Under the National Health Reform Act 2011, the Independent Health and Aged Care Pricing Authority (IHACPA) is charged with providing independent and evidence-based pricing and costing advice to Government across residential aged care, residential respite care and in-home care. This presentation focuses on IHACPA’s role in developing pricing advice for residential aged care and residential respite care.

IHACPA is committed to a consultative, transparent and evidence-based approach in the development of its residential aged care and residential respite care pricing advice. Consultation and engagement with the aged care sector is vital to IHACPA’s work. IHACPA recognises that some areas for future focus will be complex, for example, safety and quality, and require engagement with multiple agencies and departments as well as broader stakeholders.

IHACPA recently released the Consultation Paper on the Pricing Framework for Australian Residential Aged Care Services 2025–26 in August 2024. Annual public consultation is the primary mechanism for stakeholders to provide input into the development of the pricing framework, which sets out IHACPA’s policy approach, methodology and principles governing its residential aged care pricing advice. This year, our tailored consultation approach focuses on the Australian National Aged Care Classification (AN-ACC) branching structure and funding model; Aboriginal and Torres Strait Islander specialisation and base care tariffs; homeless specialisation and base care tariffs; residential respite care; and proposed changes to IHACPA’s residential aged care pricing principles.

While previous aged care funding relied on the Wage Cost Index 9 (WCI-9) indexation method that was not tailored to a specific sector, IHACPA’s annual pricing and costing advice to Government is informed by sector specific indexes and the actual costs of delivering care. The Residential Aged Care Pricing Advice 2024–25 (RACPA24) includes recommendations for the AN-ACC price and the national weighted activity unit price weights for each AN-ACC class and base care tariff category.

This presentation will outline the policy context within which IHACPA is operating, including IHACPA’s cost data collections and the methodology behind developing pricing advice to Government, with a particular focus on IHACPA’s data driven approach, indexation methodology, and the adjustments IHACPA included to prospectively account for known cost increases to the sector in the short term.