Aged Care Funding and Service Models Review
The Aged Care Funding and Service Models Review will make sure older people get the right care when and where it is needed for them and their whānau.
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Aged care in New Zealand
In 2024/25, around 33,000 people were in ARC and a further 80,000 older people were receiving services to support them to live at home or in the community.
Health NZ contributed $1.7 billion to ARC providers in 2024/25 and ARC residents’ fees contributed a further $1.2 billion. In the same period, Health NZ provided $720 million to HCSS providers.
About the Aged Care Funding & Service Models Review
Most older people live independently and are well-supported. But as more people live longer with complex needs, it's essential our aged care system keeps pace.
In July 2023 Health NZ began a review of aged care services which is about ensuring the right care is available when and where it's needed, while easing the pressure on hospitals and making better use of services across the system.
Its purpose is to provide recommendations that will, over time, improve the sustainability of services and ensure equity of access and outcomes for older people across New Zealand.
Our future aspiration is for an aged care sector that balances the need for a cost-effective system with a high-quality continuum of care that is:
- person and whānau centred
- financially sustainable
- effective at reducing avoidable hospital admissions and bed days
- providing restorative care so people can live as independently as they can
- nationally consistent while meeting the needs of local communities, and
- delivered by a competent workforce that is valued and supported.
Aged care within the community is a significant part of New Zealand’s health system, receiving nearly $2 billion in funding in 2022/23 (8% of Vote Health).
The review has 2 phases.
Phase One – Demand and supply analysis
Phase one of the review ran through the second half of 2023 and was completed at the end of December 2023.
A programme advisory group was established to provide a collaborative forum for a range of voices to inform and enhance the analysis and review work for phase one, and to enable a better understanding of the challenges and opportunities. Membership included community and whānau, employee representatives, providers, non-governmental organisations and funders.
The main output of phase one was a report by Sapere Research Group on the current state of aged residential care and home and community support services.
As expected, the report highlighted some major challenges facing older people, whānau and their communities as well as providers, workers, needs assessors and funders.
The phase one report built on a lot of earlier work, such as the 2019 EY Aged Residential Care funding model review, the Settlement Party Action Group from 2019-2020 on Home and Community Support Services, the 2021 Older Māori and Aged Residential Care report, and the Health Ageing Strategy 2016-2026.
The Sapere report titled 'A review of aged care funding and service models - A strategic assessment of aged residential care and home and community support services' identified 5 key issues:
- Aged Residential Care (ARC) and Home and Community Support Services (HCSS) are under-funded.
- The funding models used to distribute funding to the sector are no longer fit for purpose.
- There are material ethnic inequities in accessing aged care services.
- The aged care sector continues to face significant workforce pressures.
- Issues with aged care are exacerbated in regional and rural New Zealand.
Phase Two – Service and funding model redesign
Phase two of the review began in January 2024.
It is focused on developing recommendations for service and funding models that will result in a more integrated care model, efficient use of resources, and fit-for-purpose regulatory and funding regimes.
It has included extensive stakeholder engagement, including workshops nationwide in May 2024, an online workshop in June for those unable to attend face-to-face workshops and an online survey to capture views from the public and those in the sector.
The 'Future of Aged Care - Engagement Themes 2024' report outlines the key themes of that engagement.
Future of Aged Care - Engagement Themes 2024 [PDF, 951 KB]
Health NZ also commissioned independent consultancy Sapere to carry out modelling to predict the impacts of a range of different scenarios for funding and service a sustainable aged care system.
Aged Care Modelling Options for Improved Funding Models [PDF, 1.9 MB]
These reports do not present final recommendations. They offer options and analysis that are being considered as part of a broader evidence base. Both reports will help inform advice currently being developed for the Government.
Since the review began, Health NZ has already taken steps to improve services. This includes launching a national rollout of a new home and community support model, progressing work on a fairer funding approach for aged residential care, and investing in services that support hospital discharge and dementia mate wareware care.