$11bn of new money won’t rescue aged-care albatross

The $11.3bn in new money going into the aged-care sector from the budget over the next four years will not save it from its ­current financial malaise.

Aged-care nurses and care workers deserve a 15 per cent pay rise. Looking after the nation’s most vulnerable is an important job. It’s hard. The pay is low. The increase is long overdue.

But the $11.3bn in new money going into the aged-care sector from the budget over the next four years will not save it from its ­current financial malaise. Far from it.

The government funding to cover the Fair Work Commission award increase is a zero-sum game for aged-care sustainability.

It will flow from the government to providers, and then straight on to workers.

This will improve the standard of living for nurses and aged-care workers, who are predominantly female, and their families, and there is nothing wrong with that. But if nursing home operators are ­running at a loss before the pay ­increase – and many are – they will still be running at a loss after the pay increase, because it simply moves through their books on to their employees.

There will potentially be some savings on agency costs, as aged-care providers might benefit from being able to retain good workers and attract new ones because of the higher wage rates.

Nurses who work in other parts of the health system might be tempted to move into aged care. But this will be at the margins.

Aged care is the responsibility of the government, and it will remain a financial albatross despite the new wage funding.

On the government’s own most recent figures, 66 per cent of private nursing home providers currently operate at a loss, their ­facilities haemorrhaging an average $28 per resident each day.

They recorded a collective net loss before tax of $465.3m in the September quarter, ­indicative of an annual loss of close to $2bn.

This is despite the fact next week’s ­budget is set to show aged spending increased by almost $5bn this financial year compared to 2021-22, and was $2.6bn more than Jim Chalmers anticipated in his October budget.

The demographics weigh heavily. The 2021 Inter­generational Report makes for eye-goggling reading.

By 2061, the number of those aged over 85 will triple to almost two million, increasing from 2 per cent of the population now to 5 per cent.

The numbers are creating ­momentum for governments to explore having older Australians in nursing homes pay more for the things they would be responsible for if they were still in their own homes – food, laundry, entertainment. Currently, what providers can charge for those items is capped.

This appears to be the next ­sensible step in aged-care reform, and something the Albanese ­government has begun actively exploring.

Without something shifting on co-contributions, the sector will put a deeper and deeper hole in each successive budget.