The claim

Australia's aged care sector has come under close scrutiny in recent weeks following concerns that some providers have placed profit before the welfare of the elderly.

In September, Prime Minister Scott Morrison announced a Royal Commission to examine, among other things, the "quality of care provided to older Australians, and the extent of substandard care".

Sorry, this video has expired Watch Bill Shorten make the claim during Question Time

Labor immediately accused the Government of hypocrisy, claiming Mr Morrison had, as treasurer, slashed funding to the sector.

In a question to Mr Morrison in Parliament, Opposition Leader Bill Shorten asked:

"Yesterday, the Prime Minister stated: 'We are committed to providing older Australians with access to care that supports their dignity …'

"If that is the case, why, when he was treasurer, in his first budget, did the now Prime Minister cut $1.2 billion from aged care? How did cutting $1.2 billion from aged care support the dignity of vulnerable older Australians?"

Did the Government cut funding by $1.2 billion from aged care in Mr Morrison's first budget as treasurer? RMIT ABC Fact Check investigates.



The verdict

Mr Shorten's claim is misleading.

In Mr Morrison's first year as federal treasurer — that is, 2016-17 — total Commonwealth funding for aged care (excluding the pension and other forms of income support for seniors, but including a range of other programs) was $17.4 billion.

That represented an increase of more than $1 billion over the previous year.

Did Scott Morrison cut funding from the aged care budget? ( Pixabay: sabinevanerp )

The increase came despite a decision to pare $1.2 billion of "efficiencies" over four years, largely by reducing the subsidies paid to aged care providers to tackle potential over-claiming and an unexpected cost blowout.

The overall level of Commonwealth funding provided for aged care has increased on an annual basis for at least the past decade.

As experts noted, this result is hardly surprising, with Australia's ageing population leading to growing numbers of aged care recipients, increased care requirements, and higher care costs.

Analysis by RMIT ABC Fact Check shows funding has increased across a range of measures: in nominal dollar amounts, in real terms (after adjusting for inflation), as a proportion of total expenses, and as a dollar amount per aged care resident per day.

As some experts contacted by Fact Check suggested, rather than representing a cut, the decision to carve out $1.2 billion of "efficiencies" could rather be characterised as an attempt to better target aged care funding, with spending continuing to rise in real terms.

Fact Check deems that an adjustment to future spending does not represent a "cut" when the overall level of spending continues to rise.

Whether spending on aged care is adequate is a different question, and not the subject of this Fact Check.



Government spending on aged care

RMIT ABC Fact Check analysed budget papers from 2009-10 to 2018-19 (the latest).

Figures for aged care spending are included in Budget Paper No.1 (see, for example, table 9.1 on p 6-24 for the latest budget year).

Excluding spending on the aged pension, some concessions and other forms of income support, but including spending on residential care, home care and veterans' care (among other things), spending increased at an annual average pace of about $1 billion between 2010-11 and 2017-18.

If the latest budget forecasts for the years 2018-19 to 2020-21 are included, the annual average increase rises to about $1.1 billion.

Aged care nominal spending by financial year

In making his claim, Mr Shorten specifically referred to Mr Morrison's first budget as treasurer, which was for 2016-17. As previously mentioned, that year the government announced $1.2 billion of "efficiencies" (partly offset by more money in the budget for regional aged care and information services).

That announcement followed a $2.5 billion increase in the expected cost of the Aged Care Funding Instrument (ACFI), the main Commonwealth funding mechanism to subsidise aged care service providers, since the budget update just six months earlier.

According to Budget Paper No. 2 (page 101): "This measure is part of the Government's response to the continued higher than expected growth in ACFI expenditure, which has increased by a further $2.5 billion over the forward estimates since the 2015-16 MYEFO [mid-year economic and fiscal outlook]."

Despite these "efficiency" measures, total aged care spending in the 2016-17 budget increased by $1.1 billion in nominal terms, compared to the previous year.



What about aged care spending after factoring in rising prices?

If prices generally have been rising more rapidly than government spending on aged care, it is possible that spending has fallen in real terms, leading to a fall in the level of services provided.

Has this been the case? Fact Check used the Australian Bureau of Statistics' Consumer Price Index to calculate a "real" measure of spending on aged care, expressed in 2016-17 prices.

Real spending has been rising steadily, although at a slower pace than the nominal figures would suggest. As experts noted, it is unsurprising that Government spending on aged care would rise at a rate outstripping general price rises, given cost pressures linked to the ageing of the population.

In 2016-17, the year referred to by Mr Shorten, real spending grew by $834 million or 5 per cent.

An alternative method of adjusting the figures would be to use a specific measure of aged care costs to "deflate" the nominal figures.

The Australian Institute of Health and Welfare publishes a "health price index", used to estimate health-cost inflation.

As a component of this index, the institute provides an index of government hospital and nursing home inflation, based on unpublished data from the Australian Bureau of Statistics.

As far as Fact Check is aware, there are no data available that specifically measures aged-care price inflation.

Fact Check used the institute's index for hospital and nursing home inflation to produce an alternative real measure of 2016-17 prices.

Under this calculation, Commonwealth spending on aged care increased by $819 million in 2016-17, or 4.9 per cent. This is broadly similar to the result when the consumer price index is used.

Aged care real spending (HPI) by financial year



Aged care spending as a proportion of total spending

Fact Check also examined Commonwealth spending on aged care as a proportion of total spending.

On this measure, aged care spending has also risen, from 3.05 per cent in 2009-10 to 3.93 per cent in 2017-18.

Total spending figures can be found in the historical tables (see, for example, table 6 of statement 11) in Budget Paper No. 1.

What about spending per aged care resident?

Data showing Commonwealth spending per aged care resident per day is provided by the Department of Health in the annual report on the funding and financing of the aged care sector.

The latest report, released in July 2018, shows in 2016-17, the Commonwealth spent an average of $184.06 per resident per day.

That was an increase of 6 per cent on the $173.57 spent per resident per day in 2015-16.

What the experts say

Stephen Duckett, the Grattan Institute's health director and a former secretary for the Department of Health, said it was "more or less inevitable" that spending on aged care would rise at a rate outstripping inflation, given the ageing of the population.

"There are more and more people over 85 or over 90, and so the government is releasing more and more bed places into the system," Dr Duckett said.

"If you are just keeping pace with demand ... you'd expect expenditure to go up. In a sense, just standing still means expenditure will go up faster than CPI."

Dr Duckett said whether the government had cut spending in 2016-17 from aged care was a question of interpretation.

Professor John Wanna, an expert in public administration at the Australian National University's College of Arts and Social Sciences, said the reduction in the rate of increase in future spending should not be characterised as a "cut", because future spending was more anticipated than real or legislated.

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He said the "efficiencies" announced by the government in the aged care sector were "presumably an attempt to tighten up funding going to centre providers because they tend to only want those classified as high-end care needers, because they attract more funding".

Professor Wanna said while oppositions would claim cuts are being made, it was the right of any government to make changes to eligibility.

"I'd say this is better explained as an attempt to better target spending to aged care recipients and their providers," he said.

RMIT's public policy professor David Hayward said the key issue was whether the level of Commonwealth resourcing for the aged care sector had been increasing in real terms.

"The key thing is whether spending has increased year-on-year in real terms, and it has," he said.

Professor Hayward said the $1.2 billion "efficiency" measure announced in the 2016-17 budget was in response to evidence that aged care service providers had been "gaming the system" by classifying people in higher care categories without justification to claim larger subsidies.

Mike Woods, a professor at the Centre for Health Economics Research and Evaluation at the University of Technology Sydney, cautioned that a per resident (or client) comparison would need to take into account the needs of the person compared to the value of the subsidised package paid for by the taxpayer.

He said there was evidence that some clients who have been assessed as needing higher levels of home care were having to settle for lower levels of care.

Principal researcher: Josh Gordon

Sources



