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Aged care could be chronically underfunded if changes aren’t made to how it is provided.Credit:Getty

The federal government has backed away from its plan to impose criminal penalties on nursing home directors who fail essential standards,after aged care providers and the Coalition warned that the sanctions went too far.

The concession removes one of the sticking points in the negotiations between Aged Care Minister Anika Wells and her Coalition counterpart,Liberal senator Anne Ruston,on a broader deal on the funding overhaul.

The government unveiled the criminal sanctions in July as a way to act on the findings of the royal commission into aged care last year,saying tough penalties were needed to stop “dodgy” providers from neglecting their residents.

Wells wanted those in charge of residential aged care homes to be held to account if their actions put health and safety at risk,but this triggered concerns from not-for-profit providers who feared it would discourage the volunteer directors who serve on their boards.

In a positive sign for the reform plan,the government gave ground on the criminal penalties to meet the Coalition’s demands for a compromise and improve the chances of a bipartisan deal in parliament.

Federal cabinet has considered the draft plan and the Coalition shadow cabinet discussed its response on Monday afternoon,raising hopes of an agreement on the principle of charging wealthier Australians for some of the services they use.

The new approach,responding to a taskforce report delivered last year,would expect aged care residents with higher incomes to pay more for food and accommodation,while their health services would be funded in full.

The government spent $16.1 billion on residential aged care last year,as well as $5.6 billion on home care and $2.9 billion on home support. While it currently funds about 200,000 residential aged care places,it expects this to double to 400,000 by 2040.

“The number of people aged 85 years and over is expected to more than double from 565,000 in 2023 to just over 1.3 million people by 2043,” it said.

Wells called for a consensus in parliament last year by warning about the pressure on the system and the need for private investment to add to the supply of aged care beds.

“We must be innovative to address this challenge and we need a funding model that is sustainable,” she said.

“We are going to need a fair and equitable system to meet the needs of Baby Boomers who,with their numbers and determination to solve problems,have shaken every single system they’ve come across.”

Aged care expert Grant Corderoy,a senior partner at accounting firm StewartBrown and a member of the government taskforce,estimated the sector would need at least 25,000 more beds by 2030 to keep up with demand.

Corderoy said a new funding model had to be agreed upon in parliament to prevent a financial crisis in aged care,which would in turn discourage investors from building more facilities.

“If we don’t get an increase in funding from consumers for their everyday living costs and accommodation in residential aged care,we’ve got a capital strike – meaning no major investment in building new homes,” he said.

While Opposition Leader Peter Dutton has launched an all-out attack on the government over Palestinian refugees,Finance Minister Katy Gallagher hinted on Sunday that the government was hopeful the Coalition would agree to the plan for aged care.

“We’ve been working with the Coalition on aged care reforms,and I’m pretty hopeful we’ll see something shortly on that,” she said.

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