Residential aged care funding reform

Page last updated: 09 December 2019

Residential aged care funding reform

What is proposed?

The Australian Government wants to improve the way we work out residential aged care funding. 

We aim to:

  • make funding for residential aged care fairer and more stable
  • improve the assessment process for funding so it is more accurate
  • free up resources so aged care workers can spend more time delivering safe and effective care that meets residents’ needs and goals while optimising health and wellbeing
  • boost innovation in residential aged care.

In 2017 we commissioned the Australian Health Services Research Institute (AHSRI) at the University of Wollongong to develop a funding model to meet these aims. The result is a proposed new funding model - the Australian National Aged Care Classification (AN-ACC). 

A trial of the AN-ACC assessment framework is starting soon.

Currently the Australian Government has made no decisions. Consultation on the future of funding continues.


In 2016-17, the Australian Government announced it would look into strengthening residential aged care funding, including possibly replacing the existing funding assessment tool, the Aged Care Funding Instrument (ACFI) and considering options for external assessment. 

ACFI has caused funding instability for both government and approved providers, and may be incentivising outdated modes of care.  

The independent Aged Care Financing Authority discusses the issues with ACFI in their submission to the Royal Commission into Aged Care Quality and Safety.  Read it on the ACFA’s Submission to the Royal Commission into Aged Care Quality and Safety web page.

What have we done to date?

We have been working since 2016-17 to build an evidence base for a new funding model. This included the publication of two scoping reports in 2017:

The Alternative Aged Care Assessment, Classification System and Funding Models report recommended a blended payment model based on fixed and variable costs. The report also recommended a research study into the cost drivers of residential aged care. 

Resource Utilisation and Classification Study (RUCS)

AHSRI were commissioned to run the research study, known as the RUCS to:

  • look at the costs of residential aged care
  • work out which characteristics of residents and services drive costs 
  • create a new model to assess needs, classify residents and distribute funding 
  • develop an assessment tool suitable for use by external assessors. 

AHSRI completed the study in December 2018 and presented the results in seven reports.

Resource Utilisation and Classification Study (RUCS) reports

What is happening now?

We commissioned a further study on the fixed costs of providing care in residential aged care in regional and rural Australia. We expect this to be complete later in 2019. 

We did this because we had a gap in knowledge about the cost drivers for these services. We want to ensure AN-ACC is evidence based and accurately reflects costs of service provision in these locations.

We classify remoteness in Australia using the Modified Monash Model (MMM). Regional (not including locations in or within a 20km drive of a town with over 50,000 residents) and rural Australia is classified as MMM 3-5 and includes locations such as: Coonabarabran, NSW; Goondiwindi, QLD; Maryborough, VIC and Northam, WA.

Trial of the AN-ACC assessment framework

The trial commenced in November 2019. It will:

  • test the AN-ACC assessment tool and supporting software, hardware and IT systems
  • test the processes to manage an assessment workforce
  • confirm findings about the expected distribution of resident classifications


  • invited approved providers to take part in the trial through an Expression of Interest (EOI) in July 2019
  • sought assessment partners through an open Request for Tender (RFT).
  • engaged four assessment organisations in October 2019:
    • Access Care Network Australia
    • Aspire4Life
    • Care Tasmania
    • Healthcare Australia
  • started assessments in aged care homes in November 2019
  • will complete over 10,000 assessments at over 150 aged care homes across the country by April 2020

In the trial, a registered nurse, occupational therapist or physiotherapist will assess and classify residents living in aged care homes. Participation by residents is voluntary.

To find out more, read the AN-ACC Trial fact sheet.

Who is being consulted?

We started consulting with the Australian public in 2016-17, travelling to the ACT, NSW, VIC, SA, TAS, WA and QLD with the Residential Aged Care Funding Reform roadshow. Public feedback indicated enthusiasm for funding reform. More recent engagements include:

Consultation Paper

We invited the public to submit their thoughts on our proposal for a new residential aged care funding model.

Submissions closed on 31 May 2019.

We received 91 submissions. Thank you to everyone who made a submission. 

The submissions highlighted:

  • There is strong enthusiasm for ongoing conversations on funding reform. 
  • The aged care sector is keen to be involved with the reform journey, and wants a transparent process. 
  • There is a desire for more information about the model. 
  • Many submissions welcomed the proposed funding model as a positive opportunity to separate funding from care planning, and promote best practice in the delivery of residential aged care.
  • The aged care sector is keen for further discussions on funding sustainability.

These submissions offer important considerations to inform policy discussions going forward. We will ensure there is ongoing and transparent consultation about the proposed new model. 

Stakeholder forums

We have held multiple stakeholder forums in 2018 and 2019 on the proposed model. Visit our Residential Aged Care Funding Reform YouTube playlist to watch our presentations.

Slides and transcripts from previous stakeholder forums and events are available on the Residential Aged Care Funding Reform – Stakeholder Forums and Events webpage.

Residential Aged Care Funding Reform Sector Reference Group

We meet regularly with a group of aged care managers, clinicians, finance officers and other administrators to discuss residential aged care funding reform policy development and implementation. More information, including membership and communiques is available on the Terms of Reference: RUCS Sector Reference Group web page.

Find out more

To find out more about the RUCS and the proposed AN-ACC model, email 

How is funding worked out now?

An assessment tool called the Aged Care Funding Instrument (ACFI) is currently used by residential aged care service staff to work out the level of care residents need.  

ACFI assigns ratings and care needs classifications to each person. We use these to work out the majority of provider funding.

Learn more about aged care funding on the Aged care subsidies and supplements page.