The true cost of residential aged care

7 September 2020

Researchers from The University of Queensland Faculty of Business, Economics and Law and the Faculty of Medicine have co-authored a report on the cost of residential aged care for the Royal Commission into Aged Care Quality and Safety.

The report sheds light on the performance of the aged care sector and will ultimately contribute to the Royal Commission’s final recommendations, due to be handed down in February 2021.

Among other findings, the report estimates that an additional $621 million per year in funding is needed to ensure all Australian aged care facilities meet high-quality standards.

The research was a joint collaboration between Centre for Health Services researchers Associate Professor Tracy ComansDr Kim-Huong Nguyen and Professor Len Gray, as well as Centre for Efficiency and Productivity Analysis (School of Economics) researcher and ARC Future Fellow Associate Professor Valentin Zelenyuk. PhD candidates Bao Hoang Nguyen, Zhichao Wang and Alice Tran also contributed to the research.

This is an image of Associate Professor Valentin Zelenyuk
Associate Professor Valentin Zelenyuk

Associate Professor Zelenyuk has developed various theoretical and practical methods for analysing the productivity and efficiency of economic systems. He has vast experience in applying these methods to multiple sectors globally, including banking, (Luxembourg, China, Korea, and more), energy (Netherlands) and health care (Canada and Australia).

In the study requested by the Royal Commission, he helped the UQ team adapt these methods to analyse and understand Australia’s aged care sector.

“Our team found that, as a whole, the sector is relatively efficient,” Associate Professor Zelenyuk said.

“The majority of facilities are operating near the efficient cost frontier, leaving little room to improve with further cost efficiency gains.

"At the same time, there appears to be substantial room for further improving the quality of the services while maintaining the current level of efficiency.

“While working on this project in parallel with my research on the productivity of hospitals, I can also say that here, in Australia, we are very lucky to have one of the best healthcare systems in the world (though not without room and need for further improvements).

“This was confirmed by many international rankings, as well as tested by an unexpected and ruthless auditor – the ongoing pandemic.

"It is well overdue to have, and we think we can have, a decent aged care system in Australia too – with decent quality and efficiency that all Australians deserve.”

Read on for a full summary of the report and its findings by the research team.

Follow Associate Professor Zelenyuk on Twitter.

Media coverage

The report has also received extensive media coverage, appearing in outlets including The Guardian, Australian Financial Review, 7 News, The Sydney Morning Herald, The New Daily and ABC Radio National - Rear Vision.

Royal Commission into Aged Care Quality and Safety webcast

The report was discussed during a webcast of 'final submissions' on the Royal Commission's website on 22 October 2020. View the webcast here.