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This was the labor controlled senate's critical review of the 1997 aged care bill which turned aged care into a competitive market and opened it to multinationals. Many of their fears are now seen to have been well founded.

 Australian section   


Senate Community Affairs Committee JUNE 1997



The 1996/7 budget and the 1997 aged care act were referred to the Community Affairs Committee for a review by the labor dominated senate.

The review advised against the introduction of accommodation bonds but if they were introduced then it urged multiple protections. They warned that this would result in a loss of accommodation for family members and Cherry Picking of residents who came with more profitable bonds.

The review warned that the changes would result in deskilling as well as understaffing, that care would be compromised, and that the accreditation process would not be able to prevent this. Because of this they urged legally enforceable user's rights, that advocacy groups be strengthened, that an independent external complaints system be set up, and that the proposal to abolish financial accountability be abandoned.

The minority report did not address the issues raised in the majority report. Instead it aggressively attacked the labor party.

In retrospect it is clear that the majority of the issues raised in the majority report were valid and much that was predicted has come to pass. The problems remain 13 years later.

The full report can be found at



The coalition parties that won the 1996 election had been strongly lobbied by business groups operating in aged care. Part of its platform was the reform of nursing homes which were substandard. In keeping with its economic rationalist perspective and its loyalty to this group it decided to fund this from the markets rather than from taxes. It introduced a system of users pays (with protections) . It made it as attractive as it could for investment by the market.  


To accomplish this it removed all restrictions on the way private and public money was spent. It abolished the requirement that providers of aged care report how the money was spent and their staffing ratios. They were now free to spend the money and staff as they chose and take any money over as profit.The only restraint was that they meet the accreditation standards. The Aged Care Act 1997 was the main bill making these changes.


I was unaware, and it is not mentioned in any of the inquiry reports, that the probity requirements about which the department had boasted to me in 1994 had been removed and replaced with a very different system.   As a consequence there was no criticism of this.   The public would have been alarmed.  Probity requirements were replaced with "approved provider status" which was about economic and managerial abilities. Approved provider status was attached to nursing homes. It could be traded as an asset when nursing homes were sold on the marketplace. As such it was an attraction for megacorps who could buy up any number of nursing homes without undergoing any sort of assessment of their suitability.


Probity requirements have to be met by those owning or operating hospitals when they apply for state controlled licenses.   These have been a stumbling block for several large severely dysfunctional multinationals entering or trying to enter Australia including Tenet Healthcare, Columbia/HCA, Sun Healthcare and Citigroup.   Concerned citizens were able to collect information and lodge objections.   Departments responded. This proved embarrassing for the politicians who had supported them.   None of these corporations now own hospitals in Australia.   These probity provisions may also have restrained some Australian companies.

Regulations that restricted trade in order to protect the community were viewed negatively by the economic rationalists of the period.   These theorists promoted globalisation in purely market terms.   Probity requirements would have been seen as obstructions to legitimate trade. Countries were expected to repeal them as part of a process called "liberalization" which was aimed at freeing up trade.

The senate referred the federal budget and the Aged Care Act 1997 to the Community Affairs Committee for an opinion. The senate was controlled by a labor majority and the majority report was therefore critical



The committee was charged by the labour senate with examining the consequences for older Australians and their families arising from proposed changes announced in the 1996-97 Federal Budget to the funding of aged care institutions in Australia and the content of the Aged Care Bill 1997.   This bill turned the provision of aged care from an underfunded government funded service into a market in decrepitude competing for profit and funded in part by users and in part by government.   The dominant not-for-profit providers were expected to operate like market entities.    

The committee received 118 submissions and had three public hearings.

Background and proposed changes


The inquiry described the proposals as a "Structural Reform Package".   In referring to the earlier Gregory report. on which the changes were based it said that this "documented major deficiencies in capital works and criticised the nursing home funding system as providing neither the funding nor the incentive for providers to maintain their buildings".   The alternative to increased government funding this report indicated was a market based system.


"The second option involved changes to the recurrent funding system to provide nursing home proprietors with an incentive, and the means to, maintain building quality. Under this model, market forces would be applied to the industry so that nursing homes would have a stronger financial incentive to provide high quality accommodation." (Section 1.10)

The government backed by the large private providers maintained that the country could not afford the $125 million needed to upgrade aged care facilities.   The government selected the second option and decided that a user pays system was required.


"The Government adopted the approach that given the economic climate it would not be feasible to provide the substantial additional funding needed to upgrade and maintain the building standards of nursing homes. Instead, it adopted the approach that a user pays system in the form of accommodation bonds should be introduced with the necessary protections for financially disadvantaged people." (Section 1.11)

The amount of the bond was not capped and would be left to negotiations between the provider and the resident - ie the market to determine.   The providers would have access to a small amount of the bond and to the interest which accrued prior to the resident's death when it would return to the estate.


Even though 75% of nursing homes were owned by non-commercial community not-for-profit organisations the system was restructured as a market using economic incentives.


Oversight was to be vested in an independent accreditation agency and the investigation of complaints was transferred from the states to the federal government.   The report did not mention that politicians were well aware that similar accreditation and complaint mechanisms in health and aged care had been unable to withstand the pressures of the market in the USA. They had already failed repeatedly in that country.


Prior to this funding had been directed to specific purposes such as staffing and equipment . Staff ratios were specified.   Nursing homes had been required to report on their compliance.   After intensive lobbying from the industry all these restrictions were to be lifted.   Nursing homes could spend the money and staff the homes as they wished provided they met the standards imposed by accreditation.   It was argued that this would increase efficiency while preserving standards.


The majority report


The majority report in the labour dominated senate expressed extreme anxiety about the proposed changes.   They were hindered by a failure of government to supply details of what was planned.  


Accommodation bonds

The majority recommended against the adoption of accommodation bonds and advised that if they were introduced then multiple protections should be added to the bill.   They were concerned that residents would be forced to sell their homes and that family and carers would no longer be able to live in these homes when the person entered a home.   They were particularly concerned that, in a number of eventualities, the residents would lose their bonds - particularly if a provider went bankrupt. This was prophetic as it later became a major problem.


They were concerned that those unable to pay would be discriminated against when applying to enter a nursing home, and that the changes would put an unacceptable burden on those who could not afford it.   It would create a two tiered system.   Cherry picking residents who could pay better became a problem later - and some of the subsequent market focused reviews, of aged care, such as that by W Hogan in 2004 did not seem to mind this or see it as unethical.


"In their submission the NSW Council of Senior Citizens Associations (COSCA) stated that the imposition of the bonds represent `an iniquitous and inequitable provision which will discriminate against and disadvantage most seriously, vulnerable frail aged people, needing nursing home care in their final stage of life'"(Section 2.22)


As a consequence of the great stress surrounding these bond negotiations, and the shortage of beds, a families abilities to negotiate reasonable bonds successfully would be compromised.


"The Committee recommends that the Government ensure equality of access to aged care facilities is provided for all aged people and that the provision of aged care services not be left to the vagaries of a market user-pays system" (recommendation 2.111)


The misuse of residents to increase profits

The committee was concerned that residents would be exploited. They recommended that legally enforceable users rights be incorporation into agreements and into the structure of the system.   They were anxious that advocacy groups should be strengthened to counter these dangers and that an effective independent external complaints mechanism be organised, separate from government and other stakeholders.   Despite multiple problems, and community unhappiness, as well as further recommendations in 2005 and in 2009 this last recommendation has not yet been implemented. Transparency was considered to be important yet 13 years later the system remains opaque.


The committee were concerned that the changes in funding and financial accountability would result in the retrenchment and deskilling of staff as well as a loss of morale - and so would be followed by poor care.   Nursing organisations did not think that residents would be safe.   The proposed containment strategies were unlikely to work.   They recommended that the proposal to abolish targeted funding and financial accountability be abandoned.


A large number of organisations during the inquiry expressed concerns that the aged care reforms have the potential to compromise the standards of care in aged care facilities. (Section 4.1)
"Evidence to the Committee suggested that ensuring quality of care in nursing homes will be a major challenge for the new Aged Care Standards Agency,"
(Section 4.38)
"Residential Care Rights also noted that there is a strong perception among consumers and their representatives that `a significant focus of the Agency will be the needs of service providers' to the detriment of consumer interests."
'" (Section 4.42)

Even the Gregory report in assessing its second option had indicated that these pressures could not be contained.

"The (Gregory) report noted that neither the current standards monitoring system, nor any alternatives considered, would be able to prevent the diversion of funding from nursing and personal care to profit." (Section 4.19)

The reports concerns were summarized

The Committee believes that that the Government's aged care reform proposals have the potential to compromise the standards of care in aged care facilities.   (Section 4.48)
The Committee also has particular concerns at the proposed abolition of CAM funding and the introduction of a single non-acquittable payment system and the fact that the proposed reform package does not contain adequate provisions to ensure that proper levels of care will be delivered by appropriately skilled and trained staff to residents of aged care facilities; (Section 4.49)


The minority report  

The minority report drew attention to the failures of the previous labour government and sought   " - - to rebut the many distortions, misinformation and inaccuracies that have formed the basis of the views expressed by Labor Party Committee Members"   as part of an "irresponsible political campaign".   They claimed that the majority of the concerns raised by the submissions were "politically inspired" and that those giving evidence "had a very cursory understanding of the government's reform package".    

While the majority report was certainly influenced by political opportunism, the issues were nevertheless real and the minority report did not supply information to adequately allay the concerns.   Time has shown that the majority were well founded.


Consequences of the Reform Package

The new aged care system introduced when the aged care bill was passed ignored the major recommendations from the senate committee and did not implement many of the protections suggested by the majority report. Changes have been made since then in response to a succession of scandals and  the anger of the community. These have done no more than tinker with the system and burden it with unproductive oversight.

The tokenism of the accreditation and oversight processes and the discouragement of criticism is readily apparent.   The response to pressures that have built up in the system has been to tightly conceal the sort of information on which sound criticism could be based, to discourage whistle blowers, to make unsubstantiated claims about good care in the face of contrary evidence, and to disparage critics.

There are three critical interlinked pointers to the adequacy of nursing care, and they are all easily recorded, easily verified and easily quantified.   They are clear pointers to problems in a nursing home.   These are the incidence of pressure sores, patterns of weight loss and the quantity and skill of the nurses and assistant nurses providing care.   Without this sort of information it is impossible to even begin to evaluate the quality of care provided or to carry out any meaningful studies of the sector and the care it provides.  

Thirteen years after the introduction of market pressures into the aged care system nursing homes are still not required to collect this data. As far as can be determined it is not collected or reported to the accreditation agency, and if it is that information is not disclosed.   Neither those evaluating nursing home places for their families, those advising them, aged care advocates, nor researchers can access this sort of information.   Claims to transparency remain farcical.

Instead we have a system for evaluating processes rather than outcome, a process in which almost every nursing home obtains a 100% mark (44 out of 44).   If any failures occur the nursing home can easily remediate and then be reexamined.   A discriminator in which everyone gets full marks is valueless.

When the rubbery and very limited data collected and published by the accreditation agencies is reviewed and adjusted for variables where there is enough information, figures suggest that private for-profit nursing homes are four times as likely to fail one or more of the accreditation standards.   There is insufficient information available to prove that this is so.  

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This page created June 2010 by Michael Wynne