Australia faces many challenges associated with the provision and financing of aged care in the coming years. This article examines a number of these challenges and proposes reforms to the current regulatory and policy framework underlying the aged-care sector. Two theses are advanced:
First, due to recent demographic developments, the demand for aged care will polarise towards community-based care on the one hand and high-care facilities on the other.
Second, that the best means of dealing with the challenges posed by this change in demand is by reducing current regulatory constraints on supply; that is, through deregulating the number of aged-care places, combined with the use of a portable and competitively neutral funding mechanism for users of aged care. Contingent on the development of increased competition in the sector, current price regulation could and should then be gradually wound back.
The analysis begins with an overview of the regulatory and other policy constraints imposed on the aged-care sector in Australia. It then details emerging demographic trends and the pressures these will place on supply of places in the aged-care sector, before setting out a proposed means of addressing these pressures through a phased program of deregulation.