Royal Commission into Aged Care Quality and Safety

The Royal Commission was established in 2018. Its purpose was to protect and improve the safety, health, wellbeing and quality of life of people receiving Government funded aged care in response to systemic issues in funding, policy, culture and operation. A Final Report was delivered on 26 February 2021, which made 148 recommendations for the reform of the aged care system.

In response to the Royal Commission’s findings, the Government has commenced a range of reforms to the aged care system, including to improve the quality and safety, sustainability, workforce and governance of residential aged care services.

The Royal Commission identified that one of the key limitations of the aged care system is the funding model, with funding levels that are based largely on historical precedents and ad hoc decisions, which bear little direct relevance to the actual cost of delivering care. A new funding model for aged care was therefore determined to be important in driving a transparent, accessible, sustainable and affordable aged care system.

The Royal Commission recommended that a pricing authority be established that is independent from the aged care sector and Government. It also recommended that the primary approach for funding aged care services be based on the volume of activity each provider performs, using activity based funding (ABF), and, where practicable, based on a national efficient price (NEP). This approach should be supplemented by block funding in cases where ABF is impractical or inappropriate.

In response to the findings of the Royal Commission, the Government has implemented an independent process to advise the Government on aged care pricing issues. These will include the new Australian National Aged Care Classification (AN-ACC) funding model for residential aged care, the new residential respite funding model and home care pricing. This has been delivered through the expansion and renaming of the existing Independent Health and Aged Care Pricing Authority (IHACPA) to take on aged care costing and pricing functions.

IHACPA will inform Government funding decisions by providing advice on residential aged care, including residential respite care, on an annual basis starting from 1 July 2023.

IHACPA activities relating to home care pricing are anticipated to be established after future reforms take effect.

The establishment of IHACPA’s aged care costing and pricing functions will enable aged care funding decisions to be informed by regular costing studies and independent, evidence-based advice on contemporary cost structures and care delivery models.

IHACPA is not responsible for:

• advising on or implementing forms of economic regulation (this function rests with the Department of Health and Aged Care)
• determining aged care subsidies and supplements (under Chapter 3 of the Aged Care Act 1997, this function rests with the Minister with responsibility for the Act)
• providing advice on means testing arrangements and the appropriate level of consumer contributions in aged care.

IHACPA’s work in this area will support and complement broader aged care reforms and improvements occurring across the sector.