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Aged Residential Care (ARC) funding model review

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Our current funding model and its review

Why a review?

Aged Residential Care facts

Our current funding model and its review

The existing funding model was developed in the 1990s and may no longer be the best way to fund aged residential care (ARC).

A major review of the funding model for services is currently underway. 

It is being done by Ernst and Young, supported by a cross-sector steering group, and sponsored by DHBs and the Ministry of Health.

The Review will offer ideas for future funding model options and is due to be completed in 2019. 


Why a review?

Around 33,700 people per year require aged residential care in New Zealand.

This number is anticipated to increase to 58,000 people over the next 13 years.

A growing number of people will need aged residential care (ARC), whether:

  • they can no longer manage in their own homes
  • have dementia
  • require hospital-level support.

The Review will:

  • examine the existing funding model, along with its strengths and weaknesses
  • look at policy and funding relationships between aged residential care providers, and health services such as general practice, pharmacy and allied health services
  • develop and prioritise future funding model options.

Aged Residential Care facts

  • DHBs spend about $1 billion per year on long-stay ARC. Aged care residents contribute a further $800 million towards the costs of their residential care – excluding any premium charges or other financial arrangements paid directly to aged care providers.
  • Around one in six older people live with one or more long-term conditions.
  • While people are living longer, the proportion of their years spent living with some form of disability-related dependency is increasing.
  • Māori and Pacific Peoples tend to spend a greater period of their lives with a disability-related dependency, but are less likely than older New Zealanders to live in an aged residential care setting.
  • There were 607,000 people aged 65 and over in 2013. This number is expected to grow to 1.6 million by 2063.
  • The proportion of older New Zealanders living in aged residential care has been decreasing over the past ten years. Nonetheless, with significant population ageing, the number of aged care residents is expected to increase by up to 72% from now until 2031.

Healthy Ageing Strategy

December 2016

NZ Health Strategy 2016

April 2016

Improving the lives of people with dementia

September 2014

Aged care demand model (2018 update) [44Mb]

March 2018

Last updated: 31/7/19