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COTA

Submission to Productivity Commission

Inquiry into introducing competition and informed user choice into Human Services: Part 2

February 2017

COTA Australia welcomes the opportunity to contribute to this Productivity Commission Inquiry, given the essential role of Human Services in the lives of older Australians.

COTA agrees with Treasurer Morrison's media statement at the outset of the Inquiry that governments and service providers must ensure that all Australians can access timely, affordable and high quality human services, appropriate to needs and delivered in a cost-effective manner. We support this as the fundamental starting point for the Inquiry. However, we also note that the Treasurer and the Productivity Commission went further and adopted a priori the view of the 2015 Harper Competition Policy Review that to achieve this goal there should be much greater ‘choice and competition' in the Human Services sector.

COTA's focus is on achieving the best outcomes for older consumers, on a fair, equitable and sustainable basis, and as such we are a leading proponent of the current reforms in Aged Care that place informed consumer choice and control at their core. We have long argued that to achieve this outcome greater variety and contestability in service delivery is necessary in that particular sector to enable improved capacity for the consumer to exercise real choice.

We recognise, however, that greater consumer choice and control may in some instances be achievable without resorting to the creation of new delivery markets. COTA also shares many of the concerns expressed by a range of stakeholders regarding the risks of increased competition in Human Services delivery, particularly when it involves broad marketization. We argue for the absolute need for proactive and preemptive consumer protection and quality control regimes in any Human Services market.

The recent spectacular policy failure and appalling consumer experiences and outcomes associated with increased marketization in the Vocational Education and Training (VET) area provides a compelling backdrop to the Productivity Commission Inquiry. It is essential that the Inquiry take to heart the lessons from this failed program, which clearly did not contain sufficient checks and balances to prevent practices and behaviors exploitative of both consumers and taxpayer funds.

Earlier experience with government funded employment programs operating in competitive markets, targeted specifically to the disadvantaged in the labour force, also raises flags of concern. Many argue that those programs have engaged extensively in ‘creaming' of the easiest and cheapest-to-service consumers while ‘parking' higher needs, more expensive-to-service consumers in order to generate higher profits, resulting in poor outcomes for those most in need . This includes many older jobseekers locked out of work by ageism and a changing economy, and requiring intensive, individualized support to break back into employment. Around a third of the long-term unemployed receiving Newstart Allowance are over the age of 50 .

Curchin has argued that
"The contracting out of employment services was supposed to enable jobseekers to receive services tailored to their unique situation, but research shows the profit motive has actually driven standardisation of services."

Many older Australians relying on range of government funded Human Services are vulnerable to ‘sharp' commercial practices and poor service, given that they often have complex, multi-faceted needs that may be more expensive (and less profitable to providers) to address. An example of this is in health service delivery where, for example, the greater prevalence of co-morbid chronic illnesses amongst older people may require more individualised and intensive targeting to resolve or improve. This of course depends in part on the structure, adequacy and conditions of government financial incentives to providers.

Recent work in the field of Behavioural Economics also argues more directly that there is a tendency in competitive markets to target vulnerability for profit-making and cites many examples of this occurring . Curchin, quoting the behavioural economists Akerlof and Shiller, argues that modern economics has failed to take seriously the role of market trickery and deception. The best arrangement, she proposes, is when the power of the markets, government and civil society balance each other, and warns that:
"... if we create new markets in new fields we should anticipate that we are opening up new opportunities for exploiting vulnerable people."

COTA is well aware of the risks to some older consumers associated with the establishment of new delivery markets in sectors such as aged care and disability services. Bringing together new market players and a significant proportion of vulnerable consumers, with more power over purchasing decisions in these sectors could create exploitive, substandard or inappropriate service relationships if not well regulated and supported by government. In aged care the relevant entry and quality regulatory regimes are being maintained, or improved, while the move to a more market based, consumer driven service delivery model is implemented in the home care component of aged care. (Such change has not yet really commenced in residential aged care, despite some freeing up of accommodation pricing).

An example of COTA's concern in this regard is the potential for increased pressure tactics targeting older consumers through door-to-door and telephone sales. Older people can be more vulnerable to these tactics if for no other reason than they are more likely to be at home in business hours. They may also often not have access to the Internet or other immediately available information sources regarding the increasingly complex arrangements for services they need to access and are therefore more susceptible to pressure sales.

In recognition of this, in our 2016 Election Statement COTA joined a number of other consumer advocates in calling for a ban on selling through telephone cold calling and door knocking - both situations in which comparative information is not available to the consumer at point of sale. The establishment of new markets for Human Services has the potential to expose older consumers to a greater likelihood of encountering unconscionable selling conduct, so government must provide stronger, proactive consumer protections if it intends going further into marketization in these sectors.

Read COTA Australia's full submission

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