Eight months after receiving the final report from the aged care royal commission, the Morrison government is spending millions of dollars on management consultancies rather than implementing key recommendations. By Rick Morton.

Government outsources aged care reform to management consultants

The federal Department of Health deputy secretary, ageing and aged care, Michael Lye.
The federal Department of Health deputy secretary, ageing and aged care, Michael Lye.
Credit: AAP / Mick Tsikas

Michael Lye, the most senior bureaucrat responsible for aged-care policy in Australia, was being questioned about the lack of detail in the government’s planned reforms when his frustration bubbled to the surface.

“There is a culture here where providers of all kinds have been in control of this care sector. They expect to be running the show but they’re not going to run the show,” he told a senate community affairs legislation committee on November 9.

“In terms of culture, we have a real problem here that we’re trying to address, where the consumers’ interests have been subordinate to the interests of these providers. I understand they’ll have a go on this and they want to be told everything and they want to control the pace of reform, but we’ve got a very clear set of riding instructions from the royal commission and also the government, which has accepted the royal commission’s recommendations, that we need to change things about the sector.”

It was a convenient line. The Royal Commission into Aged Care Quality and Safety heard many examples of “wrongful or inappropriate behaviour” in the sector itself. But Lye would have known better than anyone that the final report of the inquiry identified a major antagonist in the tragedy of the aged-care system that rises above all other players: government.

“The role of government, and its need to make decisions between competing governmental priorities, is at the heart of the failures and shortfalls in the aged-care system we have in Australia today,” commission chair Tony Pagone said in the final report released early this year.

Staffing levels in care are too low, Pagone went on to say, resulting in workers who “simply do not have time to interact meaningfully and compassionately with older people”. This might be considered “inhuman”, he said.

“We have heard that there has never been an assessment of how much money is required to deliver high-quality care. Moreover, as discussed below, the indexation arrangements applied to aged-care payments over the last 20 years have systematically reduced the real value of the funding that is available,” Pagone said.

“These limitations on funding have been a major contributor to the substandard care so many older Australians experience. In simple terms, quality care has decreased, at least in part, because we, through the Australian government, have decreased funding levels in real terms over the last 20 years.”

So what was Michael Lye so upset about earlier this month? He was being asked what kind of money would be made available directly for the care of nursing home residents. Among hundreds of recommendations, the royal commissioners urged the Commonwealth to “improve remuneration for aged-care workers”.

The federal government provided seed funding for the expansion of the Independent Hospital and Aged Care Pricing Authority in the May budget but there was no mention of improving staff wages in the sector. The department said the pricing authority will consider wages in time.

A senior registered nurse who works across the aged-care sector, and who asked not to be identified, tells The Saturday Paper this is a clever misdirection. “The government is saying aged-care wages will be used to inform the costs of the system. It is not saying that those same wages will be increased or that it will do anything to boost pay and conditions.”

In any case, the new pricing authority won’t begin operating until 2023.

There has been a flurry of activity elsewhere in the program of reform, however. Boston Consulting Group was awarded a $1.1 million contract to research “provider maturity” in aged care and another $450,000 to provide “options and findings for enhanced aged-care governance”. Deloitte was handed $213,000 to come up with an aged-care “wage estimation tool” and $1 million to provide support for the aged-care transformation program. At the same time, Deloitte was paid $526,000 for an “independent” review of the same aged-care reform plan.

Just this week, the Department of Health published a contract awarded to PwC worth $1.8 million to conduct a pilot costing study of residential aged care.

Leading Age Services Australia chief executive officer Sean Rooney, whose organisation is the largest peak body for aged-care providers in the country, tells The Saturday Paper that one of the key messages of the royal commission was that “we must do our utmost to avoid the tragedy of the past”.

“And the tragedy of the past is, you know, 20 reports in 20 years telling us what the problems are and yet not being able to adequately resolve them,” he says. “The government is going about this whole process of reform the same way they’ve done every other time, which delivered those past tragedies.”

Provider and consumer groups are in lockstep on the need for sweeping change and don’t quibble with their role in this, Rooney says, but the government “is saying everybody needs to change except them”.

“What has really gone on here is that the things that government controls – policy, legislation, funding and regulation – has not kept pace with the needs of older Australians,” he says. “That’s the bottom line. And that has been going on for 20 years.”

In October next year, the federal government will abolish the current and beleaguered Aged Care Funding Instrument – the principal mechanism through which taxpayer care subsidies are paid to aged-care services – and replace it with a new model called the Australian National Aged Care Classification (AN-ACC). Shadow assessments of every aged-care resident have been occurring this year and will continue next year, apportioning older people into categories of care that attract more or less funding based on need.

What the government can’t tell the sector is what the floor price will be for care. Without that, the assessments are virtually meaningless. Michael Lye says the detail will come but couldn’t say whether it would happen before July, when aged-care providers have made their budgets for the following year.

By then, many of the residents already assessed under the new process will require a “change of needs” reassessment and many more new residents will have entered the system.

The Coalition has introduced several new bills to kickstart the reform process. These have all passed or are due to pass before the royal commission’s recommended Council of Elders is established to guide government through the process of aged-care reform from the perspective of older Australians. The body should have started in July but nominations only recently closed. On Wednesday, the government announced a separate National Aged Care Advisory Council almost half a year after the first legislation passed parliament. People in the sector are saying the government wants to “tick off actions and doesn’t much care about the results”.

To some extent, bureaucrats are working within significant structural constraints themselves. On Thursday, the finance and public administration references committee chaired by Labor senator Tim Ayres released its report “APS Inc.” exploring the use of contractors, labour hire and consultants in the public service. The findings are blunt.

“Under the ASL [average staffing level cap] policy the government is actively choosing to direct large amounts of public money away from essential services and towards for-profit companies,” the report says.

“The committee considers it is not ethical or in the public interest to direct billions of dollars of Commonwealth expenditure in this manner.”

Some specialised skills will always be needed, of course, but how does the Department of Health explain outsourcing the evaluation of the Aged Care Quality Standards to KPMG for $150,000? These are the critical metrics against which all aged-care services are measured by the regulator.

For its part, the watchdog formally known as the Aged Care Quality and Safety Commission says questions about this review are best put to the Department of Health. On Tuesday, the department published another contract awarded to Matthews Pegg Consulting for $250,000 to similarly “review” the quality standards.

According to figures before the senate committee chaired by Ayres, the Aged Care Quality and Safety Commission has a workforce that is 27 per cent labour hire. The total value of these contracts in June was more than $10 million. An analysis by this newspaper of AusTender contract notices published by the agency since September reveals a further $16 million has been committed across more than 160 separate agreements with a handful of labour hire firms.

These arrangements have created a bizarre circumstance where the quality standards enforced by the Aged Care Quality and Safety Commission are being evaluated by an accounting firm, while aged-care providers are being assessed against these standards by labour hire contractors for the commission who are often visiting nursing homes where poorly paid and casualised aged-care workers are hired from the same labour hire companies.

Although the government issued a dissenting report to the senate committee’s findings, Tim Ayres says it is just “common sense”.

“Commonwealth expenditure should be directed towards achieving the purposes of the agencies, it shouldn’t be diverted in this ideological frolic to the private sector where we are getting poorer services, worse outcomes and paying more for it,” he says. “How is the government going to get out of this aged-care mess with the public service in the shape that it is in?”

A starting point will always be acceptance. A spokesperson for the Department of Health walked back Michael Lye’s stern comments before the parliamentary inquiry into aged-care legislation, saying the royal commission made several findings as to the cause of the rot in aged care.

“This includes governance and services, and the way in which the system is regulated,” the spokesperson said. “The department shares responsibility around the way in which it has administered and stewarded the system, including the culture within the system.”

As the department itself notes, the royal commission has built the platform for a “once-in-a-generation reform” of aged care.

Yet early signs have the sector worried. “If we stuff this up now, and I am desperately concerned that we already have, then all of this just becomes another report that goes nowhere,” the senior aged-care nurse said. “We cannot afford for that to happen.”

This article was first published in the print edition of The Saturday Paper on November 27, 2021 as "Old habits".

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