The aged care revolution

6 minute read  31.05.2017

Australia’s aged care sector is transforming as demographic and technological changes combine with a new focus by government on giving older people more autonomy over their care.

Key takeouts

With Australians living longer, the growth of home care services is the dominant trend shaping Australia’s aged care sector


Consumer-driven funding arrangements are reorganising the market – most notably by increasing the popularity of retirement villages which now offer home care services

Novel legal issues are arising as regulatory and governance frameworks struggle to keep up


Australia’s aged care sector is transforming as demographic and technological changes combine with a new focus by government on giving older people more autonomy over their care.

The future is one where Australians will increasingly choose to remain in their own homes and communities as they get older. Hospitals and residential facilities will be accessed as a last resort. Already, savvy aged care providers are adjusting their business models to deliver a wider mix of independent and assisted living options in private homes and retirement villages. Yet novel legal issues are arising – covering everything from acquisitions and institutional structures to operators’ duty of care.

Today, Australia’s aged care sector directly contributes more than $13.5 billion annually to the economy and employs more than 350,000 people. This footprint is only likely to grow as baby boomers (those born between 1946 and 1964) retire. By 2035, current projections indicate that the number of people aged over 65 will have almost doubled to 6 million.

As Australians enjoy longer and healthier lives – with life expectancies predicted to rise beyond 95 years for men and women by 2055 – demand for home care services will skyrocket. “Home care is going to be a game-changer. Apart from the obvious cost savings to government, the evidence demonstrates that care in the community yields better health outcomes for consumers,” says Penelope Eden, a Brisbane-based partner at MinterEllison and an expert in the health and aged care sectors. “It also answers the call of the baby boomers, who are eschewing institutionalised care in favour of supported community living.”

Retiring baby boomers, Eden notes, are demanding more choice and control over the services they receive. Compared to previous generations, many are less financially constrained in paying for care services due to the greater education and employment opportunities they have enjoyed. Increasingly, people also expect to self-manage health conditions such as arthritis, diabetes or high blood pressure that fall short of requiring institutionalisation. At most, they may simply require a home care provider to periodically visit and bathe them or cook a meal.

The federal government is encouraging the trend towards home care services. Its 2014 Living Longer, Living Better reforms introduced a new system in which older Australians received funding based on need. The number of publicly funded home care packages was increased while funding for residential aged care was restructured.

Already, one in four aged care places funded or subsidised by the federal government is based in the community. Over the next decade, the ratio of Commonwealth funded home care places will increase from 27 to 45 packages per 1,000 people aged over 70, with residential aged care places dropping from 86 to 80 places.

There are obvious financial advantages. According to one estimate, it would cost an additional $31 billion to fund the 76,000 new residential aged care places needed over the next decade. This is obviously unsustainable at a time when a diminishing share of working-aged taxpayers exist to support a growing pool of retirees. As a result, residential and sub-acute hospital settings are likely to be reserved for the most seriously ill.

Another important reform is that as of February 2017, home care funding attaches to the consumer – thereby increasing their purchasing power – rather than delivered as a grant to the service provider. “Home care packages are now portable – if they’re not getting what they need, seniors can take their funding and go somewhere else,” Eden explains. “It’s a tougher ask for operators and will undoubtedly challenge traditional operating models.”

The new competitive market in aged care is forcing many not-for-profit operators and commercial players to restructure. Eden observes that a rapid convergence is underway as retirement villages take on a greater role in delivering ‘low-level’ aged care services. Many aged care providers now see offering home care within the retirement village setting as a vital part of their business model. There is also growing interest from overseas investors in acquiring Australian-based home care franchises.

As a result of this upheaval, MinterEllison’s aged care practice frequently represents clients who are financing or acquiring residential or home care facilities, or disposing of assets. The firm is heavily involved in risk and regulatory advisory work. It also handles liability claims by employees and residents.

The transformation of aged care is outpacing governance frameworks. For example, while the federal government is responsible for funding residential aged care, retirement villages in Australia are not funded at all and are covered by state regulation. Uncertainties also exist as to operators’ legal obligations towards home care clients. Eden notes that problems arise when residents, wielding their newfound autonomy, demand to receive care in a way that is inconsistent with the care coordinator’s professional view of their best interests.

Operators have also “got to be on their game” in monitoring residents for subtle deterioration in their vital signs and responding quickly, for example, when a panic button is pressed. “In a nursing home, everyone is together so it’s easy to keep track,” she says. “But if a resident is only being visited once every second day because that’s all the funding envelope provides, discharging the duty of care to the client can be a real challenge.”

Finally, the growing use of digital technology is another area where regulations are in their infancy. Aged care will increasingly be delivered in connected settings where elderly people monitor their own heart rate and blood pressure using wearable devices. They will also access doctors via cloud-based video conferencing and use household appliances that connect to the Internet of Things. “These sorts of bells and whistles are only as good as the human being on the end of the system – it requires operators to be constantly checking and monitoring,” Eden says. “The other main issue is around the privacy of the client’s information and who has access to it.”

Eden predicts the aged care sector in Australia is moving towards a ‘continuum of care’ model in which services are seamlessly delivered across a range of accommodation environments. There will always be a place for residential aged care. However, new models of retirement and intergenerational living are emerging. Innovative financial measures will also be required to support older Australians, potentially involving products such as aged care insurance. As shown by the UK government’s recent attempt to claw back the sale proceeds of the family home to pay for care – dubbed by opponents as a ‘dementia tax’ – aged care will become an increasingly contentious area of political debate.

For their part, Eden says legal professionals must expect further changes in the sector. “Aged care has gone from being a cottage industry for lawyers to evolving really rapidly,” she says. “The role of the legal adviser has also changed. Keeping pace with the rate of policy, regulatory and funding reform is only likely to become more and more of a challenge.”


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