Improving pay and aged-care standards to cost $3.5bn a year

It would cost up to $3.5bn a year to grant aged-care staff a 15 per cent pay rise and boost contact time with residents.

It would cost taxpayers and consumers up to $3.5 billion extra every year to grant aged-care nurses and personal-care workers a 15 per cent pay rise and boost contact time with residents, the federal government has been told.

A submission to the Aged Care Workforce Strategy Taskforce, commissioned by minister Ken Wyatt, says it would cost between $2.4bn and $3.5bn to close the pay gap in the sector — which the taskforce report says is 15 per cent — and raise direct-care hours per resident, per day, from a little over three hours to more than four hours.

Chartered accountants StewartBrown, considered experts in the aged-care sector, say in a submission to the review that the money will need to come from “additional government subsidy or consumer funding”.

StewartBrown also warned changes to the Aged Care Funding Instrument under successive governments, and most recently in 2016, as well as an indexation freeze, have potentially set back the capacity of the sector to build new facilities.

Using figures from the Aged Care Financing Authority, StewartBrown said the chances of both not-for-profit and for-profit providers of securing finance to fund at least $80bn worth of new facilities and upgrades in the next decade were slim.

About 66 per cent of all existing residential aged-care facilities are more than 20 years old.

“The operating-surplus return on assets employed (ROA) has ­deteriorated to 0.12 per cent per annum (from 1.59 per cent) and is a clear detraction from generating future capital and equity investment,” the submission says.

“Without sufficient operating profit to cover the interest cost and ultimate repayment of borrowings and an adequate return on investment outlaid by providers, the ongoing investment in the sector may not be justified.”

During the financial year 2017-18 when the reports on funding issues were finalised, almost all of the 72 aged-care providers ­already in trouble with the regulator for failing to meet standards were found in breach during a second “review audit”.

The Australian Aged Care Quality Agency visited 72 services in the 2017-18 financial year to double check they were providing care as mandated by the federal standards. Sixty-seven failed the review audits.

Review audits are conducted only when a service is already falling short of the standards or when a home has been placed on a “timetable for improvement” to fix recorded failures, so the 72 providers were expecting review ­audits.

Despite 93 per cent of services failing again, the AACQA revoked the accreditation of only 12 providers and “continues to monitor” the improvement timetables of a further 23. Last month the regulator said 33 services had been deemed compliant.

Prime Minister Scott Morrison yesterday ruled out expanding a royal commission into aged care to the disability sector, and abuse in institutions more broadly, as Greens senator Jordon Steele-John read into Hansard the names of disabled people who had died in care since a Senate inquiry recommended a royal commission in 2015.