Earl Gasparich believes that a solution to the aged care funding crisis exists in the merging of the retirement village and aged care business models.
Earl Gasparich, Chief Executive, Oceania Healthcare
Some would say the future of New Zealand’s elderly has never looked brighter, and in many ways that’s true. Medicine and technology have advanced such that people are living longer than ever before, while retirement villages offer senior New Zealanders the option of living independently in secure communities with a range of amenities on their doorstep.
Unfortunately, the future is not so bright for those who are no longer able to live independently and require rest home, hospital or dementia care. Within the next 10 years, as the baby boomers age, the number of New Zealanders requiring care is expected to triple.
The New Zealand retirement village industry is very advanced in terms of attracting investment into the sector, but the same cannot be said for the aged care industry. There are very few aged care facilities being built in New Zealand that are not co-located with, and effectively cross-subsidised by, large-scale retirement villages. According to recent Deutsche Bank research on the New Zealand aged care sector, net supply growth in aged care facilities has averaged just 1.2 per cent annually since 2009.
The lacklustre growth in the aged care sector can only be attributed to the current funding model, which fails to recognise the capital cost of providing a bed. With 900 to 1,200 additional beds estimated to be required per annum, and only 640 beds forecasted to be built each year under the current funding model, Deutsche Bank predicts a shortage by 2022 at the latest. There’s no doubt that a new approach is urgently required if we want to avoid a chronic shortage of aged care beds in the near future.
We believe that a solution to the aged care funding crisis exists in the merging of the retirement village and aged care business models through the use of Occupation Right Agreements (ORA) to source the capital investment required to fund an aged care bed. This concept is already well established in the New Zealand market and has similarities to the Australian approach, where refundable accommodation deposits are collected from residents by the providers of aged care beds. Oceania’s care suite product, which combines the ORA ownership model with the provision of certified care services, is effectively a private sector response to the underfunding of the New Zealand aged care sector.
With aged care already representing a significant proportion of the total Ministry of Health budget, a considerable increase in funding is unlikely and we simply cannot afford that approach. Instead, all of New Zealand needs to take responsibility for the costs of caring for its elderly and we encourage our industry to embrace the Oceania model as a means of addressing this looming crisis in aged care.