But current and projected aged care spending underestimates the cost of implementing Royal Commission recommendations.
Australia’s ageing population is overstated as a factor contributing to growing health costs, researchers say.
In fact, an analysis of the government’s 2021 Intergenerational Report (IGR) conducted by Professors Diane Gibson, John Goss and Jane Hall has found that greater investments into the aged care sector are needed.
They found the IGR “provides an outlook for the economy and the Australian Government’s budget over the next 40 years”, examining the sustainability of current policies within demographic, technical and structural trends.
More broadly, the authors were critical of the fact that both the health and aged care sectors were analysed through an economic-demographic lens in the IGR, rather than a social one.
They wrote that this framework led the government to “miss the opportunity to address the high likelihood that there will be profound social and cultural change over the next 40 years”.
Health expenditure has been flagged as an area of major growth since the first IGR in 2002, making up 4.6% of GDP in 2021-2022 – this is projected to be 6.2% in 2060-61.
However, the authors found that an ageing population was overstated in public debate as a factor driving health expenditure, with the 2021 IGR finding that spending on admitted and out of hospital medical services due to ageing grew by 0.9% per year between 2011-2012 to 2018-19.
In contrast, population growth accounted for a 1.5% increase per year in admitted and out of hospital medical services.
The researchers emphasised that the “non-demographic growth rate is the larger driver of health expenditure growth”, which encapsulated factors such as disease rate changes, excess health price inflation and volume of services per case of disease growth, indicating that these factors should garner more attention.
The authors wrote that “it is not expected that the government will be able to continue to exercise the same extent of control on growth in Medicare benefits over the coming decades”, due to excess health price inflations.
The chapter also noted that diseases such as dementia, diabetes, kidney disease and cardiovascular disease were likely to see increase health expenditure.
“Yet whenever the results are presented by politicians and reported on by journalists, there is always an emphasis on aging being a major driver of health expenditure growth, and that ageing is a major challenge,” the authors wrote.
They added that future IGRs should analyse the impact of increased technology use on health expenditure, being likely to affect “both expenditure per prevalent case of disease and disability/disease rate changes”.
Somewhat unsurprisingly, the authors found that the aged care sector was in dire need of greater funding.
While there was a projected increase in the funding allocated towards aged care between 2020-21 and 2060-61 – from 1.2% of GDP to 2.1% – much of this funding was allocated in response to the Royal Commission into Aged Care Quality and Safety and was described by the authors as largely inadequate.
“Yet two years after our aged-care system was described as ‘cruel and harmful’ by the Royal Commission, the 2021 IGR has produced only the most basic of projections for the future of aged care in Australia, and it almost certainly underestimates the expenditure that will be necessary to implement the Royal Commission’s recommendations,” the wrote.
They wrote that Australia spent significantly less on long-term care as a proportion of the GDP (1.2%) when compared to countries such as the Netherlands, Japan, Denmark, and Sweden (3-5%).
They also recommended greater investment into policies that will help offset the cost of aged care, such as preventative health.
Another critical finding was that the increasing cost of aged care reinforced stereotypical views of older Australians. The misconception that older Australians were “dependent on taxpayers because they lack agency and the ability to contribute to society” was heavily reinforced by the soaring prices of aged care.
Contrary to this claim, “15% of older Australians engage in paid work after the age of pension eligibility”, and data from the ABS reveals that “nearly 80% of people aged in their early 60s had good or excellent health”.
Looking forward, the researchers recommended a greater emphasis be placed on the sociocultural factors underpinning aged policies such as the “social benefits of improving the quality of later life”, and the importance of “honouring our social contract to ensure all citizens are properly cared for”.
“Resentment towards paying and planning for aged care is likely to diminish if the system changes sufficiently to become an attractive option for later life care,” they wrote.
Future IGR projections should account for “continuing shifts in policy away from residential aged care to community care, changing patterns of disability and disease, the impact of industry restructuring, the role of technology, labour force shortages or current shortfalls in the quantity and quality of services”, they wrote.
