Chair of Aged Care Financing Authority tells Senate that sector may not be financially sustainable – Department says viability is “issue for management”

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It’s worrying times when Peter Costello’s former Chief of Staff says the sector is in serious trouble.

ACFA’s Chair Mike Callaghan AM PSM – who has 38 years’ experience in the Federal Treasury and was Chief of Staff to the Treasurer for four years – has told a Senate Estimates meeting last week the sector may not be financially sustainable.

“There are many hurdles that the sector has to confront now towards achieving the objective of a sustainable residential aged care sector,” he said in a phone conference with the Committee.

“It’s not simply money, it’s getting the incentives right and getting the whole arrangements right. It’s getting the roles and the competitive pressures right. It’s improving the overall performance of the residential aged care providers.”

Questioned by Labor Senator Murray Watt about the Liberal Government’s $1.2 billion cut to the Aged Care Funding Instrument (ACFI) in 2016, Mr Callaghan said the 2017 pause in indexation – combined with changes to the ACFI scoring for complex health care – after the Liberal Government accused the sector of ‘gaming’ the system in 2016 had impacted on the financial performance of providers in 2017-18.

The Department of Health’s Secretary Glenys Beauchamp – who gave evidence at the recent Royal Commission hearings on the aged care workforce – denied funding had fallen.

“In terms of looking at the bottom line, the average government contribution through the ACFI instrument has actually gone up every year since 2012-13,” she said.

But Mr Callaghan maintained while ACFI is rising again, there is still significant financial pressure on providers because costs are continuing to rise higher than the increases in revenue with a “sizeable proportion” of providers making a loss and some smaller providers exiting the sector.

However, despite Scott Morrison’s Government being responsible for the funding “tightening”, they won’t be taking responsibility for providers shutting their doors.

The Department of Health gave evidence to the same meeting that the viability of a service is “ultimately an issue for the management” of a service.

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