Submission in response to the Department of Health Consultation Paper No. 2:
A new model for regulating aged care, June 2023

Background to Aged Care Crisis (ACC) Submission
Some background information will be helpful in assessing our submission.

The story of aged care

Human services including health and aged care have depended on empathic human behaviour. The risks of the sick being exploited by the self-interested have been recognised and controlled since Hippocrates recognised it over 2000 years ago. 

They have traditionally been primarily a community service supported by government, but provided by community organisations (non-profit) and professional carers who embraced caring empathic values. 

While this was open to businesses, a traditional focus on businessmen’s trustworthiness had created a system with checks and balances. These contained the pressures of unfettered market competition in vulnerable human services like health and aged care.

Free market ideology, a fringe ideology, when it developed in the 1940s, caught the imagination of businessmen and some politicians and it spread across the world including Australia where it became dominant in the 1990s. Markets were believed to be self-correcting and any restrictions (eg, regulation and oversight) on markets were condemned as impediments to effective market competition. The belief became dominant in the USA and UK at the end of the 1970s. All sectors were required to conform and it became the basis for globalisation.

Health care: The USA and the UK were early adopters of free markets in health and aged care. By the 1990s when large US multinationals were welcomed as the future for health care in Australia, there was already extensive fraud in the USA. Patients were being systematically harmed in the pursuit of profit. 

Sections of the Australian medical profession realised what was happening. State health departments were supplied with information. They were still independent of the government and resisted strong pressure from their politicians and the market. They used their probity regulations to block international companies who were being enthusiastically welcomed because of their market success even though their conduct showed they were behaving unethically and could not be trusted to behave ethically.

The medical profession used their market power to put local companies that adopted these policies and practices out of business. Health care in Australia has struggled because of government free market policies but we did not follow the USA.

Aged care: Paul Keating became Prime Minister in 1991. He did not support the Hawke government’s 1986 aged care reform program. He planned to introduce free market policies into aged care but abandoned this when his economist adviser, Bob Gregory, warned him what the consequences would be.

By the end of the 1990s, aged care in the USA was also involved in multiple fraud scandals and allegations of neglecting the elderly. John Howard had been an ardent supporter of free market ideas and a believer in market mechanisms since the 1970s. He had no hesitation in ignoring evidence and many warnings.

His government elected in 1996 immediately marketised aged care in 1997 removing all restrictions on staffing and on how money was spent. It relied instead on competitive market mechanisms to fix any problems. He also abolished the rigorous probity (trustworthiness) requirements in aged care which the department had boasted about in the early 1990s.

Also in 1997, the Howard government ignored the concerns of the Foreign Investment and Review Board (FIRB). It welcomed one of these aged care companies and met its charismatic leader, who extolled the virtues of free markets, into Australia. His company was at the centre of the scandals in the USA and it entered bankruptcy before it entered aged care here so never did so. 

A large number of reports describing what was happening in the US aged care system were sent to the department warning that this was likely to happen in Australia too. This time the department defended the government and its policies. It no longer had the power to investigate. Government ignored all the evidence and it soon did happen in Australia.

Political developments: Like every ideological belief system with consequences for citizens, this one soon became highly centralised, took control of data and marginalised the community. The information citizens received was filtered and managed in ways that supported these beliefs. Critics were not seen as credible and were excluded. Aged care was one of the bigger threats to policy and a positive image was essential.

The independence and power of the public service were a threat to policy and it was rapidly downsized. Supporters were put in charge. With everything conceived as a market, advice on policy even in community and clinical services like health and aged care was outsourced to marketplace advisers and economists who supported the belief. 

Community based charities and advocacy groups were a threat. Those critical of policies were underfunded and marginalised, while those who supported policies were later well funded and welcomed on to advisory bodies like the Aged Care Sector Committee. They were used to claim that community supported government’s policies.

The aged care system started coming apart within three years and has been dogged by recurrent scandals, whistleblowing and an ever-growing number of concerning media reports. There have been numerous reviews and inquiries and the response to each has been to tinker with the system, moving the pieces about and then make exaggerated claims to reform. The system continued to deteriorate. 

Aged care is not unique and almost every vulnerable group or vulnerability in any system has been exploited and citizens harmed. Reviews and Inquiries have not resolved most of these problems.

Social science: What was happening was obvious to those who looked at evidence, particularly when they had seen countries behave like this before. What is remarkable is how durable these systems are and how difficult they are to deal with even when no one can be unaware of the way some are being harmed. In large part this is because these are highly motivated people who build their lives and become credible (often leaders) using patterns of thinking that do not work. Criticism is not seen as credible.

This sort of behaviour and the reasons why humans behave like this has been studied by social scientists for at least 120 years. But this information is disturbing, quite complex and not intuitive. It has been ignored and marginalised even by some social scientists. 

Some are now very worried about what is happening and are writing books to try to raise awareness. Power and its concentration in individuals or groups who have adopted ideological beliefs is central to these dysfunctional systems and their durability. Solving this requires a shift in power so that power is balanced across society. The excesses and glib justifications of any one group is controlled by the others.

Aged Care Crisis (ACC): ACC was formed in 2005 after the first set of scandals exposed what was happening. Since then it has criticised the system and made submissions to most of the many inquiries and reviews describing what was happening. In 2008, its members started making recommendations to restructure the system in ways that would have balanced the dominant free market. This was not seen as credible and it was ignored.

Aged Care Crisis and the Royal Commission

The Royal Commission into Aged Care was called by Prime Minister Morrison in 2018. We had seen what happened before and were worried that the government would simply use this to buy time. We knew they still considered aged care as primarily a market rather than a community service and might appoint Commissioners who were market experts and shared their views. In our submission to Minister Wyatt, we warned him of the risks of this and when we met to discuss the terms of reference, we stressed the need for the Commissioners to consider major structural reform. Other community groups present agreed.

We were concerned when the government appointed a retired judge whose expertise was in industrial relations, and who had been criticised for supporting government’s position in contentious cases prior to being made a judge. As concerning was the second Commissioner, a previous senior public servant who had led the government’s response to market failures. We also noticed that Counsel Assisting were appointed by the Attorney General so also government appointed. The Attorney General at the time was the same Christian Porter who we now know was the Attorney General who rubber stamped the illegal Robodebt scheme introduced by Scott Morrison.

We were flattered when we were asked to make a statement with a view to appearing at the first public hearing in early 2019. We supplied data contrasting what industry and government were claiming, with what nurses were saying. We supplied staffing and regulatory data showing how badly Australia compared with the USA as well as data showing how ownership structure impacted on performance in countries that collected sufficient data to assess this. We referred to Australian data that suggested this was happening here. We canvassed the need for greater community involvement to counter this.

In a telephone conversation, Counsel questioned our legitimacy as an organisation and rejected the information we had supplied. He clearly did not see this as credible and we were never asked to appear. Our later detailed submission addressing these issues and advocating for a new structure that empowered communities was never published. In retrospect, we think it likely that there were deep divisions within the Royal Commission from the outset and some would not countenance this.

The Commissioners examined what was happening and the evidence was clearly convincing. They found we had a very poor aged care system; one we should be ashamed of. We were pleasantly surprised and very hopeful when we read the interim report which found “deep and entrenched systemic flaws” and promised “whole-of-system reform and redesign”. When the first judge died, he was replaced by another retired judge whose expertise was in tax reform.

Counsel assisting now took a very different approach and consulted largely with industry, marketplace advisors and government officials who were mostly a part of the system. Very few if any strong critics were interviewed and contentious issues were carefully avoided. Submissions that challenged the current system, criticised the way they were addressing issues and pressed for real structural reform, were ignored and often not published. The discussion seemed to be tightly controlled.

Example:  The commissioned review of staffing comparing it with international data levels, particularly in the USA was damning. Yet the closely related evidence in the sources they must have used also showed the large differences in staffing and outcomes between different ownership types. That was not mentioned. The authors of that report on staffing are now very critical of the Royal Commissions final report yet have never commented on this omission. One can only wonder about the terms of their contract. The Royal Commission seemed to be behaving more like the post-1997 public service than an open inquiry.

It was soon clear that the two Commissioners often disagreed and the final report confirmed this. They wrote separate chapters and made separate recommendations. While the retired judge wanted to rebuild (ie restructure) the system by decentralising and regionalising management and oversight, the retired public servant wanted to renovate it and not change the centralised controlling structure.

This was not the “whole-of-system reform and redesign” promised and it ignored the “deep and entrenched systemic flaws”. The judge was very critical of the ‘renovation model' and strongly opposed it. He explained that the system “has come to its present state in an entirely foreseeable manner, given its basic structure and the constraints and influences on its governance”. That structure remains, which is why it needed rebuilding.

The response to the Royal Commission

The Morrison government accepted the renovation model and ignored the rebuild model and the retired judge’s comments. It immediately appointed multiple marketplace advisers including PwC and KPMG to advise them on changes. The focus was on aspirational human rights legislation, on increasing funding and revising the funding system, and on increasing the regulatory effort. While the pieces were moved about and adjusted, the essential structure of the system, the power imbalance and the strong perverse competitive pressures all remain. 

We argue that while this additional funding might help, its overall complexity and particularly the additional regulatory complexity will make caring more difficult for staff and continue to drive them away. Some of the better community and smaller independent providers of care are not prepared to operate under this complex system and are already vacating the sector. It is driving the system further in the wrong direction.

Two recent developments throw additional light on what was happening and the arguments we make in our submission.

  1. The Robodebt scandal graphically illustrate the way in which the public service, in this case the Department of Social Services, has deliberately hidden facts and evidence to protect politicians and then aided and abetted them in unlawfully exploiting and harming vulnerable citizens. This illustrates the extent to which the public service, which once spoke out and acted fearlessly in the interests of citizens has instead ignored its responsibilities to protect them and instead protected government and industry instead.

    While it may not have broken the law in the same way, we argue that the evidence suggests that the Department of Health and Aged Care has being doing just this for at least 20 years. Without their protection, what was happening in aged care would have been obvious long ago and action would have been required. The department remains in charge of the reform process and all powerful.
  2. The recent PcW scandal reveals the conflict of interest when marketplace advisers are also contracted to advise on the regulations that are intended to control the behaviour and likely to restrict the profitability of their corporate clients. This is a dark hole and we can only speculate on the role that these sorts of advisers have played in the numerous consultancies and regulatory reviews they have conducted in aged care.

    Our experience studying similar situations is that, exposures of situations like this in one company are red flags to widespread systemic practices by competitors who must adopt the same or similar strategies to remain competitive. In the example we give on page 10 of our submission, the vast majority of competitors in the same health care sectors in the USA had poached the company’s successful managers and were behaving similarly. Most also paid large fines.

    ABC 7.30 program on 17 July 2023 exposed similar concern about the other Big 4 accounting and professional service firms advising government and industry at the same time - PcW, KPMG, EY and Deloitte. Aged Care Crisis made a submission to a Senate Committee in 2018 drawing attention to KPMG’s international problems and expressing our concerns about the extensive use of KPMG in aged care consultations. The Senate did not publish it.

Aged Care Crisis and the Department of Health

Our relationship with the department: Aged Care Crisis had made many submissions to the department over the years and was frustrated by the way the department narrowly focussed its Consultation discussion papers, and failed to publish submissions so that contentious issues could not be exposed and discussed. It was a dark hole protecting government from criticism - similar in many ways to the department of Human services behaviour in the Robodebt scandal

When after the Royal Commission reported, Aged Care Crisis found that the department was still conducting its consultations in the same way and that real discussion and debate was still being limited, it decided to stop responding to the department and instead make submissions only to parliamentary inquiries and other more open and receptive inquiries.

We made this clear to a Consultation discussion paper in December 2021 in a limited short critical submission within the 1500 word limits that the department specified concluding

“Aged Care Crisis does not want to be involved in a process that is so deeply flawed and is likely to make the situation worse. If however, anyone is interested in discussing the issues we have raised and is prepared to address them then we would welcome the opportunity to discuss them and or make further submissions.”

We directed them to a web page Why our society and human services are in trouble which explored the problems we had outlined in more depth.

Reasons for deciding to make a submission: We have recently been involved in roundtable discussions with other groups and the new proposed regulatory changes have been topics of discussion. We therefore decided to write a submission in response to the department’s latest request and publish it ourselves so that we have something to refer to. 

To do so and show what our research suggests is needed, it was necessary to review what has happened to show why the system has failed. This is not a short project. We were short of time and have therefore drawn heavily on past submissions. A short central account and main arguments is supported by multiple appendices which use extracts from our many more detailed submissions and articles. As a consequence, there were a few minor errors and a number of links that no longer worked. These issues have been addressed in the version below.

Brief outline of submission

There is a 4 page summary followed by 12 pages setting out the problems in the system and what needs to be done. Five pages respond to the proposed regulatory changes. The questions asked in the discussion paper are answered over 7 pages.

The submission is supported by 9 Appendices, many quite long. These supply the backup data needed to support the claims and arguments made. They draw on other material including many of our past submissions to inquiries and reviews as well as to the Royal Commission.

The following issues are addressed:

  1. That aged care is primarily a community service rather than a market, yet our communities have been excluded and have no role in the system.
  2. That aged care is one of many system failures that have resulted from policies that have eroded our society and undermined democracy in many countries including Australia. Fundamental change is needed.
    We address:

- the conflicted role of marketplace advisors by examining PcW and KPMG.

- The history of aged care and the impact of free market ideology on it.

- the gutting of the public service and the consequences for the Department of Health, and related aged care bodies’ – particularly in their regulatory roles. The recent Royal Commission Robodebt report exposes what was happening in the public service.

  1. What has happened to our democracy and the consequences for aged care.
  2. How health care responded more successfully to the same policies.
  3. What happened at the deeply divided Royal Commission, its failure to meet its promise of “whole-of- system reform and redesign” to address the “deep and entrenched systemic flaws” it found at the heart of aged care.
  4. The “renovation model” rather than the “rebuild model” that the government adopted as a result.
  5. The way and the extent to which those involved were in denial over the years as the system failed, including how this continued during the Royal Commission, and is still happening now. The same people remain in key positions, are still seen as credible and continue to advise government.
  6. The way government ignored evidence in 1997, how rapidly the new regulatory changes introduced then failed and how blind the government was to this.
  7. The extent of the recurrent and ongoing failures in regulation including the data that reveals the extent to which the regulators protected industry rather than the elderly. A lengthy appendix examines the extent of the regulatory failure and concludes that the regulators were protecting government and industry but not the elderly.
  8. Information showing just how badly the system was failing and the consequences for care and those receiving it is included in an appendix.
  9. The need for a system where there is a balance of insights and especially of power.
  10. The Community-led system that we argue is needed to address these issues of balance and power. We draw on our recommendations to the Royal Commission.
  11. The way we challenged the Royal Commission on their failure to address these issues and pressed for local involvement and empowerment.
  12. We refer to the social science that explains what has been happening, why the system has failed and that underpins the reasons for embracing community and giving them more power and control.
  13. The potential adverse consequences of the more complex regulatory system.
  14. Potential problems with Quality Indicators and Star Ratings.
  15. We respond to the Discussion paper and the questions asked.

Appendices to the Submission

  1. Aged Care and the Society we live in: The story of flawed policies including the outsourcing of policy. A description of the extensive societal consequences including for the public service, other social systems, aged care and our democracy. The story of aged care is summarised. We suggest that aged care is well placed to start the process of change required to address these issues.
  2. Denial Before and then after the Royal Commission: This describes the way those responsible were unable to accept what was happening as the system steadily came apart and then continued to deny when it imploded after 2016. It persisted during the Royal Commission and is still evident in many political and senior industry leaders. We describe the social pathology responsible and give a classic example of this pathology from health care.
  3. Regulatory failure Early experience: This draws on an older web site describing the flaws in the new system, the failures in the first few years after the 1997 changes and the attitudes of the new free market to aged care.
  4. Persistent Regulatory failure: Aged Care Crisis has been writing about the failures in regulation since its formation. We quote short sections from our submissions that describe what was happening or supply information about regulation. The system came apart at the end of 2016 and we made many sometimes detailed and lengthy submissions to many inquiries and then to the Royal Commission covering the failure of regulation. We list many of these and quote from some of them including from published and unpublished submissions to the Royal Commission. We deal with many regulatory issues and conclude that “adverse information about aged care was more threatening to the regulators than to the public. The worse it got, the harder they tried to conceal it”.
  5. What families and staff have to say about care: This is a copy of an appendix to our 2018 submission to the House of representative inquiry into aged care. (Zimmerman Inquiry). It describes what was happening in the sector, how bad care was and the consequences. 
  6. Aged Care Structure: This contains extracts from our submission to the Royal Commission pressing for structural changes that would address the problems by rebuilding community and giving them a central role. Supporting evidence and opinion is included.
  7. Books and people who analyse what is happening: This examines some of the social science that explains what has happened and supports the sort of reform that we have been pressing for.
  8. Regulatory changes are driving the best providers out of aged care: This appendix documents some of the better local council providers of home care and the nursing home owners who have decided that the new funding and regulations are too complex and too burdensome. They are no longer going to provide aged care.
  9. Analysis of the Star Ratings webinar for providers: This is an analysis and criticism of a webinar for industry describing and promoting the new Star Rating System.

Comment on Place Based Solutions

The Tamarack Institute in Canada has been leading in the development of what they call “place-based solutions”. They have been working with groups in New Zealand, the UK and Australia in pressing for this in situations where people are exploited because of differences in power. 

It is interesting that while the department of health and aged care is maintaining the power imbalance by strengthening central management and control in aged care, the department of social services is funding place-based programs in Australia by creating a National Centre for Place-Based Collaboration (Nexus Centre)’

The existing ‘Collaboration for Impact  is a member. It has focussed on Indigenous disadvantage in Australia but as the Tamarack Institute indicates this is equally suited to other areas where there is an imbalance of power. It will be interesting to see which other social systems the Nexus Centre will apply it to.

The Tamarack Institute describes place-based solutions like this.

Our argument is that systems transformation led at a place-level, with communities having agency over the change is the only viable way for shifting the dial on complex social problems with different casualties. We need radical devolution of power and responsibility to communities, backed by access to sources of support that will help steward the process of change without taking back power. We need to embrace the reality of uncertainty in this work and allow journeys of change to be different, whilst connecting those doing the work with each other to leverage their experience and insights.