Strengthening residential aged care: why the Government’s pricing review matters

The Australian Government’s Residential Aged Care Accommodation Pricing Review comes at a pivotal moment for the entire sector. For years, providers have been navigating rising construction costs, increasing regulatory requirements, and heightened expectations around the quality and design of aged care accommodation. These pressures are felt most acutely by providers who operate on tight margins yet serve the highest number of older Australians with limited means.

That is why CHA strongly welcomes Aged Care Minister Sam Rae’s announcement of this Review. It provides a critical opportunity to ensure that accommodation funding settings are fair, sustainable, and capable of meeting the growing and increasingly complex needs of older Australians. As highlighted in CHA’s submission, Catholic and other not-for-profit providers have long advocated for a genuine partnership with Government to address the long-term financial sustainability of residential aged care and to rebuild investment confidence in the sector.

A review that supports the future of care

The current pricing framework no longer reflects the real cost of building, maintaining and renewing high-quality aged care accommodation. Over time, the accommodation supplement provided for supported residents has failed to keep pace with inflation and construction costs. The result is a widening gap – now approaching $90 per resident per day – between the funding available for residents of modest means and the amounts contributed by non-supported residents.

For many providers, particularly those operating in regional Australia or serving disadvantaged communities, this gap makes it increasingly difficult to fund refurbishments, meet new design standards, or build new facilities. The Review is not an accounting exercise: it is an essential step in ensuring that older Australians continue to have access to safe, high-quality, dignified accommodation, regardless of their income or postcode.

CHA’s submission emphasises that accommodation funding must sit within a broader, long-term strategy to make the entire system more stable and investable. This includes measures such as a more predictable Maximum Permissible Interest Rate (MPIR), long-term indexation of the accommodation supplement, and regular independent cost benchmarking. These changes would give lenders and providers the confidence to renew ageing buildings and expand supply where it is needed most. It would also give us the flexibility to adjust capital to suit the changing casemix of residential aged care clients, such as renovating to improve and expand memory support units.

The unique value of Catholic and other not-for-profit providers

Catholic aged care providers have always served a mission that extends beyond financial returns. Catholic services operate a significant share of facilities in thin markets and deliver nearly half of their residential places to supported residents – older Australians who have limited financial means, complex care needs, or lack family support. This is a deliberate expression of Catholic mission and social responsibility. Not-for-profit providers reinvest all surpluses back into care, infrastructure, and workforce development. They play a stabilising role in a system where many facilities – especially in rural and regional communities – would otherwise struggle to remain open.

If Catholic and other not-for-profit providers were forced to withdraw due to unsustainable funding settings, governments would face far higher costs to replace this capacity, public provision or for-profit development – both more expensive in the Australian context.

This “public value” contribution should be recognised and protected. Ensuring that mission-based providers can continue to operate in thin markets, provide high levels of supported accommodation, and maintain quality infrastructure is essential to the overall stability of the aged care system.

It’s Not About Luxury – It’s About Dignity, Safety and Future Demand

There is not – and should not be – a push to make every aged care facility a gold-plated, luxury offering. The core issue is ensuring that all older Australians have access to safe, modern, age-appropriate accommodation that meets contemporary standards, and this is not achievable with the current policy settings.

Australia’s population is ageing rapidly. Demand for residential aged care will continue to grow, even as more people seek to remain at home for longer. Meeting this demand requires a pipeline of well-designed, energy-efficient, dementia-appropriate facilities that promote independence, dignity, and wellbeing.

Achieving this is capital-intensive. Buildings must be renewed every 20–30 years, and modern design standards – including single rooms with private bathrooms, small household models, and dementia-supportive layouts – require significant upfront investment. Without sustainable accommodation funding, providers will not be able to replace ageing buildings or expand capacity as demand rises.

The gap in funding for supported residents means some providers are effectively penalised for serving those who need aged care the most. That is why CHA is calling for a recalibrated accommodation supplement, targeted loadings for providers with high numbers of supported residents, and safety-net arrangements that ensure vulnerable Australians are not stranded when a service becomes financially unviable.

A sector ready to partner with Government

The Review is an important opportunity to build a funding framework that reflects the real cost of quality accommodation and supports long-term investment in the infrastructure that older Australians deserve. The budgets of both Governments and older Australians are constrained, but under-investing in aged care facilities now – particularly not-for-profit facilities – is a false economy that will lead to higher costs down the line.

This is not about luxury. It is about fairness. It is about dignity. And it is about ensuring that every older Australian – regardless of means – has access to safe, modern, sustainable residential aged care.