Little Change Since 2019: Funding Models Towards Better Care

It's not how old you are. It's how you are old. - Jules Renard

I am determined to make people the beating heart of a strenghtened aged care system that replaces fear with trust.

- Hon Anika Wells MP, Minister for Aged Care

The Scottish philosopher, Alisdair MacIntyre, once offered that what we believe to be fundamentally real underpins our ethical beliefs. This in turn reflects the economic paradigms we support, policies we promote, programs we fund, and social contract that holds each other to account.

Much can be said about our age services system, but the Royal Commission was right in highlighting the broader societal issue of caring for our elders:

The language of public discourse is not respectful towards older people. Rather, it is about burden, encumbrance, obligation and whether taxpayers can afford to pay for the dependence of older people. As a nation, Australia has drifted into an ageist mindset that undervalues older people and limits their possibilities.

What’s more, the Commission uncovered an ‘aged care system that is characterised by an absence of innovation and by rigid conformity’, and where ‘innovation is stymied'.

The premise to the Commission's conclussion, is it's position that the age services system is falling short at all levels—regulators, providers, the service delivery coal-face, and general population. Yet with over 20 inquiries (think kerosene baths, Oakden, and the Quakers Hill fires), and at least two age services reviews over the last few decades, not much has changed.

At the heart of this is a mature industry that traditionally subsisted primarily on government funding with a mix of fixed budget, capitation, and fee-for-service funding models.

Such models create wrong incentives, where providers are paid for the volume of services they deliver, and not the actual value of care delivered. Consider for a moment that fee-for-service rewards the quantity, but not the quality or efficiency of care delivered.

Equally, fixed budgets look at the macro age services landscape, but not actual patient needs— they also create pressure to increase budgets year-on-year.

Policy makers might find ample narrative for population- level improvements, but older persons (and their families) don’t care about population outcomes, they care about the quality of services they receive.

Capitation models achieve some cost savings by targeting low-hanging fruit, but it doesn’t necessarily change how care is delivered. As with the prior two models, it also incentivises volume over quality care.

Additionally, capitation models tend to encourage providers to deliver services in-house because contracting externally reduces net revenue. Combined with the need to create economies of scale and scope in order to deliver financially viable services, this inhibits competition, and unintentionally decreases choice where persons may find it hard to choose the best provider for their particular needs.

Essentially, successive governments since 2010/11 have fundamentally supported an economic and policy orientation where the age services industry is predicated on greater market competition, increasing emphasis on user-pays, and government funding that is not keeping up with demand.

Yet, whether it’s through tweaking established funding models, or models that are intended to catalyse consumer directed care — they continue to perpetuate a focus on the volume of services delivered over care outcomes, and on macro-level population impacts rather than what’s important to individual older persons.

Government reforms to create a culture of respect for older Australians need to take into consideration their leadership role in facilitating a viable and person-centred age services industry.

This is an industry-wide innovation challenge, and the following considerations need to be taken into account:

• How do you create a system that only pays for good care outcomes delivered?

• How do you fund a system that takes into consideration a person’s full care requirements and reduces inefficient costs at the same time?

• How do you design a system that allows for a fair profit for delivering efficient and quality care?

• How do you support providers from having to bear the burden of high-cost outlier care cases?

• How do you incentivise providers to be more multidisciplinary and integrated in their care delivery?

To answer these questions, there needs to be clarity as to whether the industry is a clinical service that provides social care, or a social care service providing clinical care.

How we perceive our world influences our ethics, in turn, our ethics influences our politics and our obligations to care for each other.

While some might still think that models of care are the key to industry sustainability, as others vocally call for markets of care as the panacea—perhaps the true innovation opportunity here is for government to facilitate and fund a market able to care.

Anything short of this, is just noise.

By Merlin Kong, Founder and Principal Coach, Youtopient