Aged care operating under intense cost pressures: IHACPA report
The independent aged care pricing authority has released its report on public consultations held last year.
The Independent Health and Aged Care Pricing Authority (IHACPA)’s 41-page Pricing Framework for Residential Aged Care Services 2026-27 report, contains feedback from last year’s public consultations but does not make recommendations.
The consultations were held between 10 July and 22 August 2025, and resulted in 47 submissions, including from peak bodies, aged care providers, Government departments, carers, families, and aged care workers.
What did the consultation find?
Feedback revealed widespread concern about the adequacy of residential aged care funding under the new Aged Care Act.
Stakeholders consistently pointed to rising costs driven by expanded compliance and care obligations under the new Act, including clinical oversight, care minutes, reporting, training and auditing.
Submissions emphasised that “AN-ACC and BCT price weights must be responsive to the expanded scope of compliance requirements and care obligations under the Aged Care Act 2024,” the report notes.
Several stakeholders noted the current funding model does not adequately support sustainability or innovation, proposing that AN-ACC pricing and the hotelling supplement incorporate a margin. IHACPA and Health Minister Mark Butler have both confirmed that the cost of care services does not factor in a margin.
Others called for stronger alignment between funding and service quality, including the potential for quality-based pricing adjustments.
What were the other key concerns?
Regional cost pressures were also a key theme, with proposals for location-based loadings and more flexible funding approaches to support thin markets.
Stakeholders linked digital capability, AI monitoring and robotic assistance with safety improvements, and said funding should enable providers to adopt these technologies.
There were also calls to refine the AN-ACC classification system, particularly for residents with cognitive impairment, mental health conditions and complex care needs, alongside ongoing concerns about reassessment processes.
The interface between health and aged care was raised, with some stakeholders advocating for additional funding for transitional care.
Mismatch between pricing and business planning cycles
Operational pressures were also noted, with providers citing the burden of cost collection processes and misalignment between AN-ACC pricing announcements and business planning cycles. IHACPA typically provides pricing advice in September, with changes taking effect from 1 October.
IHACPA is undertaking a multi-year review of the hotelling supplement, examining cost variations across factors such as MMM classification, AN-ACC class and service size. Potential recommendations could include tiered funding, with any final decisions to be made by Government.
IHACPA is also reviewing the National Aboriginal and Torres Strait Islander Flexible Aged Care Program (NATSIFACP) and the Multi-Purpose Service Program (MPSP), conducting 45 interviews with providers from both programs.
Most of the submissions to the consultation have been published online and are available here.
