Legal Insights

Response to the Royal Commission – the 2021-2022 Budget for delivering aged care services based on care, dignity and respect

By Lucille Scomazzon, Angela Wood

• 13 May 2021 • 6 min read
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The Final Report of the Royal Commission into Aged Care Quality and Safety (Royal Commission), titled ‘Care, Dignity and Respect’, contained 148 wide-ranging recommendations for reform to the aged care sector.

The Commissioners indicated the system, as it currently stands, is inadequate and in need of comprehensive reform.[1]

The Australian Government’s response to the recommendations of the Royal Commission was delivered together with the Federal Budget on Tuesday night. The Government has promised a headline figure of $17.7 billion to respond to the Royal Commission’s recommendations, which will be spent over a five year period across the following five key 'pillars':

  • home care
  • residential aged care services and sustainability
  • residential aged care quality and safety
  • workforce
  • governance.

Some highlights of the Budget response are set out below.

A new act

The Federal Government has accepted the Royal Commission’s recommendation that the Aged Care Act 1997 (Cth) (Aged Care Act) be replaced with a new consumer focused act. It has committed to replace both the Aged Care Act and the Aged Care Quality and Safety Commission Act 2018 (Cth) by 2023 to enact its reforms into legislation. There is likely to be opportunity for providers to engage with Government through consultation processes and drafts of the proposed legislation.

Structural change to residential aged care – the end of bed licences and the ACAR

The Government is allocating $102 million for structural reform to residential aged care which will see the end of allocated places (bed licences) and the discontinuation of the Aged Care Approvals Round (ACAR) from 1 July 2024. Instead, residential aged care places will be allocated directly to older Australians (mirroring the current arrangements for home care services). This will be a radical transformation of the competitive marketplace for residential aged care services. Careful consideration will need to be given to the effect of this change in regional and remote areas.

These changes will take effect in concert with funding to expand the Independent Hospital Pricing Authority and with funding for the new system of classification of care recipients which flows through to funding for care subsidies. The first of these changes signals the likelihood of greater scrutiny of how care is provided when funded by Government.

Interim increases in funding for care and services have been included in the Budget, together with the continuation of the viability payments until the implementation of the Australian National Aged Care Classification scheme which will embed a new funding model. The fundamental changes to the allocation of places and to the methods for payments of subsidies for care recipients is likely to mean that we will continue to see consolidation and other transactional activity in the residential aged care sector as providers consider the effects of the changes on their business models and plans.

Home care – will it address waiting lists?

The Budget also includes $6.5 billion for an additional 80,000 Home Care Packages with 40,000 to be released in 2021–2022 and a further 40,000 in 2022–2023. The Royal Commission considered the reduction in the waiting list for access to Home Care Packages to be critical in assisting older Australians to remain in their home for as long as possible.[2]

The Budget does not contain specific details regarding the level of the packages to be provided. However, the Royal Commission called for a 'rebalancing' of the distribution of Home Care Packages by increasing the overall proportion of high care packages.[3] It is not yet known whether the Australian Government will follow this recommendation.

The increase in Home Care Packages will add further impetus to the growth in home care services in the current market.

Compliance, quality and safety

Unsurprisingly, given the evidence heard in the Royal Commission hearings regarding neglect, safety and abuse concerns, the Government’s response includes an increased focus on safety and quality using the words of the Royal Commissions Final Report, namely 'care, dignity and respect'. This is seen in the following measures:

  • establishment of a National Aged Care Advisory Council which will include a Council of Elders to provide advice to the Government on quality and safety in the sector
  • significant funding for the Aged Care Quality and Safety Commission to undertake its compliance activities with a particular focus on failures of care
  • the introduction of nationally consistent worker screening, a national register and code of conduct for all aged care sector workers
  • expansion of the Serious Incident Response Scheme into home care and community-based services from 2022
  • reporting of staffing hours to be introduced in residential aged care in 2022.

Providers should expect to see continued compliance activity from the Aged Care Quality and Safety Commission, in particular with increased activity in home care which the Royal Commission identified as requiring improved scrutiny.


The Australian Government will also be investing substantially in its governance of the aged care sector. A number of the hearings of the Royal Commission focussed heavily on Government's oversight of the sector.

In addition to the proposed new Act and the establishment of a National Aged Care Advisory Council the Government will:

  • work towards the establishment of an Office of the Inspector-General of Aged Care
  • improve access to aged care services for older Australians and Indigenous Australians in regional, rural and remote areas
  • embed Departmental officers in 8 of 31 Primary Health Networks to improve oversight of aged care services in those areas.

The Government’s formal response to the Royal Commission’s recommendations

The Department of Health has also released a more comprehensive formal response to each of the 148 recommendations of the Royal Commission, titled Australian Government Response to the Final Report of the Royal Commission into Aged Care Quality and Safety. Those more detailed Reponses will be considered in further publications which will be available on our Royal Commission webpage launching soon.

Taken together with the Budget, this signals a period of significant change for the sector over the next five year period. Many providers in the residential aged care sector have paused their growth or exit strategies while they have waited to see what the Government’s response to the Royal Commission would be. We expect that the changes outlined in the 2021-2022 Budget will be reflected in a dynamic sector with growth in some areas, particularly in home care services and some further consolidation in residential aged care.

[1] Final Report of the Royal Commission into Aged Care Quality and Safety: Care, Dignity and Respect: Volume 1 page 12
[2] Final Report of the Royal Commission into Aged Care Quality and Safety: Care, Dignity and Respect: Volume 1 page 162
[3] Final Report of the Royal Commission into Aged Care Quality and Safety: Care, Dignity and Respect: Volume 1 page 163

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