Time for a new approach to funding residential aged care

Support should be tied to the health care needs of residents, not to how eligibility for subsidies is assessed

Government support for residential aged care facilities (RACFs) in Australia has undergone major periodic shifts in the attempt to match residents’ needs and the costs of care. The money involved is considerable: during 2018–19, the Australian government provided $13.3 billion in subsidies, with more than 200 000 people living in RACFs.1

The impact of coronavirus disease 2019 (COVID‐19) in aged care homes, both here and overseas, has highlighted the need to match care with residents’ clinical requirements,2 particularly given the long history of dissonance between social and health care policies. People in residential care are now generally much frailer than a few decades ago, and about one‐third of residents die each year.3 This situation highlights the need to remedy the inadequacies of health care support in aged care. Both the Royal Commission into Aged Care Quality and Safety and the tragic effects of COVID‐19 have raised serious questions about the quality of health care for people living in aged care homes.4 We need a funding mechanism that promotes the satisfaction of residents’ health and social care needs, as well as rewarding quality, innovation, and restorative care. Instead, the current system encourages care aligned with how subsidies are assessed rather than what residents need. While a successful funding mechanism will not ensure quality care for vulnerable Australians, the wrong one can certainly prevent it.

The Aged Care Funding Instrument (ACFI), which replaced the Resident Classification Scale in 2008, is the current mechanism for matching government subsidies to providers for delivering care with the care needs of RACF residents; in principle, the greater the care needs of the resident, the greater the funding available for meeting them.5 Concerns have been expressed, however, that the care provided does not match the funds allocated, with the increasing numbers of internal and external ACFI assessors leading to costly overassessment.6 Further, there is a clear perverse incentive: if a resident's function improves, funding for their care is reduced. Any funding system that encourages the inadequate provision of restorative care, specialist medical review, and allied health services is unlikely to promote excellence.

In this issue of the MJA, Eagar and colleagues report evidence for the value of a new casemix classification instrument, the Australian National Aged Care Classification (AN‐ACC).7 The AN‐ACC divides residents into 13 classes or funding levels according to a panel of clinical measures, reflecting differences in resource use. It is important to note that, unlike casemix funding in acute care, the functional and cognitive sequelae of disease are the main drivers of costs, rather than the specific medical diagnoses themselves, meaning that cognitive decline and frailty, regardless of the underlying cause, are the key factors that affect resource needs. A research‐based mechanism also provides a platform that could be developed for further investigations of both funding and, more importantly, outcomes for residents.

Opponents of casemix‐based funding call for fixed funding models,8 expressing concerns about a move from a social care model to a more clinical model. This may partly reflect historical beliefs about who lives in residential care facilities, again highlighting the startling disjuncture between health and social care in some parts of the aged care sector. The financial burden of assessment can also be a problem if money is diverted from direct care for residents to AN‐ACC assessment, although the use of external assessors would allow separation of assessments for care planning and funding. A resource use classification does not take all the costs of operating facilities into account; organisational, environmental, and social care costs will not directly influence the AN‐ACC class allocation. Palliative care and special care requirements, such as feeding tubes, also need to be considered.

The AN‐ACC could be part of a quality and safety framework for benchmarking resident outcome measures, such as mortality rates and falls, and for linking with input measures, such as staffing types and ratios. The ability to adjust staffing according to the mix of residents in an aged care home could allow more meaningful comparison between facilities of resident outcomes with respect to both safety and quality.

Costs were not examined by Eagar and her colleagues, but there is growing evidence that Australians strongly support increasing funding to achieve a high quality aged care system.9 Adequate systemic funding for meeting the complex health and social care needs of frailer Australians is ultimately the key to the reform of aged care. Any system that targets and matches this funding to the health needs and quality of life of older people in residential care is welcome. We just need to ensure that funding is accompanied by the right incentives for these potential benefits to be realised.