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Aged care exemplifies the limits of markets



Recent airing of shocking treatment of elderly residents in Australian aged care facilities has led Prime Minister Scott Morrison to announce a royal commission. Sadly, however, the allegations of abuse and appalling conditions in nursing homes are not new. The question becomes, therefore, what has resulted in poor outcomes for vulnerable citizens, and why have we permitted such treatment to go on?

Nurse listening to chest of patient in homeIn a society whose foundation unit is the nuclear family peopled by individuals who are workers and consumers, we are accustomed to outsourcing care of the vulnerable: small children and the elderly among them. As life expectancy increases, frailty and disease can take hold and institutional care is more than simply a convenience for family — it becomes a necessity.

That is not to say that home care of the elderly is an idyll. Caring work is difficult physically and emotionally, even when performed with love. Sadly also, elder abuse is now a well-documented phenomenon. However, the conditions in nursing homes speak to institutionalised malaise at best, and racketeering at worst. What is most offensive is that corporations profit from the abuse that is allegedly occurring.

While there is a mix of for-profit and not-for-profit aged care providers, there is no doubt that aged care is an industry that it is market-driven, and that this is intended. The Productivity Commission, for example, made a series of recommendations in 2011 designed to enhance consumer choice in aged care.

In 2016 the government published the Aged Care Roadmap. It reports that 'the aged care system is operating more like a consumer-driven market' but seeks to build on the Productivity Commission recommendations including to 'increase choice and control for consumers' and to develop a 'lighter touch approach to regulation' for providers. In addition, since 2013, to increase efficiencies in the industry, the government has withdrawn more than $2 billion from the industry.

It is difficult to argue against affording 'choice' to the elderly seeking appropriate accommodation. It may also seem logical to free up the 'red tape' of administration, to 'permit innovation' in aged care services. The reality is, however, that the language of markets, including consumerism, free choice, efficiency, and the absence of regulation (or an 'agile and proportionate regulatory framework'), do no favours to those entering into care.

A market system thrives on an assumption of consumer choice. In reality however, it is profits that provide the incentive for suppliers. In circumstances where consumers are vulnerable, there is a power imbalance that interrupts the assumption of their free will. In the case of aged care, the 'consumer' is the elderly. The profit motive, and the question of power, is evident in so many of the reports of abuse and poor conditions.


"While cutting costs may meet the accounting requirements of providers, it is generating extreme suffering in residents."


For example, nursing homes have the right to refuse entry. If an older person has relatives who complain, that family might be excluded. Complaints to regulatory bodies are not made public, leaving providers unaccountable for unsatisfactory conduct and other consumers none the wiser. Residents or their relatives who need care run the risk of losing their place if they pursue their complaint.

While the Roadmap identifies the importance of 'attracting and maintaining a well-led, flexible and responsive workforce', these words tend to indicate a casualised workforce. The profit motive of corporations is a well-known driver of poor pay and conditions. And this is the case in aged care.

Compounding the low pay for a 'flexible' workforce is the low staff ratio, including the ratio of nurses to residents. Evidence of chemical restraint of residents (who will not require care if they are sedated), low quality (cheap) food, and unsanitary conditions, similarly point to attempts to save costs. While cutting costs may meet the accounting requirements of providers, it is generating extreme suffering in residents.

The industry, on the other hand, responds that it cannot afford to spend more. Yet what is the purpose of running a 'care' facility if the provider provides no care? For all the rhetoric of market mechanisms to provide 'choice' for 'consumers', those very consumers are being sold a lemon. A product that is consistently unfit for purpose is evidence either of market failure, or of the inappropriateness of the market mechanism to undertake what is really a social responsibility.

The royal commission will hopefully give voice to the concerns of those hurt by our manifestly inadequate aged care system and come up with recommendations for reform. Of concern, however, is that despite so many aged care reviews, the absence of care remains.

What is needed is a fresh commitment to develop a model of aged care as a community enterprise. One that is based on and upholds dignity, love and respect in care. While it may not be impossible to marketise such a service, for example as a social enterprise, the profit motive offers too great a corrupting influence to be permitted as an organising principle. If ever there were a case for the very non-market approach of responsible government funding and oversight, supported by community engagement, it is the care of our elderly.



Kate GallowayKate Galloway is a legal academic with an interest in social justice.

Topic tags: Kate Galloway, aged care



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Existing comments

Allocating care of the most vulnerable age groups, the very young and the very elderly, to profit-driven companies is a recipe for the disaster we are witnessing in aged care and, sometimes, in child care. Community engagement can help in various ways. The staff at nursing homes know people are interested in what is happening at their facility, the residents see that people are interested in their welfare and value them, not as objects of pity, but as people with rich histories. It's essential that well-trained staff are caring for residents of nursing homes and equally important that management have ideals about what their facility stands for. Even more important: the community visits, engages and honours people who make their home in a nursing facility.

Pam | 24 September 2018  

Thankyou Kate for this straight and clear response to the crisis that exisits in both the Aged Care "Sector" and, Iets add the Disability "care Sector" and Early Years Care "Sector". We have accustomed ourselves to the idea that "The Economy" is only about Profit.. and that Human beings can be commodified to be in service of The Economy". Aristotle first spoke of the economy as the management of a household. In these times with the changed sense of the "economy" we manage our household so that some benefit by monetising others of the household, calling them consumers and using them as commodities to create wealth for others. This is certainly the result of agreeing that our Care for others be placed in the Economic Sector as it stands. We agreed to this. But we dont need to continue to agree? There are ways to create a New Economy based on different values and agreements!

Heather Lawrence | 25 September 2018  

Thank you for this timely piece, which usefully identifies and investigates the context of drivers in this 'market'. It seems to me likely that once the Royal Commission is under way, popular (populist?) media coverage will likely be a mix of cherry-picked sound bites and sensationalist outrage. To have an argument - with due gravity - presented just now around the foundational issues is especially helpful.

Richard Jupp | 25 September 2018  

The very fact that we talk about care for the elderly as an industry rather than a service says it all.

Joanna Elliott | 25 September 2018  

This critique also applies to many of the so called reforms enacted in the name of economic efficiency over the past 30 years. In pushing for the privatisation of the Commonwealth Bank, Treasury lost control over the banking sector and created a quasi-monopoly which has been ripping us off ever since, by failing to adequately regulate the health care sector, the Government is progressively destroying Medicare, the privatisation of electricity generation and transmission has doubled electricity cost, the privatisation of Telstra was the privatisation of a natural monopoly and it bin turn helped destroy the new NBN, flexibility in the workforce is undermining security of employment at great social cost, the new start allowance has created a new group of undeserving poor, unrestrained advertising is turning us into avaricious consumers, and Rupert Murdock is gradually undermining our political institutions.

Lee Boldeman | 25 September 2018  

Sadly Scomo has proved himself to be, as if we didn't already know, just another politician. And one without vision. Horror stories about the misbehaviour of banks were rife. The opposition promised a Royal Commission. The parties of the free market, the Coalition, would not have a bar of it. Their vision for the banking sector was - Let them maximise profits. When the pressure became too much the government relented and the Banking Royal Commission was set up. It soon showed there was more to the pub and sewing circle talk than the government could ever imagine. Along comes the Aged Care scandals. Once again the debacle caused by free market forces dictating behaviour by Aged Care entrepreneurs was there for all to see. Thanks to the pesky media not to any supervision by the government departments/agencies responsible. The only thing this Coalition is really good at is fear-mongering. Fear of great powers (except the USA). President Trump is a bit of a worry but our Ambassador plays tennis with him, so we can relax. As long as Mr Hockey let's Trump win. Fear of unions is a good stand by. Pathetic!

Uncle Pat | 25 September 2018  

Thanks Kate, this is very interesting piece which makes some good points but I don`t think it gets to the heart of the issue. This I believe is another example of federal government`s piecemeal meddling, poor governance and a vain attempt to try and please everyone, leading to a complete mess. Much the some could be said for healthcare, education and energy policies, but this in now an especially sensitive area. The fundamental issue is funding, and how government gets involved in this both as a payer and a regulator. One could make the case that government should pay for everything but that would mean ruinously high taxes (including on the 60% who currently pay nothing net!), and almost certainly give a poor and a rigid, highly unionised system. On the other hand the market could provide an excellent system but only for the minority with the means to pay for it. Currently, we fall badly between two stools. So, one needs a viable partnership between government and providers, whether charities or businesses. Government contributions need to be within fiscal realities, means-tested with its main concern being looking after the truly poor. But the "means" taken into account need to include everything the individual has, including the family home, and there should be no artificial cap on costs....indeed, whatever it takes. The money needs to meet the real needs-based costs and guarantee quality and choice! What all governments have been trying to do is protect its own fiscal and also political interests, the latter including featherbedding the interests of the offspring of the frail elderly so that their inheritance is largely protected. But the interests of the old should be at the centre! This is not market failure but failure of social policy, which currently interferes with the freedom of the elderly to use their accrued financial resources to look after their own interests in the last phase of their lives.

Eugene | 25 September 2018  

We walked for some days with a CEO of aged care facilities many years ago on a nature hike in New Zealand. He had a very cynical view on children and their willingness to allocate the parents own money for their good aged care. The children he said, would profess “only the best” care for their parents only to decide for a more modest offering after calculating financial impacts on their inheritance. POA holders would actually make inheritance calculations in front of his staff as they made decisions on care levels. Often these inheritance discussions would be put in terms of renovations and overseas holidays. The money was always there to pay for the best care but rarely decided in favor of such care. Yes to regulation and oversight, no to the nationalization of such services. Question : why should the public purse pay anything for an aged person who needs care if that person has the assets (not necessarily income) to pay? In so many instances today, are we not simply facilitating a tax free transfer of wealth to the children where the rest of the population is paying for this transfer. Solution : For people that do not have the income to pay for their own health care as they get older, the cost of care should accrue as a payable and an invoice be provided to the estate by the state on the persons passing. Interest could be calculated at inflation. In this way the person pays their own way all the way into the grave. Many have the money to pay for their care but their families chose not to spend it. Of course this then simply provides for estates to be transferred tax free before passing so the elder person has no income and no assets. The corporate raider would call this an asset strip. We need a better system but it will come at a cost. The point is, as this CEO pointed out, no one wants to pay for it.

Patrick | 26 September 2018  

A thought-provoking article Kate. The power imbalance you refer to is very real. While visiting an elderly aunt of mine (sharp as a tack at 95) she commented on the flurry of activity and attention during the previous week’s accreditation review, but then sadly commented that things had now returned to normal. Aged care accreditation agencies are unfortunately too removed from the day to day to provide the checks that are needed. We need to look at additional ways of building in advocacy for people in aged care. Models such as legally sanctioned community visitors (akin to Public Advocates Office Victoria) may be one model.

Mike | 26 September 2018  

Men are often disempowered by suffocating atmospheres in age care that allow little in the way of ‘dignity of risk’ – in large part a product of a lack of gender diversity in staffing. I recall my father in law, a rough and tumble plumber and contractor being asked ‘do you want vegies with your parmi dearie’ and would you like to enter the competition to name the nursing home cat! He just rolled his eyes.

Mike | 26 September 2018  

Thanks Patrick...exactly right! And so Australian.

Eugene | 26 September 2018  

Excellent comments by Eugene and Patrick, IMO. The "market", being a thermometer, not a thermostat, is only a reflection of the people in the market. It's the most efficient deliverer of people's choices, ... whatever they are. So if you love your parents, the market will reflect that. If you don't, ditto. Don't shoot the messenger. The number of nursing home patients parked there to die unvisited by their children is the real evil. No legislation to cope with the alleged "evils" of the market can fix that.

HH | 26 September 2018  

Thanks for a good article, I work in aged care and it has become apparent to me over time that facilities although on the surface seem genuine, often are driven by money. Frequently short staffed and , certain basic care needs hurried or not done at all. Most staff feel like they are on the ragged edge.

Peter Day | 27 November 2018  

Hello Kate, you have stated "For example, nursing homes have the right to refuse entry. If an older person has relatives who complain, that family might be excluded" I was denied access to see my beautiful Mother in the final months of her life. The Assistant State Manager of the Complaints Investigation Scheme WA told me that the provider had the right to do so. I downloaded the Aged Care Act 1997 and found Section 23.8 (now superseded) which states something to the effect 'if a care recipient has asked a representative to attend to their needs, the nursing home must allow access at any time'.

Linda McGough | 29 January 2019  

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