The aged care sector has been targeted for savings after a budget update that forecasted bigger deficits than expected.

Yesterday the Federal Government announced that $472.4 million will be cut from the aged care sector over the next four years as part of its Mid-Year Economic and Fiscal Outlook (MYEFO).

The savings will be achieved through the revisions of ACFI scoring, intended to ‘better align funding with residential care needs’. ACFI is the Aged Care Funding Instrument, which is a classification instrument used to pay subsidies to residential aged care services. As such therefore, the savings will likley come from cutting funding and subsidies to aged care providers.

As well as changes to the ACFI, the MYEFO Budget Paper shows that the Government has also flagged improved compliance by aged care providers as an additional savings measure.

It is uncertain how ACFI scoring and current compliance measures will be changed to achieve the cuts and the Government will consult with the industry before finalising the exact changes.

The Government’s decision to target the aged care sector for budget cuts is curious given the country’s ageing population and increases in life expectancy, which both indicate a greater demand for aged care services in the near future. For example, in 2014 there were approximately 190,000 places in the residential aged care sector; however this is forecasted to increase to approximately 260,000 places by 2022.