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Insights into funding model for aged residential care

Media Release

Review provides valuable insights into funding model for aged residential care

A new report into the funding model for aged residential care provides valuable insights into how government could fund this sector in the future, say the Ministry of Health and the country’s 20 District Health Boards.

The first comprehensive Review of the funding model in 20 years was commissioned by the Ministry and DHBs to look at whether the way funding is currently allocated to the sector is fit for purpose now and into the future.

“While the aged population is growing steadily, the characteristics of people in aged residential care are changing. People are going into care later than in the past at an average age of 85. They frequently have complex needs involving long-term conditions and disability-related dependencies requiring specialist, around-the-clock care,” says Keriana Brooking, Deputy Director General Health System and Improvement, Ministry of Health.

“The Review was an opportunity to examine how things are working and to see what if any changes we could make for the future. It focused on the way funding is currently allocated, it did not review the amount of funding provided to the aged care sector.’’

The aged residential care sector receives about $1.95 billion in funding, of which $1.2 billion comes from District Health Boards.

“Currently care for older people is funded according to whether they need rest home, dementia, hospital, or psychogeriatric care,’’ says lead DHB Chief Executive for older people Chris Fleming. “Ninety per cent of residents fall into either the rest home or the hospital categories.

“The report includes a recommendation that a funding model be adopted that enables providers to target resources more specifically to a resident’s individual needs.’’

“For example, currently one resident in the rest home category may have physical limitations, whereas another resident in the same category may have physical limitations and impaired cognition, requiring a higher level of care. The proposed new funding approach would make it easier to identify the resources required to support these different needs.’’

“The Ministry of Health, the DHBs and a cross-sector Funding Model Review Steering Group have accepted that the recommendations of the Review have merit and warrant further consideration,’’ say Ms Brooking and Mr Fleming.

“Considerable work is now needed to fully understand the feasibility of adopting the Report’s recommendations, including health system and cost implications and any legislative changes that may be required.”

The Ministry and DHBs will continue to work closely during these next steps with aged care provider representatives, and other organisations in the aged care and wider health care sector.

The full report by Ernst and Young (EY) can be found at:



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