The disaster wreaked upon aged care by COVID-19 is a consequence of policies that have turned aged care into a profit-making opportunity for corporations, according to two new studies by Public Services International (PSI).
The PSI reports make it clear that long-term aged care was “already beset by multiple crises stemming from the promotion of profit-making above patient care” even before the arrival of the pandemic.
The reports say the sector had “pre-existing structural risk factors” that left it vulnerable to the coronavirus.
The two most important factors were a “privatisation juggernaut” and a more hidden trend of “financialisation”, which has led to a flood of private equity firms, hedge funds and banks investing heavily in the aged care sector.
Globally, privatisation of the sector has been relentless.
In 1979, nearly two out of three residential and nursing home beds in Britain were provided by the state; by 2017, this had fallen to one in 20.
At the same time, in most developed countries, government spending on the sector stagnated or fell.
Investors from the finance sector often “deploy tools, techniques and tricks – each quite legal, many highly acquisitive, often involving large-scale borrowing – to syphon wealth out of this sector for themselves, instead of investing for better care”.
The intersection of this financial model in aged care with the arrival of the coronavirus exposed the vulnerability of aged care during a health emergency.
Throughout the developed world, including Australia, nursing homes have been at the epicentre of the pandemic, with a disproportionate number of deaths compared to the rest of the population.
The consequences for residents have been tragic.
Within the first year of the pandemic, four out of 10 of the people who died from COVID-19-related causes were nursing home residents, according to an analysis of 22 OECD countries.
“While the pursuit of market solutions to care has been rationalised as a budgetary cost-saving measure, more than ever it is evident that the economic and social costs of reliance on private investment outweigh the benefits,” the PSI says.
Tax evasion common
PSI says aged care is widely seen as attractive for investors because it offers low risk and high returns, rising unmet demand, and a lack of regulation of the quality-of-care provision.
It is low risk with high returns thanks to government funding.
PSI says a number of investigations have shown that these financial institutional investors extract profits through ownership and business models designed to transform government subsidies and resident fees into other sources of income, including lease agreements, management fees, interest payments to owners, and related-party transactions.
The role of rental income from nursing homes as lucrative real estate assets is especially critical, often in conjunction with complex multinational company structures to facilitate tax evasion.
For-profit providers also engage in a number of strategies to minimise costs, mostly focused on reducing labour. Such methods include short staffing, contracting out, wage suppression and erosion of conditions.
A key difference that emerges from many studies comparing for-profit, non-profit and public facilities is the adequacy of staffing.
Perverse financial incentives have been found to encourage for-profit providers to limit the care and treatment that could prevent hospitalisation, instead transferring responsibilities back onto healthcare systems.