Government funding breakdown: Budget will offer crucial support

Following the Federal Government’s confirmation it will fully fund the 15% aged care pay rise in this week’s Budget, accountancy firm StewartBrown has released a detailed breakdown of the additional funding.

The Government will set aside $11.3 billion over four years to help fund the hotly anticipated 15% pay rise for roughly a quarter of a million nurses and aged care workers. It’s arguably the largest commitment to aged care and one that will ease a considerable amount of pressure on providers who otherwise would have had to make up the difference in wage growth.

“The Government’s commitment to fully fund the FWC ruling to increase direct care workers, recreational officers and head chefs/cooks by 15% has been met with the budget announcement,” StewartBrown said in its report. “This must be applauded and will have considerable flow-on benefits for staffing and quality of care. It is a significant and important funding initiative.”

Funding breakdown – where it will have an impact

• $10.1 billion will be allocated to the Australian National Aged Care Classification (AN-ACC) subsidy funding
• That includes $7.6 billion to fund the 15% pay rise and $2.5 billion in indexation to cover other cost increases
• An additional $743 million will be included when the care minute quota rises to 215 minutes from October 1, 2024
• $116 million will fund a brand new hotelling supplement, a new daily fee replacing the Basic Daily Fee Supplement

According to StewartBrown modelling, the increased AN-ACC price and the $11.3 billion Government investment “should be sufficient” to cover the higher wages. 

The AN-ACC funding model was introduced in late-2022 as the Government’s new method of funding aged care providers. Subsidies are provided based on the type of service offered and resident care needs. 

Each resident will be independently assessed to determine the funding that can be passed on, and it accounts for 96% of direct care revenue. The AN-ACC price will increase from $216.80 (including the Daily Supplement Fee) to $243.10 from July 1, a 17.6% increase.

StewartBrown said the increase would alleviate any pressure felt by providers who were slugged with rising staff costs and increased indexation that was underfunded by the original $216.80. There will also be increased funding for residents in regional, rural and remote areas, First Nations services and homeless services as outlined by the Government.

Providers are set to benefit from the removal of the Basic Daily Fee Supplement and the separate funding of the Hotelling Supplement as StewartBrown said it will provide more clarity.

Instead of having a $10 fee included in the AN-ACC price for daily services (laundry, meals, etc), there will be a separately funded amount of $10.80 automatically paid by Services Australia. 

The additional 80 cents will assist in funding the wage increase for head chefs and cooks within aged care homes, although StewartBrown said there will still be a shortfall that cannot be met by current Government funding.

“At the present time, the costs of providing the daily services exceed the revenue (including the Basic Daily Fee Supplement) by in excess of $6.30 per resident per day,” they stated. 

“In our opinion, this shortfall should not be met by Government (taxpayer funded) but instead should be met through further structural reform allowing for providers to charge a higher Basic Daily Fee for those that can afford to pay, and in turn providing a higher quality of daily service to all residents.”

Financial stability remains unclear

Some providers may have seen increased direct care revenue due to the introduction of AN-ACC funding in 2022, however, StewartBrown has not given aged care providers the all-clear. 

Financial stability is still uncertain as additional funding will fully fund the pay rise and the incoming mandatory care minutes quota will directly absorb funding as well. According to StewartBrown’s data, the average provider reported an average of 186 direct care minutes per resident, per day in the quarter ending December 2022.

As a result, there was a daily average benefit of $13.22 from the quarter ending September 2022. But once those minutes reach 200 from October, any transitional benefit is expected to be lost as costs rise to meet the legislated mandated number.

It means providers will have to continue to pay close attention to finances over the next few months as those major funding changes coincide with the start of the 2023-24 Financial Year.