The introduction of a targeted user-pays approach to funding high-level residential aged care in Australia: an empirical investigation of the impact on price

In response to predictions that population ageing will increase government spending over the coming decades, in 1997–98, the Australian Government introduced means-tested income fees and accommodation charges for those admitted to nursing homes with income and assets above set threshold levels. Immediately prior, all residents paid the same price for their care and were not required to contribute towards the cost of their accommodation. In addition, in relation to those eligible to pay a higher price, the Government reduced its subsidisation of the cost of their care. The Government anticipated that the initiative would more equitably share the cost of age-related services across the public and private sectors, and result in some cost savings for itself. The purpose of this study is to assess the impact of the policy on the average price paid by residents. The findings suggest that the policy may have contributed to an increase in the average price paid, but statistical evidence is limited due to a number of data issues. Results also indicate that the rate of increase in the price was greater after the Residential Aged Care Structural Reform package was introduced. The study contributes to the economic analysis of the sector by evaluating time series estimates of prices paid by residents since the early 1970s.