Innovation due to meet costs and demands of ageing trends

09 July, 2009

An innovative model of accommodation and care for older Australians, if replicated, could help lead the way to combating the massive costs associated with the future demands of a rapidly ageing population, a new study has revealed.

The study by ACIL Tasman Economics found that “Apartments for Life” - as part of a vital national push for smarter responses to the challenges posed by ageing trends - could save hundreds of millions of dollars in government expenditure on aged care services as a result of improved lifestyles and living conditions.

Based on current official projections, and assuming there are no policy shifts, the cumulative costs of meeting the needs of Australia’s increasing aged population will reach $427 billion by 2045.

The study report says the model’s underlying target of only five per cent of residents needing to leave and move into a higher care, higher cost nursing home facility in their lifetime – versus a current industry ratio of 40 per cent of aged clients having to move - has the potential to contribute strongly to savings.

The study was commissioned by The Benevolent Society (TBS) to rigorously test the financial and social costs and benefits of its proposed Apartments for Life (AFL) accommodation and care complex in Ocean Street, Bondi, Sydney.

TBS has pledged to allocate an unprecedented 40 per cent of units to affordable housing, including units priced at a discounted rate and subsidised rentals.

The study estimated that the innovative model could notionally save more than $60 million in government expenditure over the lifetime of the project, and much greater amounts if copied.

“TBS envisages that around 50 developments of the AFL model could proceed over the next 25 years, and is strongly supportive of encouraging and supporting wider adoption of valuable innovation in the aged care sector,” the ACIL Tasman report states.

“The upshot of such a trend, using an increasingly well understood model, would be very large in the collective benefits to users, their families, to government and the wider community.

“There are risks, but these appear modest and are being accepted by TBS, and this actually reinforces the case that expected benefits exceed expected costs.”

Drawing on statistics from the Productivity Commission and Treasury, the study report says over the next 38 years:

- The number of citizens over 65 will increase more than two and a half times, to exceed 25 per cent of the total population – up from 14 per cent in 2009;

- The number of people over the age of 85 will more than quadruple, leading to a tripling in demand for low care places and more than a quadrupling in demand for high care places;

- Federal Government Aged care expenditures (as a percentage of GDP) will rise from 0.7 per cent in 2006-07 to two per cent;

- Costs per person in residential care will be 2.8 times Community and Aged Care package costs per person, and 1.7 times Home and Community Care package costs per person;

- An increase in rates of taxes (State and Federal) of about four per cent – as part of an overall increase in tax rates of 21 per cent – will be needed to meet the net increased costs to government from ageing.

“Limiting unnecessary costs is an imperative alongside retaining and even strengthening the upside benefits of ageing trends,” says the study report.

”A vital issue of the rising population of aged Australians is the implied significant workforce pressures in meeting demand – pressures that could add further to costs or result in a decline in standards.

“Equally, poor utilisation of formal carers, because of the time involved in moving between clients spread over a substantial area (up to 20-25 per cent of care worker time is spent travelling), adds to the pressures on forward costs.”

Other key findings include:

- Developments of the type envisaged could play a useful role in both expanding the housing stock and assisting to deliver a mix of housing types better suited to future demographic patterns;

- The increased life expectancies of older people trying to stay in their family homes could be expected to lower turnover of homes in inner city settings, adding to problems of affordability of homes suited to families for younger people and families;

- The proposed AFL apartments have been designed, and will be fitted out, in a way to engender maximum flexibility to reduce the high cost, painful and sometimes fatal accidents associated with older residents;

- The model improves the feasibility of enabling more residents to remain in their own apartment in their own area until end of life.

“The modelling certainly suggests that there are adaptations of the AFL model that could prove commercially attractive, without any subsidies – though probably at the sacrifice of some of the benefits, including some of the external benefits to governments,” ACIL Tasman says.

“It also strongly suggests there may be scope for developing commercial models that include sale of services, such as of affordable housing to governments or others, as well as delivering commercially marketed accommodation.“

The Chief Executive of The Benevolent Society, Richard Spencer, said the findings of the ACIL Tasman Study reinforced the organisation’s commitment to the AFL project.

“Pioneering an innovative project of this size and scope certainly has its challenges, but we believe our research undertaken over many years places us in good stead,” Spencer said.

“This is a smart response that combines age-friendly design and well-planned community facilities that increase older people’s options so that moving to a nursing home needn’t be an inevitability.

“We are committed to making the investment in this innovation because as the study demonstrates, the benefits that will flow from the investment – to residents, the community and other stakeholders – far outweigh the costs.”