Report calls for action over creaking aged care model

An advisory group tasked with assessing the aged care model is sounding the alarm, saying the system is “at a turning point” and “major systemic reform must start now”.

“While many older people are supported well, current settings will not be able to meet future demand safely, equitably or sustainably without major deliberate system change,” it said.

The Ministerial Advisory Group on Aged Care in New Zealand, chaired by former Labour minister of health David Cunliffe, has made 40 recommendations in total, including the government committing to “significant price uplifts” and lowering the threshold at which people with assets must pay more towards their care.

It warned if there was no change, there could be a shortage of more than 9000 residential beds in just over a decade, at an additional cost to the government of nearly $600 million a year.

But even the recommended course of action is only somewhat cheaper than the worst-case scenario, with all projections costing billions of dollars.

Late last year, Associate Health Minister Casey Costello said there were “major political considerations” attached to any changes in the aged care system and so an independent group was needed to make recommendations. Long-term thinking and a bipartisan approach were also needed.

On Monday, she said the government had appointed the group because it wanted ideas for reform.

The 186-page report, titled A place to grow old: Securing the future of aged care, was released on Monday. It said that “if we do nothing there will be a mountain of unmet need, alongside a much higher demand for hospital beds”.

The advisory group was tasked with considering the way services were funded and how costs might be shared, as well as how care systems and health services might be better integrated, and provide recommendations.

It tested possible scenarios and came to the conclusion there was “no alternative but fundamental reform”.

“The only real choice is between a hard set of changes made deliberately now, or a more painful set of changes forced on the country later.”

The report said there were not enough beds in residential care for the number of people who would need them, and not enough workforce to care for those people.

“That is not only a projection for the future – it is already starting to happen.”

It specified the whole country’s aged care system was under real pressure today, and “those pressures will only grow as the population ages”.

New Zealand’s aged care system was built for a “different era”, the report said.

There are about 950,000 people aged 65 and over, with that number expected to reach about 1.3 million by 2040.

“In 1996, about one in 10 people in New Zealand were aged over 65,” it said. By the 2050s, this would be one in four.

People were living longer and coming to residential care with more complex needs. That growing need would place even more pressure on hospitals, emergency departments, GPs and residential care.

The report also outlined “well recognised inequities” in aged care that were “structural and compounding”.

“Māori, Pacific and Asian people are much less likely to be living in residential care in advanced old age.”

The report described long-standing workforce challenges that constrained service delivery, and that workforce capability and capacity had “not kept pace with the growing demands placed on in-home and residential providers”.

As well, it specified the aged care system was under “sustained financial pressure”, with funding no longer keeping pace with the rising costs of delivering care.

The government spends more than $2.5 billion annually on aged care, including in-home care and aged residential care.

The advisory group tested the outcomes of three scenarios:

The report showed that in scenario A, the national shortfall in residential care capacity would increase significantly. Not only would this leave older people without care but it would shift the cost into the hospital system, the report stated.

This situation would see direct costs to the government and the health system grow. A shortage of more than 9000 residential care beds by 2037/38 would cost the government nearly $600 million more each year.

The total cost to the government would reach $4.4 billion.

For scenario B, the group noted that spending more would alleviate short-term supply pressures for a while but that it “rapidly becomes unaffordable”.

This scenario noted that the projected cost to build an additional 10,000 beds would be $2.6 billion.

In this scenario, total aged care costs (both government funding and private contributions) would rise from about $3.9 billion in 2025/26 to $5.1 billion in 2028/29 and to over $9.3 billion by 2047/48.

By 2037/38, the government cost would reach $4.6 billion.

For those in care making private contributions, the total would increase by 17 percent from $1.4 billion in 2025/26 to $1.8 billion in 2028/29, and by 135 percent to $3.3 billion in 2047/48.

The 2047/48 costs would average $49,700 per resident.

Scenario C looked at a set of major reforms to help moderate futures costs.

The four major levers were supporting more people at home and reducing avoidable hospital stays; better targeting of residential care funding through differentiated pricing; rebalancing how we share the costs of care; and initiatives to improve in-home care and improve efficiency across the system.

The group’s modelling estimated scenario C would cost around $3.7 billion in 2037/38.

The report emphasised that without reform, the costs would continue to blow out as the population aged.

The group made 40 recommendations in total.

They suggested “an integrated system”, reforming it into a single system encompassing in-home care, residential care, end-of-life care, and wider health and social services.

The report recommended streamlining assessment in the aged care system and modifying current assessment tools to take into account various other elements, such as cultural needs or non-clinical social factors.

It also suggested changes to contracting and regulatory settings, and it said the government should commit to “significant price uplifts” within two years.

For in-home care, that would look like a 6 percent increase next year (costing about $30 million) to address rising costs and a further investment in 2028/29 to grow the sector’s capability to deliver care.

For residential care that would look like a 7.1 percent increase in per-bed prices next year.

The group also suggested fundamentally restructuring the funding model for aged care services and stated that as a principle, public funding should prioritise essential needs-based care.

It also recommended the threshold at which people with assets must pay more towards their care be lowered to $100,000.

Associate Health Minister Casey Costello said on Monday that governments had kicked the aged care can down the road for too long.

She said the way aged care services were funded was “outdated and does not recognise the future investment required”.

“The current model is siloed and doesn’t deliver a cohesive system.”

Costello welcomed the “substantial” report, and said the government would consider the recommendations carefully before making any policy and funding decisions.

“This is a significant issue which has a real impact on peoples’ lives, personal and government finances, the sector, and the wider health system. We need to make the right decisions.”

The Ministry of Health has been directed to work with other agencies to develop advice for the government on the recommendations.