Big business, ‘consumer empowerment’ and the undermining of care for the elderly
Australians are living longer. An Australian woman aged 65 today can expect to live nearly 23 more years, on average—more than two years longer than a woman aged 65 in 2000. A man of 65 today can expect to live nearly 20 more years—three years longer than a 65 year old man in 2000.1 Across the same two decades, the share of older people (aged 65 and over) in the population increased from around one in eight to one in six.2 By 2050, official population projections put the share of older people at one in five.3
Half of all older people have a disability of some kind, and four in ten need assistance with everyday activities. One in six has a profound limitation, such that they always need help with communicating, getting up and around, and/or looking after their bodies (bathing, eating, toileting).4 The vast majority of older people live in the community and more than two thirds of people who need assistance get informal help from their family and friends—mostly their partners and daughters. Alongside, or instead of, this informal support, some get formal assistance through the aged care system. Some buy help from commercial providers. Some don’t get any help. Around one in six older people who need assistance with looking after their bodies goes without. Overall, one in three who needs assistance has some level of unmet need for help.5 The one in twenty older people who don’t live in the community live in residential care.6 Almost all of these older people have a profound limitation,7 half live with dementia, and most have multiple other health conditions. Despite their living situation, these people too may not get the care they need, as studies on ‘missed care’8 and the recent Royal Commission on Aged Care Quality and Safety have documented.
Australia’s formal aged care system is a set of programs funded and regulated by the federal government. During the last quarter of a century, policies of the governments of both major parties have relied increasingly on market instruments—competition, user choice and private provision—to address older people’s needs for support. The language of consumer empowerment has given cover to the unleashing of private providers, and the language of sustainability and fairness has given cover for austerity and user-pays. Not least because of the considerable influence private providers have over it, regulation has struggled to ensure that public spending results in high-quality care in Australia’s aged care system.
Aged care programs provide care and assistance to older people either at home (through the Commonwealth Home Support Program, and the Home Care Packages program) or in what are called, with rather unpleasant technocratic neutrality, ‘residential aged care facilities’. The federal government spent $18 billion on these services in 2018–19—about twice as much as it spent on unemployment benefits, and less than half the revenue it forwent in tax concessions for superannuation, 9 which skew strongly towards people with the highest incomes.10 Older people contributed over $5 billion in the same year, 11 not counting the $30 billion pool of ‘refundable accommodation deposits’ (commonly called ‘accommodation bonds’) that 95,000 residents had contributed as interest free loans to the owners of the facilities they live in, in lieu of paying a daily rate for their accommodation.12
So who do the billions spent on aged care go to? It depends on the program, but across all programs the share of for-profit providers is growing, drawn in by the business opportunities opened up through the marketisation of aged care. Older people are now expected to navigate highly complex markets for residential or home care, staffed by a decreasingly professionalised, low paid workforce.
The marketisation of aged care that we live with now started in earnest in residential care. The Howard Coalition government’s Aged Care Act 1997 removed some critical brakes on potential profitability for private providers. Among other deregulations, the Act did away with requirements that providers spend (and prove they had spent) a certain proportion of their funding on care staff and that they employed a certain proportion of skilled staff.13 The government’s plan for ‘structural reform of residential aged care’ included a major expansion of user-pays principles in the system, which it only partly implemented, following what it considered electorally dangerous opposition.
Despite challenges to aspects of the government’s plan, anticipatory excitement about the business opportunities in residential aged care was high at the time. A representative of an industry association for private providers told The Australian Financial Review in October 1997: ‘I think you will see the large conglomerates coming in. I wouldn’t be surprised if the Coles Myers and the BHPs of the world started taking an interest in aged care’.14
This is not quite what happened. Nevertheless, in the years that followed, the for-profit share of residential care places increased from 27 per cent in 200015 to 41 per cent in 2019.16 Across these two decades, the number of places in residential care increased from around 140,000 to nearly 214,000, and more than two thirds of this growth was in for-profit facilities. The share owned by non-profit providers (religious, charitable and community organisations) fell, from 63 to 55 per cent. Public provision collapsed, from 10 to 4 per cent, with nearly two out of every five public residential care places closed or sold.
And while Coles Myer and BHP have not entered residential care provision, some very large companies have grown up: today the three largest corporate providers of residential care, BUPA, Regis and Opal, together own one in twelve places, up from one in eighteen a decade ago.17 Private equity companies, investment banks and foreign investors have moved in and out of the sector, and several companies are now listed on the stock exchange. Reports by consulting firms about deals done and business opportunities available are revealing—they tout the ‘high level of revenue certainty’, and the opportunities for consolidation and increasing shareholder value through ‘scale benefits’.
A brief look at the prehistory of the Howard reforms that (re)started growth in the for-profit private sector sheds light on how we got here. In the 1950s and early 1960s, before ‘residential aged care’ existed as an object of social policy, the Menzies government offered capital subsidies to religious and charitable organisations to fund the building of special housing for older people in ‘hostels’, later called ‘low care facilities’. Separately from hostels, a smattering of private convalescent homes and a few public long-term care institutions existed for people who needed more care. In 1963, the government formalised these long-term care homes under a new category of institution, ‘nursing home’, and began offering their operators a nursing home benefit of $2 per patient per day. Very little was regulated by the federal government—not opening up a home, nor where homes were placed, nor fees charged to residents. There was no means test for residents, and no regulation of patient admission. When the benefit was introduced, state governments ran half the ‘beds’. Within five years, the number of beds had increased by around 50 per cent and almost all the new beds were run for-profit. By 1972, 56 per cent of all nursing home beds were run for-profit. The establishment in the 1960s of a large for-profit sector would cast a shadow that has darkened aged care since, as private providers have sought to defend and extend their interests.
The number of (non-profit) hostels grew at a slower rate during the 1960s, and governments came to see the unbalanced growth of higher-cost, higher-care nursing homes as a policy problem, among others in aged care. Between 1972 and 1996, there was much policy activity as both Coalition and Labor governments tried to get some control over the size and structure of the residential care sector and of its costs both to the public purse and to older people. The two sides of politics went about it in different ways. The Coalition did put in place the first controls on fees nursing home operators charged older people, but in general its policies combined attempts at cost-containment and cost-shifting with defence of private enterprise. The ALP was concerned about the growth of the for-profit sector, but it did not directly confront it. Rather, Labor governments focused on supporting the growth of non-profit providers, especially of hostels, and on controlling the market power of nursing-home providers through regulation. During the 1980s, they introduced new regulations for approving providers, including a planning system that controlled where they could locate and how many beds they could open; new regulations governing how older people came to access residential care; new forms of quality regulation; and a new funding system that specified what was to be spent on care, separately from other costs. Labor also further regulated fees charged by nursing home providers, strictly limiting their opportunities to shift costs to residents.
Labor’s policies to increase the non-profit share worked, to some extent—between 1972 and 1984, two thirds of all new nursing-home places were in non-profit homes. But public ownership by state and local governments had already begun to fall in the 1980s. And in the faster-growing hostel sector, Labor gave up a long-held principle and made care (but not capital) subsidies available to for-profit providers in 1990, so they began to grow. By 1995, for-profit providers owned a smaller share of nursing-home places (47 per cent), while the ownership profile of nursing homes and hostels taken together was 12 per cent public, 61 per cent non-profit and 28 per cent for profit.
Private providers resisted Labor’s regulations with great energy, in the courts and in the media. They had the Opposition’s vocal support—their attacks on Labor’s funding and fee control policies in parliament spanned allusions to the Gestapo, ‘socialism gone mad’ and the ‘politics of envy’. The then largest provider, Doug Moran, vigorously lobbied the incoming Howard government in 1996 to deregulate the sector, and claimed to have been successful. As noted above—the new Aged Care Act 1997 removed key regulations that limited profitability.
Since the Howard years, marketisation of aged care has been a bipartisan project. In 2010, the first Rudd Labor government asked the pro-market Productivity Commission to make reform proposals for aged care, and recommendations in its report Caring for Older Australians leant heavily on ideas of competition and consumer choice. Many of the commission’s recommendations were implemented in the Gillard Labor government’s Living Longer Living Better package of 2012. The government’s proposals framed the problems in aged care in terms of demographic pressures, unsustainable reliance on public financing, disempowered consumers and uncompetitive markets. In a brief about the changes to the industry, consultants KordaMentha predicted that the Living Longer Living Better reforms would disproportionately benefit large, metropolitan, for-profit providers.18
Finding ways to make consumers pay more was a central goal of the Living Longer Living Better package. Accommodation bonds, formerly chargeable only in hostel or low care facilities, were extended to all places in residential care, and the distinction between ‘high’ and ‘low’ care was removed. Residential care providers could also now charge for ‘additional services’ for ‘amenities’ such as food choices and entertainment. Consultants Ansell Strategic euphemistically described these charges as a way providers could ‘maximise sustainability’ in the context of constrained public funding. As should have been foreseen by the government, large for-profit providers found multiple creative ways to clip the proverbial ticket at older people’s expense. Regulation of additional service charges has had to evolve, following interventions against providers by the Department of Health and the Australian Competition and Consumer Commission.19 BUPA and Regis both ended up in the Federal Court, which found various of their additional charges on residents illegal.
When Labor lost power to the Coalition in 2013, the new government unsurprisingly continued these directions. It appointed an Aged Care Sector Committee, whose members included the managing directors of both BUPA and Opal.20 The committee’s ‘road map’ set out ‘what is needed to achieve a sustainable, consumer driven and market based system’.
In residential care, ‘consumer driven’ seems to mean finding ways for providers to charge older people extra for anything other than the bare minimum of accommodation, food and care. In home care, marketisation is ‘individualisation’, which puts primary responsibility on older people to find and negotiate the content and terms of their care.
Labor had introduced the Home and Community Care (HACC) Scheme in 1985, to address a long and widely held view that premature admission to (expensive) residential care, which often occurred against the wishes of older people, could be avoided if older people had more support to remain in their own homes. Under this block-funded scheme, renamed the Commonwealth Home Support Programme following the Living Longer Living Better reforms, mostly non-profit organisations today provide typically small amounts of care and assistance to around 20 per cent of older people. This is generally considered a successful program that could be even better with more funds.
In 1992, Labor introduced a second home care program, called Community Aged Care Packages, designed as a substitute for low care residential care. In 1995, the Labor government integrated packages into the planning system it had established to control the number and distribution of residential care ‘places’. Under this system, the mostly non-profit providers tendered for a number of packages each year, which they could offer older people assessed as eligible. Over the years, the program has grown, and now offers care to around 4 per cent of older people in a system of four ‘levels’ of home-care package.21
Labor’s Living Longer Living Better reforms promised to make all home-care packages ‘consumer directed’ by 2016. This means funding for a specific level of package is allocated to the person assessed as eligible, not to a provider. The older person can spend the funds on a designated range of activities to meet their needs and preferences. What’s not to like?
For one, a person is likely to wait literally years to be allocated a package after they have been assessed as eligible for one, because the total number of ‘places’ in the program is restricted. The planning procedure for aged care places that Labor introduced in the 1980s makes sense: without some control over the system as a whole, governments could not achieve policy goals such as rebalancing the system away from residential to community care or ensuring some degree of geographical allocation according to need. The planning system is a decidedly non-market policy instrument, and successive market-oriented reform plans have called for its abolition—in effect calling for a return to the bad old days of provider discretion at the public’s and consumers’ expense. But governments have so far resisted, not least because it is also a handy tool of budgetary management: only those places it ‘releases’ are funded, more or less regardless of how many people might be assessed as eligible for one. Most people waiting for a package are eligible for support from the Commonwealth Home Support Scheme in the meantime, although this program is designed to give ‘entry level’ services only. Meanwhile, the gap between places released and people assessed as eligible has remained persistently large, leading to headlines about the hundred thousand people in the queue and the tens of thousands of people who die waiting for a package.
Once an older person has eventually been allocated a package, they enter the market to find a provider. My Aged Care, the portal website for the entire aged care system, lays out the process for them: compare providers, select one, discuss terms and enter into a service contract with the provider, and monitor and review the services you receive annually. The number of providers to choose from has grown considerably, since they no longer have to tender for home-care package places. In the three years to the middle of 2016, when consumer-directed care was rolled out, there were about 500 providers; by the middle of 2019, there were nearly 930—growth of nearly 90 per cent. Of the new entrants, nearly 80 per cent were for-profit, increasing their share from 13 per cent to 36 per cent across three years. International franchise companies have moved in, including the privately held Home Instead (United States) and Nurse Next Door (Canada). Another is the US-based private-equity-owned conglomerate Caring Brands International, which purchased an established, for-profit Australian franchise company, Just Better Care, in 2014.
Selecting a provider using My Aged Care is almost impossibly complex. It is like choosing an electricity plan, with much higher stakes and many, many more variables. A search for providers of, say, a Level 3 home-care package in Cowra, a town in rural New South Wales, yields more than thirty, some based in Queensland, and several in Sydney or in larger rural towns—how distant providers deliver responsive, well-supervised care is unclear. A search for providers in a middle-ring Sydney suburb yields well over 100, distributed around greater Sydney and Australia at large. The only evidence about service quality presented on My Aged Care is whether or not a provider has been sanctioned by the regulator—a rare occurrence, especially in home care. Providers are free to set their own prices, and charge (sometimes wildly) different amounts for the same services. Some charge administration fees and others do not. Older people’s ‘exit’ option is supposed to drive competition and quality improvement—yet providers can charge them an exit fee if they decide to change. Some providers charge a levy if you want to have a component of your package delivered by a different organisation. You can choose to ‘self-manage’ your package, selecting providers of various services and coordinating all aspects of their delivery yourself. Under this option, you still have to choose a provider to hold and administer the funds, for which you pay a fee. And so on.
Of course ‘providers’ do not actually provide care; care workers do, under poor conditions for very low pay. Nearly nine in ten are women. Job quality is poor; the vast majority work part-time or casually. Nearly a third of residential-care workers and two in five home-care workers want more hours of work.22 The share of migrant workers, especially those from non-English-speaking backgrounds (NESB) has also increased. As Sara Charlesworth and Linda Isherwood’s recent article in Ageing & Society shows, NESB care workers are more likely to be employed casually and to be underemployed, especially if they were employed by a for-profit provider. In other research with John Lowe, Sara Charlesworth found that the already poor pay and working conditions of care workers are weakly enforced by the labour regulator responsible, the Fair Work Ombudsman.
In residential care, the outworking of the Howard-era changes, uncorrected by governments since, are evident. Without regulation of staffing, providers have substituted cheaper for more expensive categories of worker. Between 2003 and 2016 (the earliest and most recent years for which data are available from the National Aged Care Workforce Census and Survey), the share of more highly trained care workers—such as registered and enrolled nurses and physiotherapists—fell from 43 to 28 per cent, while the share of personal care assistants, for whom no minimum level of training is required, rose from 57 to 72 per cent. Meanwhile, the group of older people living in residential care became much sicker and frailer, requiring more, and more specialised care, not less. There was no compensation for skill loss with more staff time: the ratio of total staff to residents actually fell slightly between 2003 and 2016.23 The consequences are clear: a study undertaken for the Royal Commission into Aged Care Quality and Safety by Kathy Eagar and colleagues found that 58 per cent of older people in residential care lived in facilities with unacceptably low levels of staffing.24
In home care, which has been expanding, the number of people employed in direct care roles actually fell between 2003 and 2016. In home care, individualised funding of packages destabilises providers’ funding, further undermining already precarious working conditions for their employees. The gig economy has entered the field, via platforms such as Mabel, turning care workers into individual contractors without basic employee protections.
These changes have put the aged care workforce under enormous strain. A 2019 survey of care workers in both residential and home care found that large majorities report being often or always unable to do key aspects of their work, and seeing older people going without emotional support when distressed. Nearly half reported having seen in the last fortnight older people going without support with hygiene, around mealtimes and with maintaining their mobility.25
By relying on private provision and increasing the use of market instruments to organise aged care, successive governments on both sides of politics have left older Australians vulnerable to poor care and the care workers who help and care for them vulnerable to exploitation. As big businesses have entered the sector, they have threatened quality, working conditions and the normative underpinnings of the care system. Evidence presented in publications from public authorities and the Royal Commission shows that for-profit providers run much larger facilities on average, and both for-profit ownership and larger facility size are correlated with lower average quality of care and jobs, and higher profits. Meanwhile, the rules of the game, through which governments try to contain and shift costs, and providers seek to maintain their margins, have enabled the scandalous but legal behaviour we read about in the business and real estate gossip columns of weekend papers: trophy homes, European sports cars, and million dollar remuneration packages for corporate CEOs.
Non-profit providers are not exempt from scandal. As alleged in the recent investigation by ABC’s Background Briefing, the Greek Orthodox Church has been charging inflated rents at some of the nursing homes it runs to fund the lifestyle of its archbishop.26 One of these homes was St Basil’s, in which forty-five older people died of COVID-19 in Melbourne in July 2021. Many others died in Victorian facilities owned by large corporate chains and other non-profit providers, often because care workers had jobs in multiple facilities to make ends meet. It cannot be a coincidence that in Victoria’s publicly owned nursing homes, where the state government regulates staffing levels, there were very few cases and no deaths from COVID-19.
At the time of writing, in the wake of the Royal Commission and in the lead-up to the federal budget in which the Morrison government has foreshadowed additional spending on aged care, private providers are circling. According to the Financial Review on 19 April, in anticipation of funding increases and in the hope of further fee deregulation, the share prices of the three largest listed residential care operators have increased by between 68 and 125 per cent during the last six months, recovering their pandemic-related losses of 2020.27
It is to repeat a truism to say that the COVID-19 pandemic has revealed how essential care work is to our shared life and where the costs of care fall. Many problems in aged care both before and during the pandemic have been caused by marketisation, privatisation and commodification of care. These have always been elite projects. We need to radically democratise social policy design so that aged care workers can offer the kind of care they, and the community, aspire to, and that the humanity of older people demands.
Note: The author would like to acknowledge that this article draws on joint research with Dr Richard Baldwin on residential aged care.
1 For 2019, see https://www.abs.gov.au/statistics/people/population/life-tables/latest-release; for 2000, see https://stats.oecd.org/Index.aspx?ThemeTreeId=9 (Health status Life expectancy)
3 Calculations on Table B9. Population projections, by age and sex, Australia – medium series; https://www.abs.gov.au/statistics/people/population/population-projections-australia/2017-base-2066#data-download.
5 Based on calculation from SDAC Table 27.3 Persons aged 65 years and over, living in households, needing assistance, activity type, by provider type–2018, proportion of persons, in which 17.7 per cent of people who need assistance with self-care are coded as ‘assistance not received’.
8 J. Henderson et al., ‘Missed care in residential aged care in Australia: an exploratory study’, Collegian, 24(5), pp 411–16, 2017; J. Henderson et al., ‘The impact of facility ownership on nurses’ and care workers’ perceptions of missed care in Australian residential aged care’, Australian Journal of Social Issues, 53(4), 2018, pp 355–71.
9 https://www.aihw.gov.au/reports/australias-welfare/welfare-expenditure. The Australian government spent $10.2 billion on unemployment benefits in 2017–18, and gave $38 billion in tax concessions for superannuation.
10 https://treasury.gov.au/sites/default/files/2021-02/p2020-100554-ud03_equity.pdf. Retirement Income Review Final Report, chart 3A-11.
11 Aged Care Financing Authority, Annual Report on the Funding and Financing of the Aged Care Industry 2020, Table 2.2.
12 Aged Care Financing Authority, Annual Report on the Funding and Financing of the Aged Care Industry 2020, p. 89 and Chart 7.1: Total pool of accommodation deposits held, 2012–13 to 2018–19.
14 S. Bagwell, ‘How Doug Moran looks after himself’, The Australian Financial Review, 18 October 1997.
15 Department of Health and Ageing, Report on the Operations of the Aged Care Act 1997: 1 July 1999-30 June 2000, Canberra: Department of Health and Ageing, 2000.
16 Aged Care Financing Authority, Annual Report on the Funding and Financing of the Aged Care Industry 2020, Chart 6.3.
17 A. Richardson, Aged Care Residential Services in Australia, Au Industry (ANZSIC) Report Q8601, Melbourne: IbisWorld, 2021.
19 https://www.minterellison.com/articles/aged-care-extra-services-under-accc-spotlight; https://www.gadens.com/legal-insights/federal-court-determines-asset-replacement-charges-capital-refurbishment-fees-prohibited-aged-care-act-1997/
21 RoGS 2021, chapter 14, appendix table 14A.2, cell reference 026. (Home Care Packages levels 1-4 per 1000 population over 65 = 40.4)
22 K. Mavromaras et al., The Aged Care Workforce 2016, 2017, https://agedcare.health.gov.au/sites/g/files/net1426/f/documents/03_2017/nacwcs_final_report_290317.pdf
23 G. Meagher et al., Meeting the Social and Emotional Support Needs of Older People Using Aged Care Services, Macquarie University, University of New South Wales and RMIT University, 2019, https://researchers.mq.edu.au/files/108106140/AgedCareReport_MeagherCortisCharlesworthTaylor_Oct2019_Final.pdf.
24 K. Eagar et al., How Australian Residential Aged Care Staffing Levels Compare with International and National Benchmarks, Centre for Health Service Development, Australian Health Services Research Institute, University of Wollongong, 2019.
25 Meagher et al., Meeting the Social and Emotional Support Needs of Older People Using Aged Care Services.
26 A. McGhee, ‘Greek Orthodox Church took tens of millions in rent from aged care home at centre of deadliest COVID outbreak’, Background Briefing, 2021, https://www.abc.net.au/news/2021-04-16/st-basils-greek-church-taxpayer-funding/100068128.