Last week, I interviewed Scott Scoullar, Chief Executive of Summerset, one of New Zealand’s largest retirement village operators, for our podcast. His assessment of our aged care challenges was sobering and demands urgent policy attention.

New Zealand faces a demographic tidal wave. By the 2040s, our 85+ population will nearly triple.

This age group has the highest care needs, yet our current trajectory shows we are woefully unprepared for this shift.

Scott highlighted a critical shortfall in our future care capacity. By 2030, New Zealand will need approximately 15,000 additional aged care beds, but the sector expects to build only 5,000–6,000. This gap of nearly 10,000 beds presents an enormous challenge with dire consequences.

Where will these elderly citizens go? The answer is troubling.

Many will end up in our already stretched public hospitals, creating “bed block” and preventing other patients from receiving timely care. For elderly patients, this means prolonged hospital stays, faster physical decline, and increased loneliness and confusion.

The economics make this scenario even more concerning: a hospital bed costs around $1,000 per day, while an aged care bed costs approximately $180.

The numbers simply do not add up. Aged care providers face chronically low government subsidies that fail to cover the actual costs of care. Many facilities now operate at a loss, forcing some to close beds or entire facilities precisely when we need expansion.

These issues mirror findings in our recent report on primary healthcare by Dr Prabani Wood. Both sectors suffer from fragmentation, insufficient funding and lack of continuity of care. Each represents a perfect case for the social investment approach – spending strategically now to prevent greater costs later.

Perhaps most concerning is the disconnect Scott described between providers and policymakers. Despite the sector providing over 90% of New Zealand’s care beds, Scott noted significant difficulties establishing meaningful dialogue with Health NZ.

This communication gap hampers collaborative planning when we need it most.

Moving forward requires action on multiple fronts. The funding model needs fundamental restructuring to ensure viability. The government must ensure planning and consenting processing be streamlined and most importantly engage with sector expertise to develop a cohesive strategy.  

Without substantive reform, we risk condemning thousands of elderly New Zealanders to inappropriate hospital stays while simultaneously crippling our acute healthcare system.

Listen to Dr Oliver Hartwich’s interview with Summerset CEO Scott Scoullar in this week’s podcast