The role of the Independent Health and Aged Care Pricing Authority (IHACPA) was recently expanded to include modelling aged care provision costs and providing advice to government around the quantum of aged care system funding.
IHACPA will fail if it cannot provide independent advice or if the government is not obliged to listen. In a world where most aged care providers are operating at or below the line, this is a real concern for the sustainability of the aged care system and its ability to deliver quality care in an equitable way.
The IHACPA is envisioned as a beacon of unbiased advice, guiding government decisions away from political biases. This is the role it has adopted in relation to Australian public hospitals funding with, many would report, good effect. However, the practicalities of such an arrangement as it is envisaged for aged care are far from straightforward.
The problem is that in aged care, unlike in health where IHACPA actually determines the annual national efficient price and national efficient cost for Australian public hospital services, the government will simply review IHACPA’s recommendations. That is, the government of the day will not be bound by such recommendation and will makes its own decision about what it thinks is the real cost of providing aged care.
Here is the rub - aged care system funding decisions are not made in a vacuum. The government will always be under an ‘economic policy’ constraint – lest they be attacked by the opposition. When the opposition attacks a government’s fiscal mismanagement, they don’t refer to an over-spend on ‘health’ or ‘aged care’. They attack the headline figure. In the brave new world of clickbait and soundbites, there isn’t recourse to a discussion about how the money was spent.
Some argue that it would be a very bad look for a government to ignore or reject the pricing advice of the IHACPA. This strikes me as a touch optimistic. The government has never really cared too much about what the sector thinks and, frankly, only the sector will complain if it perceives that it is underfunded.
It is also fair to say there is a fair degree of scepticism within the aged care sector about the effectiveness of the IHACPA in advising government of the real costs of providing aged care. Over 70% of providers are financially struggling. In light of the varying cost structures faced by providers, the task of setting a uniform price across different modes of care (residential, home care packages, CHSP) and a wide range of locations seems almost Herculean.
The Modified Monash Model, which measures remoteness and population size for the purposes of government program eligibility, has been widely criticised as inequitable and it remains to be seen whether there is a more effective tool.
The recently released NDIS Review has also recommended IHACPA take on NDIS pricing which will further inflate its workload.
Fundamentally, IHACPA is going to need to engage meaningfully with the aged care sector if it is to meet this challenge. This consultation needs to extend across Australia and to include smaller providers and those catering to CALD or Aboriginal populations. Such consultation needs to be transparent so that it is clear how pricing decisions are going to be made and how those decisions align with the actual costs and quality of care.
Thought also needs to be given to implementation and the readiness of the sector to adapt. This is particularly important in the context of the new single assessment and funding model being designed for Home Care.
What is clear is that IHACPA will identify a significant gap between current aged care system funding and the real cost of providing aged care. In principle, this has been accepted by government and an Aged Care Taskforce has been established to consider how that gap will be funded. Obviously, the extent to which the government of the day will accept IHACPA’s recommendation is up for debate however, it seems clear that an increased user-pays component will ultimately be part of the solution.
In the end, the effectiveness of IHACPA's role will be measured not by the elegance of its models or the sophistication of its advice, but whether its advice and recommendations translate into concrete policy changes and adequate funding, ensuring that quality care remains accessible and sustainable. Despite the establishment of the Aged Care Taskforce and the government's acknowledgment of a funding gap, the sector remains apprehensive. A space to watch.
Many thanks to Andreas Geronimos, Solicitor for Aged Care & Disability, for his contribution to this opinion.
This article first appeared in Amber Crosthwaite's article for Business News Magazine on 29th January 2024.
