Care minutes shock: Gov announces reduced funding for target failure
Published on 19 December 2024
The Australian Government’s mid-year budget has not brought much Christmas joy for the wider economy. The government announced it will hold back on most of the $19 billion in new spending it promised beyond this year.
With a deficit projected for each of the next four years, ‘unavoidable’ spending on aged care is at the centre of the action. However, the government is pleased to have found over $5 billion in savings from the sector, and more could come thanks to a very Grinch-like announcement on Wednesday night.
From April 1, 2026, aged care homes in metropolitan areas will only receive their full care minutes funding if they meet their care minutes targets.
This will see the Base Care Tariff (BCT) funding for MM1 non-specialised services reduced by 0.113 of the National Weighted Activity Unit (NWAU) from April 1, 2026. This amounts to $31.64 per bed day based on the current AN-ACC price of $280.01.
Providers who fail to achieve 85% or more of their registered nurse minutes and total care minutes will receive nothing under the BCT, with a sliding scale of calculations applicable for all other possibilities.
Homes in rural, remote and very remote areas and those providing specialised homeless care will not be affected.
Aged care’s budget influence
Mid-year budgets tend to bring less fanfare than the major budget release and the 2024 edition is no different. That’s also likely due to the government having one eye on a looming election and not wanting to give voters more reasons to turn their backs.
However, despite painting this budget as responsible, back-to-back budget surpluses could not be sustained due to what the government calls ‘unavoidable spending’.
Payments related to the Aged Care Services program are expected to increase by $808.3 million in 2024–25 and $8.4 billion over four years to 2027–28. This is largely due to increased funding for wages as a result of the Fair Work Commission Aged Care Work Value Case, the setting of the Australian National Aged Care Classification (AN-ACC) price for residential aged care for 2024–25, and an update to the AN-ACC funding model, including updated AN-ACC price growth assumptions.
The budget impact of this increase is partially offset by funding provisioned in the Contingency Reserve for the Aged Care Work Value Case outcome. Additional savings will also come from user co-contributions.
In the short-term, over $10 million has been allocated to aged care across the 2024-25 Mid-Year Economic Fiscal Outlook (MYEFO) with the aged care workforce, home care and COVID-19 support among the major investments.
- The government’s aged care workforce investment continues with an additional $3. Billion over four years funding the next round of pay rises from January 1, 2025
- Just over $100 million will release 7,615 additional Home Care Packages in 2024–25 to reduce wait times ahead of the commencement of Support at Home
- A focus on aged care for older Aboriginal and Torres Strait Islander peoples will be delivered with $88.1 million invested over three years from 2025-26
- The government has committed $157.8 million to continue supporting residential aged care providers to manage COVID-19 outbreaks through the Aged Care Outbreak Management Support Supplement, surge workforce program and increased surveillance, monitoring and reporting of COVID-19 in residential care
More information and details from the MYEFO can be found here.
Care minutes shock
While the MYEFO itself is important to aged care, it’s the government’s care minutes funding change that is the greatest headline.
Despite claiming the intention is to not reduce funding, funding will be reduced for residential care providers in metropolitan areas failing to meet their care minute targets. The intention is to boost care minutes compliance.
The change comes into effect from April 2026 so providers have ample time to prepare or uplift their care minutes delivery.
The Department of Health and Aged Care will consult with affected providers on the draft Aged Care Rules legislation that would establish these changes through an exposure draft process, prior to implementation.
Why is this change being introduced? As per the government’s announcement, care time reporting shows a significant proportion of providers are not meeting their care minutes targets. In the April – June quarter of 2024, only 41% of all services met both their care minute targets. Compliance rates are even lower for services in metropolitan areas (38%).
“This is despite consistent feedback from the sector that workforce shortages are most acute in regional, rural and remote areas. This change aims to lift compliance with care minutes requirements by metropolitan services to ensure Government’s substantial investment in residential aged care leads to more care for residents as intended. It will also ensure Government is not providing funding for care minutes not being delivered,” the statement added.
As a result, eligible providers that fail to meet one or both of their targets will see the BCT funding reduced from April 1, 2026. The amount will depend on the services’ care minutes performance from the October – December quarter of 2025 onwards.
All residential aged care providers will be required to have an audit of their care time and associated expense reporting, undertaken at the end of the financial year by an external auditor. Providers will be required to submit the first care time audit as part of their Aged Care Financial Report (ACFR) for 2025-26. The department will provide further information on this new audit requirement in the coming.
Additionally, from July 1, 2026, providers will also transition to being paid on services delivered.
“This change will help improve the viability of providers of residential aged care by simplifying the payment process and cutting the administrative burden,” the department explained.
“Paying residential care providers on services delivered is not only simpler, it improves payment integrity by removing discrepancies between funding to providers and their entitlements.
“This change does not impact funding for any aged care residents. It also does not affect the amount paid to any residential aged care providers.”