Media headlines are calling out the new pricing for home care as “outrageous”, but the reality is home care providers must increase their prices – or face financial oblivion.
This week has seen several articles circulating on the negative impact of the “indicative prices” for home care services recently published by the Department of Health and Aged Care.
The concern is that older people will be deterred from accessing lower-level services, forcing them into residential aged care early.
But the fact is 90% of home care recipients are full or part Pensioners – and any contribution they will need to make to the cost of their services will be less than it would cost them on the open market.
Let’s say a $10 contribution for a lawnmowing service compared to $70 for a privately paid service.
The 10% of participants who are self-funded retirees, and typically pay for services such as cleaning and gardening privately, will also benefit as they will now have access to fully Government-funded clinical care services.
And as the latest Aged Care Financial Performance Survey from StewartBrown shows, operators must increase their overall service margins to remain financially sustainable.
CDC saw race to cut prices
When Consumer-Directed Care (CDC) commenced in February 2017 and funding moved from providers to consumers, there was considerable price cutting as operators competed for clients.
This won’t fly under the new Program.
To maintain the current 4.3% margin, StewartBrown says operators need to earn $73.83 in revenue on their direct services per client day.
For a 9.5% margin – which StewartBrown says is required to be “investible” – operators need to make $88.24 per client day.
This poses a considerable challenge for the sector and Government.
The First 25% of home care programs in the latest StewartBrown survey are earning $88.43 – just above this figure – but at the other end, 20-30% of program are operating at a loss.
If operators need to cut those unprofitable programs to stay afloat, it will be older Australians who miss out.
Is this what we want as a country?
The message?
All stakeholders should be engaging in a sensible conversation with the community about why service prices are increasing.
And remember: higher prices will mean very little if Mum or Dad can’t find a provider in the first place.
