A Labor budget to address workforce shortages in aged care

May 20, 2023
Aged Care Worker

A 15% pay rise forms the centrepiece of Labor’s 2023 aged care budget. It is one of three significant aged care reforms that Labor has introduced since coming to office – a new funding model, mandated minimum staffing and now a pay rise for aged care workers. It’s a great start. But there is much more to be done.

Described by the Minister for Aged Care as the largest ever pay increase for aged care workers, the centrepiece of the 2023 federal aged care budget was an allocation of $11.3 billion to cover the full cost of a 15% pay rise for aged care workers. It forms part of an overall aged care spent of $36 billion in 2023-24.

Other significant aged care budget announcements included funding for a National Worker Registration Scheme ($59.5m), $72.3 million for a new regulatory model and prudential framework and enhancements to the Aged Care Star Rating system ($126.7m).

There were small amounts in the budget to improve food standards and introduce monthly statements for care recipients as well as other initiatives directed to implementing various recommendations of the Aged Care Royal Commission.

The budget papers also include an announcement of 9,500 additional Home Care Packages, new aged care assessment arrangements from July 2024 and a decision to delay for a further year the introduction of a new Support at Home program. This decision to delay is welcomed as the program being planned has some serious flaws. But that is a story for another day.

The $11.3b pay rise

The announcement of a significant spend on the pay rise is welcome news but had been expected. One of the first acts of the newly elected Labor government in 2022 had been to support a pay rise for aged care workers. In early 2023 and after more than two years of hearings, the Fair Work Commission brought down its decision that aged care workers should be granted a 15% pay rise, effectively from July 2023. This is an interim decision only with a claim for a further 10% under consideration.

Labor responded by committing to fully fund the cost of this 15% pay rise and they delivered on this promise in the 2023 budget. This is despite the fact that they had previously argued in the Fair Work Commission proceedings that the pay rise should be spread over two years.

The goal of this investment is to recognise the increasingly complex and previously undervalued work of the aged care workforce and to help aged care providers attract and retain staff.

The bigger picture

Workforce problems are symbolic of many of the problems that have beset the aged care sector over the last decade. Aged care has had a growing attraction and retention problem for years because, at its core, workers have been under-valued and underpaid. Part of the reason is ageism. Older people are not valued and either of those who care for them. Another is sexism. Aged care reflects the under valuing of ‘women’s work’ more broadly.

A further significant reason goes back to reforms implemented during the Howard era. These reforms led to the deregulation and deskilling of the aged care workforce. This was driven by a powerful rhetoric which emphasised that aged care is a person’s home (not an institution), and that aged care must move from a ‘clinical’ to a ‘social’ model. This narrative won widespread support.

But it had a significant downside that, two decades later, the 2023 Labor budget is now trying to repair. These Howard era reforms provided the platform for successive governments to outsource their duty of care for older Australians to private providers, including leaving it to providers to make their own decisions on staffing. The requirement to staff ‘nursing homes’ with nurses was lifted and ‘nursing homes’ became ‘residential aged care facilities’. Providers were no longer required to spend their government subsidy on staff, and a largely unregulated and poorly paid workforce of personal care workers, recreation officers and the like replaced registered nurses and allied health professionals such as physiotherapists.

The abolition of workforce standards and the deregulation of aged care allowed successive governments to make significant savings. In the absence of minimum standards, governments were no longer accountable for paying sufficient subsidies to cover the required number and skill mix of staff. All financial risk was transferred from government to providers.

Providers, particularly in the private-for-profit sector, in turn transferred their financial risk onto residents. They did so in the form of inadequate care.

This is at the core of the litany of failures in quality and safety documented by the Aged Care Royal Commission. The 15% pay rise in the budget is a necessary circuit breaker. So is the introduction of the new Australian National Aged Care Classification (AN-ACC) funding model and so is the introduction of mandated minimum staffing. The question is whether Labor is prepared to go further in its second term to tackle the underlying problems that these solutions are meant to address.

Some aged care providers try to wriggle out

Most providers welcomed the funding and committed to pass it onto their staff in full. Yet it did not take long for some aged care providers to make it clear that, while the government would be passing on the 15% to them, they felt under no requirement to pass the 15% on in full to all of their staff. This was particularly the case in relation to workers employed under an enterprise agreement and to the small number of workers already being paid above award.

As an expert witness on staffing at both the Royal Commission and in the Fair Work Commission pay case, I was gobsmacked that any aged care provider would consider not passing on aged care pay rises in full. But I should not have been surprised. The mixed reaction from providers is a good refection on some of the inherent tensions and structural failings of the aged care system itself. The government reacted by threatening to ‘name and shame’ aged care providers not passing on the pay rise.

Enhancements to the Aged Care Star Rating system

Enhancements to the Five Star Rating system are very welcome. It went live in the last year and suffers from both poor data quality and poor design.

The Star Rating System was a recommendation of the Aged Care Royal Commission. It called for improved transparency including a public five star rating system to help older people and their families make informed choices about the care they need. The Royal Commission recommendation was based on a similar system in the USA called Nursing Home Compare.

The American five star rating system is based on quintiles. Each star represents 20% of homes. Five star is the top 20% of homes, four star the next 20% and so on. The bottom 20% of homes are rated as one star. Not so the Australian system. Stars are calculated by an opaque method that is unintelligible to a lay person. Only 5% of homes were rated one or two stars in the last quarter, with the Minister boasting that the star rating system is working to improve aged care

Try it for yourself. Click on Nursing Home Compare and enter the name of any city. Pick three nursing homes and click Compare. Among other information, you can instantly compare them on five star ratings overall, plus separate five star ratings for Health inspections, Staffing and Quality measures.

Now try the new Australian five star rating system and compare the difference. It is designed to help you find a provider but it is almost impossible to compare providers, which surely is the point of a five star rating system.

There is another critical difference between the American and the Australian systems in how they assess staffing. In the US system, providers must submit their payroll data and their rating for staffing is based on this very objective measure. In the Australian system, providers simply self-report, giving lots of opportunities for homes to manipulate the numbers. No wonder the relevant unions and staff are so sceptical about the implementation of mandatory staffing levels. When the staff don’t believe the numbers, no one else should either.

A funding commitment of $126.7m to improve the five star rating system will hopefully overcome the failings of the current approach. However, it may not.

Labor can be genuinely proud of the big three reforms (new funding model, mandated staffing levels and the pay rise) it is implementing. But, apart from those, it is hard to see the remaining initiatives as anything more than the government going through the motions in order to tick a box on a Royal Commission recommendation. This is hardly surprising given the mixed bag of recommendations in the Commission’s final report to Aged care: Commissioners hand government a ‘get out of jail’ card with disagreement between Commissioners and its failure to get to the heart of the problems (link here to Fundamental failure: Aged care a public good or competitive market? RC fails to address role of private providers

Labor ultimately needs a bold strategy if it is to really fix aged care. The question is whether a bold strategy will be at the heart of a second term aged care agenda.

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