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More choice in aged care

If the aged care market is deregulated, reforms need to focus on improving outcomes for consumers.

March 2016

Vocational education and aged care: not two topics you'd normally associate with each other.

Yet it's a connection we desperately need the government to make. Let me me explain why.

A few years ago, the government of the day set about introducing competition in the vocational education and training sector. The theory was good - if students had more choice, this would drive competition between providers. This would, in turn, create pressure for greater variety and quality, ultimately making it easier for students to find the best training to equip them for the employment market.

The reality turned out to be somewhat different.

As part of the reforms, the government gave vocational education students access to the FEE-HELP scheme that had previously only been available to university students. There was no cap on fees, and providers received fees regardless of whether students completed courses.

This created incentives for private colleges to enrol as many students as possible. To take advantage of this, many private colleges engaged third-party recruiters, who had incentives to sign up as many students as possible. Some hit the streets in disadvantaged areas, promising free laptops and iPads in return for enrolment.

The end result? Thousands of students signed up to courses of questionable value, with the only certainty being a debt for the course fees.

This is a lesson of competition reform gone wrong, with many consumers ending up as victims rather than beneficiaries.

But what does this have to do with aged care?

If media reports are correct, aged services could be the next target of this type of reform, with the government considering deregulation. Support would be provided through 'packages', with providers competing for business. Brokers would be enlisted to help consumers negotiate the market.

While we may not see offers of free iPads, there is a big risk that we fail to learn from the lessons of vocational education reform. Will brokers receive commissions from private operators based on the number of clients they refer? Will consumers be able to trust brokers to give them advice they can trust? Will consumers feel in control or more confused?

Competition is a nice idea in theory but it only works where there's a properly functioning market. That requires a diversity of providers. But it also requires consumers to be able to negotiate through the system, understanding the different types of products and services on offer, and to be able to compare them, like-for-like.

If the introduction of more choice in aged care is to work, reform needs to be carefully designed, based on improving outcomes for consumers rather than reducing costs for government. Based on our track record with similar reforms, I'm not optimistic.

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