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Thin market subsidies should be given to care recipients rather than providers, health and social care economics expert Professor Brenda Gannon has told this week’s Senate Inquiry hearing into Support at Home.
“In thin markets where services are not actually readily available, there are some Support at Home grants for thin markets, and so they can be given to the providers to help them to boost up the services if they are in that space already,” said the University of Queensland Professor of Health and Care Economics at Monday’s hearing in Brisbane.
“Subsidies and caps – I think the subsidy should be to the person themselves, rather than to the providers, in order to try to boost up their ability to pay for a service.
“There should be price caps on various services because otherwise these prices will vary across different providers, they will vary across regions, they will vary across localities. So, if there was a certain price cap, that after that it’s not feasible for anyone to pay, whether it’s government or person – perhaps that could be a way of dealing with the market.”
Liberal Senator Wendy Askew asked what happens in remote and regional areas where providers could not afford to deliver services within the set price cap.
Professor Gannon acknowledged this as “a fair point”, saying it is generally the current argument against price caps.
But price caps could be incorporated into local thin markets, she said, and that any extra subsidy or grant will add to administrative burdens, due to the need to apply for it.
“That may be a way of differentiating across markets – it’s not the same in a rural area, a regional area and a city where things are a bit more accessible perhaps, where people may have transport and buses, or less distance to travel, at least,” said Professor Gannon, who is also the Health, Ageing and Care Economy Research Group lead and a Mater Research Institute Affiliate.
“There are inequities across the board, so perhaps maybe there should be variation in prices as well.”
Standard economics cannot be applied to aged care
Earlier, in her opening statement, Professor Gannon acknowledged pricing is an issue in thin markets, and particularly in the aged care sector.
“Often across the board we would look at market economics and say demand and supply [are] equal, we have prices,” she said.
“But that does not occur in health and ageing care, because there is a lot of uncertainty involved, and due to the breakdowns of the markets there, there is government intervention, which is exactly home care support and other interventions.”
“However, there is always an issue there of uncertainty going forward, and is supply driving demand or is demand driving supply? And it’s an ongoing ball-rolling of ensuring that there’s enough care there for people.
“So we cannot apply standard market mechanisms to get the price, so there is a bit of trade-off involved in terms of where are the best prices and what are the actual costs involved.”
Professor Gannon said a lot of economics is focused on cost-effectiveness of services. Looking at the example of an occupational therapy service for people living with dementia or mild cognitive impairment, she said they found it was cost-effective for particular ages, but not for everybody, because the price they looked at was the actual price, rather than just the cost involved in the service provision.
That cost was around $100 per hour, she said. But looking at a survey conducted by the Department of Health, Disability and Ageing last February, the indicative price listed by surveyed providers was up to $220.
“That immediately means that a person cannot avail of the service that was deemed to be cost-effective, but then when they go to look for the service, the price is actually higher,” she said.
“So I would say that in a cost-effectiveness analysis, the cost-benefit, we have to not only look at the healthcare sector and the health provision, but also the societal side, and that is something that we are more cognisant of now. When we look at cost-effectiveness analysis, we also look at including the societal side, the burden on the carer, the burden on the family, and the person themselves.”
Value needs to be on perceived quality of care
The transition into Support at Home has been “quite troublesome for many,” she said.
“Any change in policy will lead to distress, and we would hope that in another year or two, that adjustments are made and that people are more comfortable with new policies. In the meantime, there is a distress, and that’s what we found before when we looked at the changes to consumer directed care,” Professor Gannon said.
“But we have to think also about how we value people – and this is where consumers come in, and I am a consumer, everybody here is a consumer, either now or in the future – and we have to think about how do we value people.
“It’s not about putting a monetary cost on. It’s about their perceived quality of care. When we look at cost per quality, it’s not actually just that quality of provision, it’s about how people perceive they are valued, and how they are looked after into older age and respected into their older age and embed there the culture of respecting elders as well.
“The focus may be better [to] take some money that may have been saved into prevention and reablement where necessary – that is investment of people into the future – and at all times involve consumers into our economic analysis,” she said.
The next hearings of the Senate Standing Committees on Community Affairs are scheduled for:
- 3 August in Melbourne
- 4 August in Launceston
- 24 August in Adelaide.
The inquiry has so far . It is due to report on 24 November 2026.
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