is the Coalition spending '$1 billion extra, every year' on aged care?

In aged care in particular we’re spending A$1 billion extra, every year.

– Prime Minister Scott Morrison, doorstop interview, Guildford, Western Australia, October 2, 2018

Preparations for the Royal Commission into aged care are now underway, with Prime Minister Scott Morrison having warned Australians to brace themselves for “pretty bruising information” about the mistreatment of elderly people in the sector.

The Royal Commission will examine the quality and sufficiency of aged care services currently being provided – including a focus on evident substandard treatment, mistreatment, abuse and systemic failures – and the challenges facing the sector more broadly as Australia’s baby boomer population begins to require its services.

Opposition leader Bill Shorten said it wasn’t possible to “repair the system whilst you’re cutting it at the same time”, with the Labor leader and other MPs asserting the Coalition had made cuts of between A$1.2 billion and A$2 billion to aged care during Morrison’s time as Treasurer.

The Prime Minister rejected those accusations, saying the government was spending “A$1 billion extra, every year” on aged care.

Let’s look at the numbers.

Checking the source

The Conversation requested sources and comment from the Prime Minister’s office, but did not receive a response before publication.

Verdict

Prime Minister Scott Morrison’s statement that the Coalition is “spending A$1 billion extra, every year” on aged care is correct when spending is calculated in nominal terms (not adjusted for inflation).

Budget papers show that estimated nominal spending on aged care has risen by more than A$1 billion per year since financial year 2014-15, following the Coalition’s first budget in May 2014.

In real terms – adjusted for inflation – estimated spending on aged care increased by between A$679 million and A$796 million per year between 2014-15 and 2017-18.

Spending on aged care is projected to continue to increase by more than A$1 billion per year (in nominal terms) from 2017-18 to 2021-22.

Coalition spending on aged care

The Australian government is the primary funder and regulator of the aged care system, with care provided by a range of non-profit and private providers.

Budget papers show that estimated nominal spending on aged care (not adjusted for inflation) has risen by more than A$1 billion per year since financial year 2014-15, following the Coalition’s first budget in May 2014.

The table below shows estimates from each Budget of spending on aged care and services, including care and services for veterans, spending on nursing homes and other institutions, and community care services for older people, but excluding the aged pension and concessions.

In 2014-15, estimated spending was A$15.3 billion. This grew to an estimated A$18.4 billion in 2017-18.

In real terms – adjusted for inflation – estimated spending on aged care increased by between A$679 million and A$796 million per year between 2014-15 and 2017-18.

Here’s spending per person aged 85 and over:

Have there been cuts to aged care funding, as Labor claimed?

In the wake of the announcement of the Royal Commission into aged care, Opposition leader Bill Shorten said the current government had “cut A$2 billion, nearly, in aged care funding”.

Labor Senator Penny Wong, Shadow Minister for Employment and Workplace Relations Brendan O'Connor, Greens Senator Sarah Hanson-Young, the Australian Council of Trade Unions and its Secretary Sally McManus, among others, pointed to a figure of A$1.2 billion in cuts from aged care during Scott Morrison’s time as treasurer.

Shadow Minister for Ageing and Mental Health, Julie Collins, said Morrison’s “$1.2 billion cut in the 2016 Budget came on top of the almost $500 million from aged care funding he cut in the 2015 MYEFO”.

Funding changes outlined in 2015 MYEFO

In its 2015 Mid-Year Economic and Fiscal Outlook (MYEFO), the government did outline a range of policy decisions that had reduced spending.

One of these was changes to the Aged Care Funding Instrument – a measure used to assess the needs of aged care residents, and therefore how much funding the aged care providers receive as a result.

The government said it would refine the Aged Care Funding Instrument to “better align the funding claimed by providers to the level of care provided, through changes to the scoring matrix”. In other words, to make sure aged care providers weren’t receiving money for care that wasn’t required or being delivered.

The government said these changes were expected to reduce cash payments by A$472.4 million over three years to 2018‑19.

In addition, the 2015 MYEFO update noted that “improved compliance” around the provision of funding to residential aged care providers (including a focus on false claims) would lead to a net saving of A$61.9 million between 2015-16 and 2018-19.

The combination of the two initiatives were expected to lead to savings of A$534.3 million over four years.

But there were also increases in spending.

The 2015 MYEFO noted that payments related to the Residential and Flexible Care program were rising, and were expected to:

… increase by A$162 million in 2015-16 (A$943 million over the four years to 2018-19), largely reflecting a higher than expected growth in care subsidies provided to residential aged care facilities.

Overall, the increase in payments to 2018-19 (A$943 million) was greater than the savings (A$534.3 million) over the same period.

Funding changes outlined in the 2016-17 Federal Budget

In the 2016-17 budget, the government said that by expanding on the refinements to the scoring matrix of the Aged Care Funding Instrument (outlined in 2015 MYEFO), it would achieve savings of A$1.2 billion over four years.

(That’s the A$1.2 billion federal Labor and other groups were referring to.)

In addition, the government said it would reduce indexation of the Complex Health Care component of the Aged Care Funding Instrument by 50% in 2016-17 (and establish a A$53.3 million transitional assistance fund to support providers).

The government said these measure were in response to continued higher than expected growth in spending on the Aged Care Funding Instrument, which had increased by a further A$2.5 billion over the forward estimates since the 2015 MYEFO.

The next item in the Budget papers outlined higher spending for regional aged care facilities. The government said it would provide A$102.3 million over four years from 2016-17 to target the viability supplement (which address cost pressures experienced by residential care providers) more effectively to areas of greatest need.

The bottom line?

The claims that the Coalition has cut aged care spending do refer to specific saving initiatives the government has made, but they do not include other policy changes that have increased spending and variations in actual spending due to higher costs.

So while there have been decreases in aged care spending in some areas, the MYEFO and Budget papers show that these were made, in part, to offset increases in spending in other areas of aged care.

And when we look at the final figure, it shows that estimated spending on aged care has risen by more than A$1 billion per year since 2014-15, and is projected to continue to increase by more than A$1 billion per year from 2017-18 to 2021-22. – Peter Whiteford

Blind review

Politicians love to claim credit for spending more on things such as health and aged care, and it would be a rare year if more money was not spent, given the underlying economic and demographic dynamics.

Governments like to focus on inputs – such as spending – preferably not adjusted for inflation or population growth, as it makes the numbers bigger. Oppositions also like to focus on numbers – and often reductions in promised future spending – suggesting governments are chiselling consumers or the industry.

The Government is indeed spending more on aged care, as shown in this FactCheck. But although aged care spending has increased, it would have increased more but for the Government’s actions, as Labor has asserted. – Stephen Duckett

The Conversation’s FactCheck unit was the first fact-checking team in Australia and one of the first worldwide to be accredited by the International Fact-Checking Network, an alliance of fact-checkers hosted at the Poynter Institute in the US. Read more here.

Have you seen a “fact” worth checking? The Conversation’s FactCheck asks academic experts to test claims and see how true they are. We then ask a second academic to review an anonymous copy of the article. You can request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.