Home Care Reform, A New Vision or Repeating Past Mistakes?
- Jason Howie
- Dec 7, 2022
- 4 min read
Anyone can make mistakes, but only a fool persists in error (Cicero)
One thing that more than twenty years of experience in a single industry will do, is provide a lot of perspective.
While the current round of reform is being billed as a ‘once in a generation’ reform, you only have to go back to 2017 to have experienced a much more far reaching reform than the one being proposed at the moment.
In fact the bare bones of what was proposed in the January 2022 Support at Home paper was not particularly imaginative, and was really a rehash of other programs we have experience with, such as the NDIS, Veterans’ Nursing or Veterans’ Home Care. The breeding cycles of the marketing executives who believe that a five year reform cycle is generational, appear to be remarkably short.
While all of these may have their own administrative quirks, at the end of the day, they are all essentially fee-for-service programs, where organisations are paid for each hour of service delivered.
And while experts in government departments like to talk about theoretical approaches to markets, voucher systems and social programs, what matters at the end of the day is what behaviours they drive across the industry.
Does a program incentivise organisations to improve quality, to lower the cost of service delivery, to innovate or to provide a better customer experience? Or does it provide no return on investment for innovation, customer service, or reducing the cost per customer?
Fee for service programs pay for each hour of service delivered. The more regulated they are (for example with fixed pricing), the more they commoditize services, eliminate return on investment for innovation, and drive up the cost per customer. This is because to increase profitability, the industry will increase hours, and deliver them as cheaply as possible. As I’ve said at many conferences, if all you pay for is hours of service, all you get is (a lot of) hours of service.
Increasing hours to existing customers is much cheaper than bringing on new customers, so there is a structural pressure to increase the number of hours per customer. This pressure is driven by both organisations and consumers. Assessors and regulators are almost powerless to arrest it. Regulation can only provide limited influence over this upward pressure. I have argued for many years that cost over-runs in the NDIS can no longer be characterised as transitional. They are structural, as a consequence of this dynamic.
It surprises me that Treasury is allowing us to travel down this path, making it likely that we will embed this same structural dynamic into the Aged Care system.
When funding the Home Care system, you have three choices. You can fund the geography (CHSP), you can fund the customer (HCP), or you can fund the service hours (NDIS). The last of these is popular with social programs around the world, as it gives the illusion of increased control. In contrast, while the first provides the most fiscal control, it can also be problematic from an equity perspective, as the system causes people to miss out or wait to receive services when funding in a particular area is exhausted.
To my way of thinking, the best way to fund the system is similar to the existing HCP program, where the consumer is funded. This provides fiscal control based on predictable demographics and puts downward pressure on costs. Organisations become more successful as they innovate to lower the total cost of supporting consumers and improve customer experience as they compete for new revenue.
The structure also provides incentives for consumers to store funding for a time when they may need it more. This reduces the amount of service required across the system. In fact the existence of customer surpluses, far from being a sign of the system failing, is in fact a sign of its success in lowering service hours.
We have a significant amount of insight at this point regarding the direction that the department is headed. While we don’t yet know the details, the strategic implications are becoming clear. In next week’s blog, I’ll look at the known and unknowns, and the implications for strategic planning in the coming months.
Many organisations will get on the front foot regarding their planning, and will be strategically well placed to benefit from the reforms when they are implemented. Make sure yours is one of them. Contact me on jason.howie@howiefsc.com.au for a free, no-obligation discussion regarding how we may be able to assist you in preparing for the challenges ahead.
For the benefit of those newer to the industry, I’ve provided below a list of some of the various reports that have been written in my professional memory, and a brief summary of the evolution of the industry over that same period. Reading any of these reports or their summaries will provide insight into why I’m skeptical that moving back to a fee-per-hour system will provide better customer experience, service quality or fiscal control. It is much more likely that it will simply result in us rewriting the reports below in the next ten years.
See sections 9.7 and F7
In response to these reports, we’ve addressed the demand for services in multiple ways over the years. In the past 20 years, we’ve seen the following, among many other changes:
The State Based HACC System (60/40 Fed/State funding split, with administration by State Governments)
We added the Federally funded and administered CACP and EACH/D (CCP) programs
The HACC system was federalised to create the CHSP program
CCP was converted to Consumer Directed Care (CDC) providing consumers with more control over their service budgets
Consumers were provided a choice of service provider, moving the aged care model from a B2G (Business to Government) to a B2C (Business to Consumer) model
‘Tweaked’ payment arrangements for HCP and CHSP, and stripped more than a billion dollars of working capital from service providers’ Balance Sheets.
Numerous reforms to Operational Requirements since the introduction of the CDC, including new standards, more oversight from the ACQSA, SIRS, Governance Requirements, Fee Capping and so on.
The current proposal is to combine the CHSP and HCP programs into a single program which is being built from the bottom up in a complete overhaul.
There are of course also the Veterans Home Care Program, the DVA Nursing Program, and the Short Term Restorative Care program, and we could repeat the exercise in the Home Based Care sector for Disability Services, and the NDIS.
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