Further Reading in this section will help you to do that.

We would love to hear your thoughts on the direction aged care should take in order to make life worth living and working in Australian nursing homes: Join our conversation  Author: Dr. Michael Wynne, Copyright 2015