The Australian Parliament must agree a long-term plan to reform the health and aged care system to address an unsustainable growth in demand and rising costs that will consume more than 40 per cent of most government budgets by 2050.

Business Council of Australia Chief Executive Jennifer Westacott today released the paper Preparing for a Better Future: Creating a Sustainable System of Aged Care Services for Australia. The paper is the council’s response to the Productivity Commission’s final inquiry report on aged care services.

“We strongly endorse the need for change and the Productivity Commission’s recommendations, and we urge the parliament to agree that only major long-term reform of the sector will address the challenges ahead,” Ms Westacott said.

“Surely if there was ever an issue the parliament could find common ground on it would be making sure we provide the services that we will all need as we age and in a way that is going to be affordable for all governments long term,” she said.

“Business has a stake in this debate because a poorly managed approach to the ageing population will dramatically reduce the scope of governments to provide other essential services such as education and infrastructure.

“And the unsustainable growth in demand for aged care services within the current system of service delivery places a significant competing demand on an already tight labour market.”

Council research undertaken with Deloitte Access Economics has applied the Intergenerational Report approach to get a picture of the combined finances of Commonwealth, state and territory budgets out to 2050, and shows a bleak outlook.

The research shows:

• Without major reforms and under the present approach to government spending the combined budget deficits of federal, state and territory governments will hit 5 per cent of GDP by 2050, or $70 billion in today’s terms.
• These deficits are driven largely by the projected healthcare and age-related spending associated with increasing demand for healthcare services and an ageing population.
• Spending on health care and ageing is projected to go past 40 per cent of the total budgets of most Australian government jurisdictions by 2050.
• Without fundamental reform, the healthcare and aged care systems will, under this modelling, become unaffordable with ever more difficult choices about how to ration services including who might have to miss out.
• Increasing constraints will be imposed on the ability of governments to support growth in the broader economy, and the ability of business to access the working population required to meet skills needs in other sectors.

The council endorses the Productivity Commission’s report as a blueprint for change.

The commission’s report recommends a fundamental shift in how aged care services are provided from a system of government-funded services in which choices of care and services are limited, to one in which older people are entitled to subsidies that can be applied to the services of their choice in the setting they choose.

Preparing for a Better Future: Creating a Sustainable System of Aged Care Services for Australia examines the Productivity Commission’s report and outlines five clear implementation risks that must be managed if the commission’s vision for the sector is to be realised. These are:

• Ensuring that consumers are empowered to make informed choices about what services they access and where, including through greater competition between providers on the basis of best-outcome service delivery.
• The health and aged care systems must be properly integrated so services can be delivered in the most appropriate clinical settings.
• Regulation and financial incentives must be overhauled to better attract investment and foster innovation and competition in the sector.
• Regulatory barriers to career advancement and to attracting sufficient numbers of skilled staff must be removed.
• Articulating a clear implementation plan, and improved and consistent methods of reporting and monitoring sector performance must be adopted.

“The greatest risk in addressing the growing and significant challenges presented by the aged care system is that people do not recognise or accept the fundamental nature of change that will be needed in the next few years,” Ms Westacott said.

“Only by agreeing and acting now will people and care providers have time to adjust.

“A decade of reports have so far only led to incremental change, but as our research shows tinkering will not avoid the crisis that is looming within coming decades in our aged care system.

“At a time when Australia must improve the productivity of the economy and better use its scarce resources the performance of the aged care sector must be improved.

“Like healthcare and disability services reforms, this change is now urgent,” she said.