It is the first main output of a review of funding and service models for aged care services, which Health NZ began in July last year, and includes feedback from key stakeholders.
The review's second phase has begun and was focused on developing recommendations for the sector.
Its analysis found if historic building rates continued, there could be a shortage of almost 12,000 aged residential care beds by 2032.
It showed there was a variety of levels of service in different areas of the country, for example, the waiting times for high priority individuals being admitted to an aged residential care facility ranged from 92 days in MidCentral (Manawatū area) to 219 days on the West Coast.
High needs dementia and psychogeriatric care residents were waiting, on average, nearly six months to be admitted to an ARC facility after being assessed as high priority for moving out of a home setting.
The review said with an ageing population, its expected demand for these care beds will increase - with the sector's lack of beds and staffing for these people causing significant issues.
Health New Zealand ageing well director Andy Inder said it was vital they fully understood the challenges faced by older people and their whānau across the sector and work together on solutions.
The report identified five pressing issues where policy and service delivery reform are required.
Funding models for the sector not fit for purpose
The review found the funding models for aged residential care and home and community support services was not fit for purpose.
The aged residential care model relied too heavily on a broad-based average price to incentivise providers to proactively manage residents' needs.
It said new contracting and funding arrangements may be necessary alongside a more sophisticated funding model to address pressing issues in the sector.
In the home and community support services (HCSS) sector, it said the funding model for HCSS providers' travel costs needed urgent reform due to it being an uncapped liability for the government which had seen costs increase by 68 percent since July 2018.
Funding levels need to be increased
The report stated there was clear evidence the sector was underfunded with providers building smaller care centres, facilities closing and a shift to providers taking more revenue from residents through more "premium beds" and occupational rights agreements (which set out a person's right to occupy a property for retirement).
It stated a substantial increase in the price paid by Health New Zealand for services in an Aged Residential Care facilities was needed to incentivise large scale new investments.
Material ethnic inequities in accessing aged care services
The review found Māori, Pacific and Asian population were much less likely to be admitted to an aged residential care facility than NZ Europeans - with Māori and Pacific populations more likely to receive in-home care and support.
The average cost Health NZ would spend on a subsidised client in a rest home was $65,000 a year whereas they would spend about $7400 per year on someone receiving in-home care and support.
The report found a case could be made for a more equitable funding arrangement that would involve a significant increase in HCSS expenditure.
Workforce shortages
The report noted that workforce issues were long-standing for the aged care sector which have been exacerbated by the 2023 pay settlement for Te Whatu Ora nurses. It widened the pay difference between HCSS and aged residential care nurses and those in publicly funded hospital roles.
It was out of the review's scope to examine pay disparities, but the report said it understood Health NZ was aware of the issue and examining it further.
Issues exacerbated in regional and rural NZ
The report addressed that many issues facing aged care services were heightened in rural and regional areas due to difficulties associated with financial and scale performances in lower populated areas of the country.
The paper outlined that current funding models may not be appropriate for aged residential care and home and community support services.
