Migration and workforce shortages in aged care: risk and insurance perspectives

As aged care risk and insurance specialists, at Lockton we are very present to the evolving
changes within aged care, particularly the impact the current workforce challenges are
having on our clients’ services and mission; and even their viability as an organisation.
We are keenly aware from feedback from our clients and partners in the aged care sector
what a critical issue workforce and staffing is, particularly in the current post-pandemic
environment. In this paper we outline the key risk and insurance issues aged care providers face as a function of the workforce challenges in the sector.

What the workforce crisis means for aged care providers' level of risk

Staff shortages are having the most significant effect on the quality of care but are also impacting governance and the ability to comply with continually changing legislative requirements. While every aged care provider is different, and many factors will have affected their experience, the issue of employee retention and attraction in the sector is now critical across the industry, and there is a potential for greater reliance on agency staff.

According to a National Skills Commission report published at the end of 2022, the aged care and disability care sectors have more than 74,000 job vacancies, while job vacancies for nurses and aged care workers have doubled in the past three years. The strain on the workforce carries significant risks for aged care providers, particularly in relation to insurance costs.

Staff shortages create significant risks when care customers don’t receive the level of care they need, leading to more serious incidents and potentially fatal accidents.

Insufficient staffing may also result in an increased exposure to acts of violence and aggression from care customers, along with a decrease in the required observations to effectively risk assess their needs and changing presentations, and an inability to keep care plans and risk assessments updated.

In addition, there are increased risks of injury to the staff themselves, when taking on roles and responsibilities with which they are unfamiliar, particularly if they are agency staff with insufficient training in relation to certain equipment.

Impact on staff

Having fewer staff increases the physical and psychosocial risks in the workplace, increasing the likelihood of injury and workers’ compensation claims. High job demands and
poor support/resources are both recognised psychosocial risk factors that can increase the occurrence of physical and psychological injuries. Burnout and a high turnover
rate only compounds these factors creating a host of extra expenses and issues for management and the workforce.

With significantly increased workloads it can lead to mistakes, corners being cut and fatigue causing clinical errors.

Impact on aged care providers

To attract new talent, many care providers must face paying higher rates especially for nurses and personal carers; or where there are staff shortages, costs for agency labour hire
to meet care needs. Staffing costs are putting a huge strain on organisations with already thin margins. Critical staff shortages can affect the ability of under-resourced facilities
to attract new residents or avoid forced shut-downs as a result of imposed sanctions. As a result, organisations are in danger of losing funding or may even have to consider
closing down.

In April 2023, Wesley Mission announced closure of three aged care facilities in NSW, estimated to affect nearly 200 residents and over 2,000 staff. Also during April 2023, Perth
aged care provider, Brightwater (a current Lockton client) announced it will close three of its 12 residential facilities during the next 12 months, affecting 75 residents and 160 staff. We anticipate that there will be many more providers, particularly in rural and remote areas who will not be able to continue operating and will follow suit.

New ACQS standards further adding to the toll of workforce shortage

The new ACQS standards require that all aged care homes in Australia must have a round-the-clock nurse on duty by 1 July this year. On top of the 24/7 nursing mandate, aged
care providers must also provide at least 200 minutes of care per resident per day by 1 October 2023. The impact of reforms on the aged care sector is predicted to create a
shortage of 11,800 registered nurses by the next financial year. The workforce would also need close to 10,000 personal care workers after the care minute increase to 215 comes into force by October 2024. Despite the government’s initiative to raise the minimum pay standard by 15 per cent from July to attract more staff, the sector is still short of thousands of workers.

Impact on insurance premiums and cover

These scenarios naturally receive increased scrutiny from insurers, with some exiting the aged care market altogether. For those that remain, they are keen to mitigate the potential for significant losses.

As workforce shortages increase, the likelihood of errors being made by carers; and increasing claims for allegations of abuse, negligence, or failure to provide compliant care
is rising. Staff who are already stretched, are much more likely to make claims against their employer for stress, mental or physical injury, with the associated workers’ compensation insurance costs rising exponentially as a result. Insurance premiums are now a large expenditure item on most providers’ P&L. Tightening of coverage and increased deductibles means providers are now required to hold substantially more of the risk on their balance sheets – often to the point of non-viability.

Summary statement

Workforce resourcing is the single largest challenge faced by the aged care sector in the current climate. Without sincere effort by public stakeholders, Australia is at risk of not protecting a key component of society's most vulnerable: the elderly.


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