Magazine of Socialist Action in Australia

Remove the profit motive from aged care

Reading Time: 3 minutes

Since 2009, there have been at least ten federal government inquiries into residential aged care. In addition, the ABC’s Four Corners program recently exposed the horrible truth of what has been happening in the sector.

It was after that bad publicity that the government announced yet another inquiry, albeit a royal commission, into aged care quality and safety. This royal commission will only reveal what we already know, namely the gross systemic neglect of vulnerable elderly residents.

The crisis in aged care is a direct consequence of a flawed model that is primarily built around profit making. Since the Liberals introduced the Aged Care Act in 1997 there has been a shift away from publicly run facilities and a huge increase in private investment in the residential aged care “market”.

The dominance of the profit motive in aged care has led to fewer trained nurses, a lack of mandatory ratios of staff to residents, insufficient access to doctors, malnutrition, over medication, poor sanitary care, as well as physical, psychological and financial abuse.

The Liberals introduced a business model built on churning through clients who often sell homes to afford entry and pay fees. In essence, these greedy companies put the interests of their rich shareholders above the vulnerable people they are supposed to care for.

This type of profit-driven private model has failed everywhere it has been introduced, from the Commonwealth Bank, Telecom and Qantas to our energy and public transport providers. Regulatory bodies have constantly failed to head off corruption and rip-offs no matter what the sector.

Big business has argued that the more government services are outsourced, the less need there will be for regulation and enforcement. Increasingly people are seeing this for the sham that it is.

The end result of privatisation is that it enables profiteers to raise prices and gouge government funding while they refuse to provide adequate services or well-paid and properly trained staff.

Overall spending on aged care is $18 billion a year, and 70% of this goes to residential care to provide a basic subsidy for permanent residents. In the 2017 budget, the then treasurer Scott Morrison cut at least $1.2 billion from aged care by changing the formula used to determine residents’ needs.

It has been found that aged care providers only spend about two-thirds of their government funding on actual care. Providers can use public funds for any purpose they like, including executive salaries and dividends to shareholders. Generally they make profits of up to $25,000 per bed per year on margins of 20% at the expense of care for residents.

Dr Sky Marshal noted “…on average, half of all residents in aged care are malnourished”. This is hardly surprising, given the average spent per resident is a mere $5 per day for three meals plus morning and afternoon tea!

On top of this, 70,000 residents are subject to “chemical restraint”, that is drugs used to calm dementia sufferers rather than activities, distraction and human contact. In Australia, the hours of care per day are only 2.8, compared to 4.1 hours delivered in the United States.

The bulk of funding of the private providers comes from taxpayer funds, yet multinationals like Bupa aggressively minimise tax with complex offshore structures. In fact, nine big aged care companies use trusts as part of the company structure. One company, Allity, has paid no tax in two years, and some rich family owned operators do not issue financial reports.

Most likely, the royal commission will recommend tweaking the laws to deal with some of the worst excesses, but the real source of the problems – the profit-driven nature of the sector – will not be examined. In this sense, the royal commission will be a toothless tiger.

There are still some public aged care providers but these are becoming fewer by the day. The Victorian government is the largest public provider of residential aged care in Australia, with the majority of facilities in regional areas. These public facilities provide specialised care with a skilled and qualified nursing workforce and a statutory duty to have a nurse on duty at all times.

While not perfect, we need to build upon this publicly-run model. Taxpayer funds should be used to finance not-for-profit facilities that are accessible to all those that need them. We need facilities that allow residents to age in their own local communities and live in mixed use and mixed demographic developments.

On this basis, people who have contributed to society for their entire lives can be rewarded with some dignity in their old age.

By Michael Naismith


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