New Zealand’s aged care funding to get major overhaul

On the eve of the most significant aged care reform Australia has seen in 30 years, politicians across the ditch have announced their own plan to build a “fit-for-purpose” aged care system.

The New Zealand Coalition government has agreed to reform the nation's aged care sector, establishing a Ministerial Advisory Group to provide independent recommendations on how the existing funding model can be improved.

Health Minister Simeon Brown and Associate Health Minister Casey Costello made the announcement on Tuesday, assuring that the party is committed to a bipartisan approach to reform.

“Improving the lives of older people is a priority for the coalition Government,” Ms Costello said.

“[This] announcement is about two things – better health outcomes for the 900,000 of us who are over 65, and a better, fit-for-purpose aged care system.”

Ms Costello admitted that the current system is outdated, adding that “piecemeal change” is not the way forward for the sector.

“We want a system that provides the right type of care in the right place – and that allows people to transition between these types of care, that’s easier to navigate and access, that’s fair, and that is sustainable and will endure as our population ages,” she said.

The Ministerial Advisory Group will advice government on three key areas of concern, including sector sustainability, consumer co-contributions and the cohesion and integration of health, disability and aged care services.

“These are significant policy issues, with major political considerations attached and that’s why an independent group is required,” Ms Costello said.

“The goal is that the Group’s recommendations will inform any future government policy and funding decisions.”

In mid-2023, Health NZ launched an inquiry into the funding and service models for the aged care sector.

The resulting report, delivered by Sapere Research Group in December 2023, revealed five key issues:

1. Aged Residential Care (ARC) and Home and Community Support Services (HCSS) are under-funded;
2. The funding models used to distribute funding to the sector are no longer fit for purpose;
3. There are material ethnic inequities in accessing aged care services;
4. The aged care sector continues to face significant workforce pressures;
5. Issues with aged care are exacerbated in regional and rural New Zealand.

In the two years since the report, federal funding for the sector has seen an increase of $270 million.

Sector peak body, the New Zealand Aged Care Association (ACA), warmly welcomed the government’s latest commitment to industry reform.

“This is a truly positive step — not just for the aged care sector, but for all New Zealanders who want to see a strong, fair and enduring system of care for our older population,” ACA chief Tracey Martin said.

“It signals a commitment to long-term, bipartisan reform — something the Association has been calling for over the past 18 months.  We are genuinely encouraged to see that call being answered.”

The Advisory Group’s recommendations are due in mid-2026, with changes to the funding model to be implemented in 2027.

Ms Martin noted, however, that this timeline means recommendations will not be delivered in time to inform the 2026/27 Budget.

“Ministers Brown and Costello understand what is needed to steady the sector in the short term while the Advisory Group develops its proposals,” she said.

“We would urge Finance Minister Willis to invite them to bring forward a Budget bid that delivers the immediate support required to give providers confidence and continuity while the longer-term reforms are being developed.”