Friday, 9 August 2013

(Dam)aged Care?

By Sean Hyland, Research Anlayst, Motu Economic and Public Policy Research

The quality of aged care in New Zealand is again in focus after the sad story of a Wellington retiree last week. That case (whilst not isolated) leads me to wonder how the Government weighs the quality of aged care relative to the binary existence of such facilities. When faced with trade-offs over the public purse are we blindly favouring low-cost providers?

Recent deregulation in the industry has promoted cost-cutting. A 2012 joint NZNO-FSWU submission to the Health Select Committee describes a disintegration of staffing regulatory standards, which began when minimum staffing requirements were ignored in the Health and Disabilities (Safety) Act 2001. Unsurprisingly, profit maximising firms have adjusted the composition of skills employed away from best practice standards, which compromises the care of residents.* 

Industry traits (left unchecked) further reduce the business case for higher quality care. It is currently difficult to differentiate facilities by the quality of care provided before Grandma enters, whilst significant exit costs and deteriorating health reduces the ability to move her between facilities. As a result, profit-maximising firms will act to reduce costs. A publicly available national framework for comparing the dimensions of care (note, not outcomes) across providers could alleviate this risk, whilst the extent to which exit costs are anti-competitive is an empirical question.

Ironically, cost-cutting can actually lead to taxpayers paying twice for services. The Government currently subsidises private residential and hospital level aged care; however, the public health system has to step in when things go wrong. As a result, preventable public hospital admissions can arise. Is it  time to attach ambitious goals to funding?

Whilst I cannot comment on Government objectives, I would suggest the current regulatory framework encourages little more than the existence of aged care providers; better regulatory standards are required if we truly care about the quality of our aged care.

*In a response to the recent story the NZNO describes a case where one nurse was responsible for more than 200 residents and patients!


  1. Nice post Sean! Are there any publicly available data sets that could be used to look at these questions?

    1. Thanks Alex.

      I am fairly confident the data exists to credibly comment on the current incentives around the private provision of (quality) aged care using hospitable admissions marked "preventable", and I am currently drumming up some interest around Wellington to enable this (as well as other health economics questions).

      Unfortunately, I am currently unaware of any public data that would enable me an examination of the extent to which exit costs impact competition/quality of care.