The new peak body Aged & Community Care Providers Association (ACCPA) is seeking an explanation from the Labor Government after it was announced the subsidies paid by the Commonwealth to providers to care for residents will increase by 1.7% in 2022/23.

With inflation up 5.1% in the March quarter and forecast to hit 7%, ACCPA interim CEO Paul Sadler said the increase is dire news for aged care providers that are stretched beyond their financial and organisational limits.

“This figure is patently inadequate particularly as we know that two-thirds of aged care facilities are currently operating in deficit,” he said.

“After campaigning to improve aged care, the new Federal Government’s first major decision in aged care is to cut funding in real terms,” he said on LinkedIn.

“We want to do more and better for our residents every day, but this is a real blow.

“I implore the Government to reconsider urgently.”

Klaus Zimmerman AM, who was CEO of Eldercare for 12 years, said the 1.7% increase was “completely unacceptable”.

“The industry is being set up to fail. The one thing the industry needs is long term sustainable funding to pay for higher wages, employ more staff for direct care and deal with the mountain of compliance,” he said on LinkedIn.

The Commonwealth Department of Health states the indexation increases are expected to deliver an additional $370 million to aged care providers in the new financial year. There was a 1.1% increase last year and 1.4% in 2019.

“This indexation change, along with the introduction of the Australian National Aged Care Classification funding tool from 1 October 2022, and associated funding uplifts, will mean that the average Government funding per full time recipient of residential care is expected to be over $85,000 in 2022-23 – an increase of nearly 10% per resident compared with funding levels in 2021-22,” the Department states.

The indexation sees the Basic Daily Fee for residential care rise from $52.71 to $54.69. The income-free area for a single person will go up from $28,100.80 to $29,234.40, while the income threshold for home care for a single person will increase from $54,220.40 to $56,295.20.

But ACCPA said the situation is exacerbated with award wages for most employees rising by 4.6%, plus a further 0.5% increase in superannuation starting on 1 July.

“The inadequacy of aged care indexation is further illustrated by the fact that NDIS subsidies have been increased by 9% with a further supplement to provider funding for COVID-19 costs,” Paul said.

“We are deeply concerned that the aged care crisis will continue to worsen without urgent action to adequately cover the costs of care and well-deserved pay increases for hard working staff.”