Minister confident NZ’s aged care funding puzzle will be cracked by year’s end
Sunday, 15 March 2026
The aged care funding model is in crisis, but the Government aims to have identified a clear pathway forward by the end of this parliamentary term, the Minister for Seniors says.
That’s because one of the two significant pieces of work on the country’s aged care system it has instigated was completed recently, and the other is well on its way.
Last week the Government released its official response to the health select committee’s report into aged care support services for people experiencing neurological cognitive disorders.
The report makes 14 recommendations covering aged residential care, home and community support services, carers and the aged care workforce.
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It is “a valuable contribution to the work underway to strengthen services”, Minister for Seniors Casey Costello said.
But what will happen with many of the recommendations won't be clear until the aged care ministerial advisory group, which was established in October to review aged care funding, delivers its report later this year.
Action can not come soon enough as New Zealand’s population is ageing fast, with the number of Kiwis aged over 65 expected to increase from about 900,000 now to about 1.3 million by 2040.
Currently about 34,000 people are in aged residential care services while 80,000 use home and community services annually, but demand is expected to sky-rocket over the coming years.
The Government spends more than $2.5 billion on aged care annually, but a report from the first phase of Health NZ’s review of the aged care sector found funding was “not fit for purpose”.
It also found there could be a shortage of almost 12,000 aged residential care beds by 2032, and many aged care operators have warned it is a looming crisis that must be addressed.
Costello, who is also Associate Health Minister, said the aged care system had been in place for decades, and no-one was saying it was working well.
“It’s widely recognised there are challenges and that we can do better, and we are very focused on getting an improved aged care system designed and progressed.
“There have been so many reports and evaluations over the years, and action just keeps getting put off, so we hope to get a clear direction of travel in this government’s term.”
There is a lot of crossover between the select committee and ministerial advisory group, and the work they have been doing feeds into each other, and shows there is broad, bi-partisan alignment, she said.
But the pathway forward will be established with the ministerial advisory group report, which is expected in June, and a subsequent decision from cabinet.
Costello hopes for a Cabinet decision before the house rises before the election. That will mean they can provide the sector with clear direction on the way forward, and it will inform the 2027 Budget, she said.
“It will also show the sector that help is on the way - because there’s some despair. There are smaller operators out there that can’t continue operating because it is not commercially viable.”
The crisis is one of funding for care, rather than of care itself, but there are real opportunities to improve the way the system works for ageing people, she said.
“It’s important to understand that people are living well for longer, and many people are not really changing the way they live until they are well into their 70s.
“We want to ensure there is a system which is not just about taking care of people when they get sick, but taking care of them so they remain well and living independently for longer.”
That means it is not just about care beds, it is about having a system designed to make it easier to transition between care levels, and to provide a greater level of care when it is needed, she said.
“The thing is we definitely need more beds as part of the aged care equation, but we will not meet the demand for aged care if we simply focus on beds, and don’t look at other aspects of the system.
“There are real benefits from investing in in-home care, transitions from hospital, and respite care and rehabilitation. It provides support to keep people well, and takes the pressure off the care bed system.”
Costello said arriving at a coherent, collective solution for the problems in the aged care system is a priority, but in the meantime several ministries have work under way that aims to better support ageing people.
That includes work around housing options, senior drivers licenses, and enabling gold cards to be a primary form of ID.
Last year a more flexible new in-home care system was rolled out in the South Island, and expanding that system into the North Island is now being explored.