Australia's aged care industry needs to be rebuilt from the ground up

It's a big industry - consuming $20 billion of taxpayers' funds in 2020, and needing additional investment to reduce excessive waiting times for home care and to overcome obvious deficiencies in the quality of residential care.

The Royal Commission on Aged Care and the COVID-19 pandemic have exposed the parlous state of the industry, with hundreds of tragic deaths and stories of neglect and abuse. A recent research report issued by the Royal Commission showed, yet again, the highly variable nature of quality in residential care facilities and the need for investment there.

The government announced a further expansion of home care - an extra 10,000 places - in the recent Mid Year Economic Forecast on top of 23,000 new places announced in the budget. However, many of the places announced are at the lowest level of provision and so won't meet the need for independently-assessed, necessary, care. Even if the new places were all at the right level, it would still leave 75,000 older Australians waiting for needed care. Funding more home care places is welcome but is a wasted opportunity - renovation and a quick lick of paint is not enough.

A Grattan Institute report released earlier this month argues the aged care system needs to be rebuilt from the ground up. Policy makers need to start from a different place - putting the needs and rights of older Australians front and centre. Australia needs a new approach to working out who should pay for what. We need a more rational approach to ensuring older Australians pay for things they would normally pay for when they were younger - meals and ordinary living expenses - but also get taxpayer support for necessary care - as they do for Medicare.

There should indeed be more home care places, but these should be based on an individual's needs, not allocated as now into one of four broad categories, which result in $1 billion of taxpayers' funds sitting unused, side-by-side with unmet needs.

We calculate fixing the aged care system could cost upwards of $7 billion year, a 30 per cent funding increase. But Australians should think of this as an investment to respond to the evident and urgent needs of older people, and to help stimulate the economy as we seek to recover from the COVID recession.

In the COVID context, the additional investment might be better phrased as creating more than 70,000 new jobs - and with these jobs spread over more than 70,000 people, because most who work in aged care work part-time. These new jobs - necessary to help older Australians lead a decent life at home - are more than total current employment in coal mining. The 2020 federal and state budgets have rightly focused on the need for economic stimulus. But the federal budget focused too much on hard-hat projects, missing the target in terms of which industries need stimulus.

A program which creates 70,000 new jobs is very big news indeed, especially when these jobs can be created all over the country - in cities and rural areas alike. But the $7 billion required to create these jobs and provide necessary care will not materialise from a magic money printing machine.

The government's response to the Royal Commission on Aged Care will require additional spending. And its response to federal Treasury's Retirement Income Review, and to next year's Intergenerational Report, should be used to create a national narrative on ensuring the additional necessary investment in aged care is sustainable. Consideration of additional spending and revenue should occur at the same time, so we do not exacerbate intergenerational inequity as we respond to necessary policy issues.

The taxing and spending narrative should be carefully crafted to emphasise that, while a large proportion of these costs may come from older Australians, it they who will also benefit. This should help manage difficult politics of addressing one of the inevitable policy pressures points that emerge from the Aged Care Royal Commission.

It should crystallise in the minds of all Australians that aged care doesn't need renovation, it needs a rebuild.