Retirement Village and Aged Care in Australia

Reforms, impacts on the industry and investors carve out the future path of aged care law in Australia.

Aged Care Reform in Australia
Arthur Koumoukelis

Arthur Koumoukelis

September 7, 2021 07:00 AM

It is a truism that in spite of the global pandemic, the world continues to age rapidly. Today, we are seeing the emergence of demographics around the world where the proportion of the aged population has increased to a point where the total population is in decline (e.g., Japan), and the burden on younger taxpayers is increasing.

The public policy challenge of meeting the clinical, cultural, and domiciliary and support needs of the ageing population continues to intensify.

All governments around the world are struggling and searching for policy positions that meet and balance the competing objectives of:

1. Who pays? To what extent the aged demand is met through the public purse (without overwhelming the younger taxpaying population) or the aged individual and their family;

2. Who is responsible? Providing autonomy and dignity to the aged through choice (in circumstances where capacity may fail) but holding providers responsible for provision of services;

3. Who cares? Where does the workforce to provide this support come from, what are their qualifications to be? What is the role of family support?

This paper will discuss the current regulatory framework in Australia, the reform agenda and the future directions in Australia in relation to the provision of care and the built environments.

Current Regulatory Framework

In Australia, the provision of care or domiciliary support to the ageing population is provided either through:

  • the publicly funded Aged Care Act 1997 (C’th), which provides subsidised care services described as:
    • Commonwealth Home Support Programs provided to individuals as subsidised care and support;
    • Home Care Packages - being packages for domiciliary and clinical support for people living at home;
    • Residential Aged Care - being funding for care and services within a built environment being a nursing home.
    • Flexible and Respite care - funding for provision of accommodation and care on short term basis
  • privately funded user pays services.

‘Seniors living’ is a term often used to describe the form of purpose built environment intended to be occupied by aged persons. This form of built environment can be further divided into three distinct categories:

1. Independent living – often described as the person’s “home”. This may be a suburban home, an apartment, mobile home or other independent living which is regulated under the Real Property Act, strata title, rental or mobile home legislation;

2. Retirement Villages - being purpose -built environments for “retired” person, regulated under the Retirement Villages Act across all jurisdictions in Australia, hosting varying degrees of ancillary services and facilities;

3. Nursing Homes – purpose[1]built environments regulated and funded under the Aged Care Act.

The majority of seniors living is within independent living , with approximately 7% of the population over 65 occupying retirement villages and approximately 190,000 aged persons living in nursing homes no more than 2%.

Australia’s aged care system is highly taxpayer subsidised (approximately $30Bn pa 2021) and regulated. In contrast, neighbouring countries are less regulated in terms of an aged care structure both across support services and the form of housing and less reliant upon Government-funded support. With the growing pressures referred to, Australia continues to explore less reliance on Government-funded support while still providing consumer protection, while neighbouring countries move towards and are exploring greater Government support and regulation and looking to Australia for examples.

Government Reform

Over the last four years, there has been a heightened focus on consumer protection and interrogation of quality-of-care services provided in aged care, both home care and within nursing homes.

In New South Wales, the review of the retirement villages industry undertaken by Kathryn Greiner AO in 2017 has provided a platform for significant reforms to the Retirement Villages Act to give greater consumer protection, disclosure, security, and provision of services to residents.

In aged care, the Commonwealth Royal Commission into Aged Care Quality and Safety that commenced hearings in February 2019 exposed significant shortcomings in the provision of aged care through the current structure with the Interim Report titled simply ‘Neglect’. The final report issued in March 2021 provided 148 recommendations for reforms to the aged care regulatory system structure and the Aged Care Act itself.

Aged care and seniors living continues to be a challenging industry that mixes a highly regulated environment with the challenges of a vulnerable section of the population.”

The Royal Commission took the approach of a consumer-centred, taxpayer-funded, demand-driven support system for those needed to access aged care services. This holistic approach was essentially rejected by the Federal Government, leaving open the way for greater consumer contribution to the cost of support but maintaining the consumer-focused regulatory framework.

The Federal Government response to the final report moves the policy focus to reflect a clear separation of accommodation, (being the responsibility of the consumer) from care services (funded by the Government on an assessed needs basis) with a role for consumer co-contribution (to be further explained) forming the foundation going forward.

The reform agenda has commenced with clear direction to bring the various forms of care support categories under a single assessment model with varying support packages based upon changing needs.

Reforms to the funding of home care in 2021 have put pressure on current home care providers to explore consolidation amongst industry participants and a move to aggregate the customer cohort to geographically confined areas to drive efficiencies of delivery of service.

All of these reform agendas have given rise to increased take-up of home support services within retirement villages, a reluctance by the aged to enter nursing homes (due to a large degree from the Royal Commission report) and the development of innovative models such as vertical co-located, intergenerational, mixed-use built environments that can cater for the full range of a person’s care and accommodation needs.

All these reforms are continuing and will continue until 2024, when the current structure of funding nursing homes directly based upon planning regions is dismantled.

The Future

Aged care and seniors living continues to be a challenging industry that mixes a highly regulated environment with the challenges of a vulnerable section of the population, pitted against a body of substitute decision- makers who will be asked to fund the reforms from their taxes but will also benefit from the most significant intergenerational wealth transfer the world has ever seen.

These pressures give rise to difficult questions of assessing an aged person’s capacity, determining who the best decision-maker is, what it means to act in the best interests of the aged and assessing and accessing the resources held by the elderly to provide for their care. From the operators’ and providers’ point of view, it gives rise to opportunities of developing innovative accommodation structures, financing products and service delivery models.

The evolution and innovation within the industry have really only just begun, and the legal framework that emerges will play an integral part in assisting the future development whilst continuing to protect the most vulnerable people in our community.

Arthur Koumoukelis is a Partner at Thomson Geer, specialising in the aged care and retirement village industry. Arthur holds degrees in both accounting and law. This background in corporate and tax allows him to advise on all aspects of the structuring, acquisition, disposal, development and operation of aged care, assisted living and independent living retirement living environments. He also provides assistance to approved providers and operators of seniors living facilities in relation to any litigious issues, disputes and administrative actions.

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