SYSTEM DYNAMICS MODELLING AND AGED CARE

Modelling the Future - Techniques & Directions

Australian Institute of Health & Welfare Workshop - Feb 1996

Keith T Linard
Senior Lecturer, School of Civil Engineering
University College (University of New South Wales) Australian Defence Force Academy
Keithlinard#@#yahoo.co.uk (Remove hashes to email)

SUMMARY
The longer term pressures from an aging society are very significant. Of particular importance is how we
manage the longer term pressures stemming from increasing demands of the aged for medical, hospital,
home care and long term residential care services. At present, about 50% of health and care spending is on
those aged 65 and over. A substantial increase in the proportion of budget outlays for the aged is projected,
especially beyond the first decade of the 21st century.

Contributing to this projection will be both the aging of the population and the continuing pressure to
increase aged care costs per head through greater access and usage, and higher quality. Real growth in aged
care outlays will continue at a rate significantly greater than the population growth for people aged 70+ until
the year 2005. Beyond the year 2005, Australia will experience a rapidly aging population as the baby
boomer generation moves into old age. The growth in the population aged 70+ will rise rapidly to a peak of
4%pa in the year 2017.

The policy analyst has powerful tools that help predict the raw population demand, in terms of cohort
numbers. Equally important, however, are tools which help identify the likely impact of alternative policy
levers on both the supply of and demand for particular services. It is here that system dynamics has a useful
role to play. In essence, system dynamics models the feedback characteristics of a system and the impact
which delay plays.

The simulation model, which is the focus of this paper, comprises two main elements, namely a
representation of the physical structure of the aged care system, and the behaviour of the component parts of
that system. The behavioural assumptions of the simulation model rely heavily upon historical data and
future projections in regard to population, use patterns, age structure, fertility, migration etc.

This paper draws extensively on work1 done, under the authors direction, by the following students in their
major assignment for the post-graduate System Dynamics Modelling subject, Master of Management Studies
at the University College: David Bingham, Tarek El-Ansary, Mark Gainsford and John Smeltink. The key
aspects of the model development was done by Mr David Bingham.

Keywords: Aged care; public finance; policy analysis; health economics; system dynamics.

Keith Linard runs the postgraduate system dynamics program at the Australian Defence Force Academy and
lectures in transportation and systems engineering. Former positions include Chief Finance Officer
(Financial Management Improvement), Commonwealth Department of Finance and Director, Evaluation
Methodology, Commonwealth Bureau of Transport Economics.

______________________________________________

1
Bingham, D., T. El-Ansary, M. Gainsford and J. Smeltink, A Simulation Model of Aged, Health and Care Services in
Australia. Unpublished project report towards System Dynamics Modelling subject, MMgtSt degree, November 1995.
Modelling the Future - Techniques & Directions
Australian Institute of Health & Welfare - Feb 1996

1. INTRODUCTION

1.1 Overview of Demand for Aged Services in Australia

Australia, like many other countries, is faced with the prospect of an aging society. That is, an
increasing number of people in the population aged 65 and over. The social implications of this
trend are numerous, however, one of the most significant is the anticipated increase in demand for
health care and support services and its impact on health budget outlays for the Commonwealth
Government. This group in society is the dominant consumer of Government funded health and
care resources, traditionally absorbing between 30-50% of Government outlays for these service.

Currently those over the age of 65 are approximately 12% of the population. Over the coming
decades this will increase to 16% of the population as depicted in Figure 1. (This, of course, is
based on continuous of current demographic and policy parameters, especially with respect to the
quantum and composition of the immigration program.)

Figure 1: Proportion of 'Over 65' in the Population

(Powersim simulation)
Corresponding to this increase in the numbers of aged persons will be a proportional decrease in the
number of working age persons whose productive capacity helps support the elderly. The number
of working-age persons per aged person will drop by 30% over the same period.

Figure 2: Proportion of Working Age to 'Over 65' Population

(Powersim simulation)
 Simulating Aged Health and Care Services

There are a variety of social implications of these trends. One of the most significant is the
anticipated increase in demand for health care and support services and its impact on health budget
outlays for the Australian Government.

The increasing consumption of these services is borne not only from an absolute increase in the
number of elderly within the population, but also from an increasing requirement for external
assistance associated with demographic changes within our society2. Such assistance for the elderly
is not restricted to medical services, indeed it comes in many forms, including:

medical care from traditional providers such as doctors, clinics and hospitals;
dentistry, optical, chiropody and physiotherapy services;
aid with washing, bathing, personal hygiene, cleanliness, dressing and feeding;
cooking, cleaning, and laundry services;
shopping, household repairs and gardening;
social support, including companionship and dealing with authorities. [EPAC Report, 1994,
p72]

The longer term pressures arising from an aging society are predicted to have a substantial impact
on the health and medical care outlays for the Commonwealth Government. The real growth in
Government outlays on aged health care will continue to increase at a rate significantly greater than
the population growth for people aged 70+ until the year 2005. Beyond the year 2005, Australia
will experience a rapidly aging population as the baby boomer generation move into old age. The
growth in the population aged 70+ will rise rapidly to a peak of 4% per annum in the year 2017.
These health budget problems are further compounded by the increased pressure on health costs per
capita arising from greater access, usage and quality of service provided.

A reference model depicting the anticipated increase in Australias real health expenditure during
the period 1990-2031 is shown at Figure 3. The fundamental problem facing the Government over
this period is the sufficiency of resources to meet the growth in the need for care of the elderly.
10,000

1990-91 1995-96 2000-1 2005-6 2010-11 2015-16 2020-21 2025-26 2030-31

Year

Figure 3: Effects of aging and population growth on Australias real health Expenditure
1990-91 to 2030-31

2
Such changes include the increasing number of elderly living separately from younger generations in private
households and a reduction in the level of family support from these generations. [EPAC Report, 1994, pp70-71]
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Modelling the Future - Techniques & Directions
Australian Institute of Health & Welfare - Feb 1996

1.2 What is "System Dynamics"?

In a nutshell, the rigorous study of problems in system behavior using the principles of feedback,
dynamics and simulation. In more words system dynamics is characterized by:
Searching for useful solutions to real problems, especially in social systems (businesses, schools,
governments,...) and the environment.
Using computer simulation models to understand and improve such systems.
Basing the simulation models on mental models, qualitative knowledge and numerical
information.
Using methods and insights from feedback control engineering and other scientific disciplines to
assess and improve the quality of models.
Seeking improved ways to translate scientific results into achieved implemented improvement.

System Dynamics is a methodology for understanding complex problems where there is dynamic
behaviour (quantities changing over time) and where feedback impacts significantly on system
behaviour. It has been applied to social, environmental and regional planning for many years and,
more recently, to transportation planning.

It provides a framework and rules for qualitative description, exploration and analysis of complex
systems in terms of their processes, information, boundaries and strategies; thereby facilitating
quantitative simulation modelling and analysis for the design of system structure and control.

Powerful graphics software is now available for Macintosh and PC, which allows the modeller to
construct a visual and symbolic representation of the model, with a minimum of programming
skills. This graphical approach facilitates knowledge capture and subsequent communication of
findings. The software constructs the basic structure of the equations.

These modelling tools are now being used in policy advising areas of State & Federal departments,
including Department of Finance. Department of Defence is using them in strategic planning,
movements planning, planning for staffing and training, logistics and maintenance planning etc.

2. Purpose of the Model

2.1 Background

The sponsor for the development of this model of Aged Health and Care Services in Australia is the
Department of Finance. This Commonwealth Government Department forms part of an Inter
Departmental Committee (IDC) which is responsible for the analysis of requirements for aged
health care in the future. The primary concern for the Finance Department is the financial impact of
an aging society on the Commonwealth Budget.

The Australian Government, like other Governments in the OECD, has over recent years
formulated health care policies to ensure that elderly people, including those requiring care and
support, should wherever possible continue to live in their own homes, or in a sheltered and
supported environment close to their former community. This is a fundamental shift from the
provision of institutional care, such as long stay hospitals and nursing homes, to greater non-
institutional care services such as hostels and community support programs. A direct result for the
Commonwealth Government and the taxpayer has been a reduction in the cost of care provision per
 Simulating Aged Health and Care Services

user, given the significant cost differences between institutionalised care and other community
based programs.3

As part of this policy shift, the Australian Government has established policy and planning targets
devised to meet the anticipated demand for aged care services. This policy structure is based on a
four tiered structure of care for the aged as follows:

Acute care
Nursing Home care,
Hostel care, and
Home based care through the Home and Community Care (HACC) and Community
Aged Care Package (CACP) programs.

Table 1 outlines the Government targets for restructuring the aged health care system in Australia.
The target figures are forecast to account for increasing life expectancies within the general
community.

Time 1987 Present Target

Resource (beds /1000)
Nursing Home 70 53 50
Hostel 30 40 40
CACP 3 10
HACC 6% Real Growth

Table 1: - Government Plan for Allocation of Accommodation of Aged Care

2.2 Aim

The academic objective was to illustrate the strengths and weaknesses of the system dynamics
modelling paradigm by constructing a POWERSIM model that captures both the structural and
behavioural characteristics of aged health care resources and demographics over time.

The specific aim of the model is to determine the adequacy of current aged care

3. Model Outline
3.1 Behavioural Concepts

The Influence Diagram at Figure 4 provides the basis for the mathematical simulation model of the
aged care problem. The necessary refinement is incorporated by breaking down the model into six
modules; firstly a demographic model incorporating the changes in the population over the period
of interest, and sub-models reflecting each of the five tiers of aged health care services.

3
The public cost of nursing home care is almost five times the cost of hostel care. [EPAC Report, 1994, p77]
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Modelling the Future - Techniques & Directions
Australian Institute of Health & Welfare - Feb 1996
Births Migration Elderly
+ Sickness & Frailty

+ + +
Population Growth Population Age Profile Demand Loop Demand for Health Care Services
_ +

Deaths d
+
Health Care Resources
+

+
Cost

Government Health Care

Policy Targets Supply Loop
+ +
Health Budget Outlays

+
Budgetary Pressures

Figure 4: Aged Health Care Influence Diagram (Causal Loop Diagram)

3.2 System Boundaries

The model has the following boundaries:

The population is bound by entrants through birth and immigration and losses incurred
from death;
The flows into each of the health care programs originate from the general population or
one of the other programs;
The flows from each of the health care programs arise from death or movement to one of
the other programs; and
Cost figures are only derived from each of the health care programs.
Specific areas not included within the model include:
External factors such as an epidemic or new disease;
The capacity of the population to fund health care through levying of asset wealth and
incomes;
The effects of price-responsiveness;
The effects of healthy lifestyle programs upon society;
Total Government outlays associated with general health care services such as Medicare,
pharmaceutical benefits and hospital costs;
The potential effect of technological advancements in biomedicine, transportation, and
communication.

3.3 Assumptions

The model assumptions are as follows:

Australian population growth forecasts are based on Australian Bureau of Statistics
Series A projections for the period 1990-2051 [EPAC Report, 1992, p13];
 Simulating Aged Health and Care Services

Net Migration is forecast at approximately 40,000 per annum until the year 2000 and
70,000 per annum beyond that period in accordance with ABS Series A predictions;
Selectivity for entry into one of the health care programs are completely random and not
based on any pre-requisite assessment criteria. The real provision of health care services
is based on an application and consideration by aged care assessment teams (ACATS)
against specific eligibility criteria;
The death rate for each of the health care programs are equivalent to that of the general
population;
A queuing system exists for admission to Nursing Home, Hostel, HACC and CACP
services;
Movement between each of the existing health care programs are shown at Table 2;
HACC expenditures and per capita costs include spending on frail aged, younger people
with disabilities, and the carers of both. Typical distribution of this expenditure by age
shows that approximately 78% is consumed by people aged over 60 years.
HACC user characteristics forming the basis of model input may include clients of more
than one service and can therefore be counted more than once;
CACP costs discontinue if the recipient takes a holiday (goes back to the community or
population steam); enters a hospital or receives alternative short-term residential care,
even though their entitlement to CACP is not renounced.

From/To NHomes Hostels CACP HACC

NHomes
Hostels
CACP
HACC
Table 2: Movement Between Health Care Programs

3.4 Demographic Model

The basis of the Aged Health Care Model is the demographic model shown at Figure 5. This model
is centred around the Population stock variable, shown as an array to capture the different age
cohorts of Australias population (0-100).

Population accumulations within this array change over time in accordance with the following flow
variables:
Inflows as a result of Births within the population;
Inflows resulting from Net Migration;
The aging process which progresses the population through the different age cohorts;
and
Outflows resulting from Deaths within the population.

This model provides the population accumulations which interact with the other sub-models of the
Aged Health Care system to derive the demand associated with each health care program. Each of
these sub-models will now be outlined.

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Modelling the Future - Techniques & Directions
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Figure 5: Graphical 'front end' of Powersim Demographic Model

3.5 Acute Care Model

In the event that an elderly person suffers from extreme ill health because of disease or injury they
must be provided with acute care as per the general population. Generally, the only organisation
capable of providing this special level of care is a hospital. In this event the person will temporarily
pass out of the aged care system and into the public hospital system. They will remain there until
they either regain their health or they die. The mechanics of this process are shown in the Acute
Care sub-model shown at Figure 6.

Figure 6: Acute care model (Powersim graphical interface)

The Acute Care array variable captures the population, by age cohort distribution, who utilise
acute care resources for a given time period. The accumulation of people within this variable is
determined by its inflow and outflow variables, which for the purposes of this model are simplified.
 Simulating Aged Health and Care Services

Entry into acute care is shown as being from the general population, given that it is assumed that a
nursing home or hostel place is kept open while the person is in hospital. It follows therefore that
the outflows from the acute care system are also depicted in terms of the general population, which
comprises of death, movement back to the general population, or a previously held hostel or nursing
home place. For this model, it is assumed that the Population distribution input is equivalent to the
Hospital separation distribution.

The acute care sub-model is primarily aimed at capturing information pertaining to the costs
associated with its provision, as shown by the Acute Cost variable. The result of an elderly person
entering the public hospital system is an increase and shift in the cost burden for the Government.
The cost increases to at least $215 per bed per day (as of 1991)4 or about $78,500 per bed per
annum, which is met by the public health system and mostly funded from Medicare contributions.
The current drain on the Medicare system by the provision of acute care for the aged is $1148
million per annum5. This equates to about $595 per person aged 65+ per annum, compared to the
national average of $301 per person per annum.

Given the cost of occupying an hospital bed, it is desirable to minimise the length of stay for an
aged person within the public health system. It is often the case that the aged person requires a long
period of convalescence in an institutional environment but not at the level of specialised care
provided by a hospital. This care may instead be available in a nursing home or hostel, thereby
relieving the public health system of unnecessary expense. Currently it is common practice for
nursing homes and hostels to provide convalescent care for the elderly. In the event of not being
able to either place an elderly person in institutional based care or to discharge them into the
community for convalescence, the hospital must incur high additional expense. However, difficulty
arises in anticipating the demand for such care, as there exists a long waiting period for the frail
elderly to gain admission into institutional care.

3.6 Nursing Homes Model

The need for the provision of nursing home accommodation has long been recognised as an
essential component of the care for the aged. Given the level of assistance that is required in caring
for the frail and incapacitated, institutional care is inevitable. The institutional structure of nursing
home care brings with it the need for specialised facilities and qualified staff, which means that it is
the most expensive form of dedicated aged care. Due to a number of decisions made since 1963,
this cost continues to be borne fully by the Commonwealth Government.

The Nursing Home Care sub-model is shown at Figure 7. The Nursing Homes array variable
captures the population distribution by age cohort utilising Nursing Home type accommodation and
services. The flows into the Nursing Home system come from the following:

General Population;
Patients currently being cared for in Hostel accommodation; and
Patients within the community currently being cared for through community based
programs (HACC and CACP).

4
Australian Commonwealth Government "1995-96 Budget Statement" Page 3-95
Note: Extrapolated from 94-95, estimate uses CPI of 5%
5
Estimate based on Medicare Averages and population distribution on information supplied by the Australian
Department of Finance
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Modelling the Future - Techniques & Directions
Australian Institute of Health & Welfare - Feb 1996

Figure 7: Nursing Home Model (Powersim graphical interface)

As stated above, patients entering the Nursing Home system are subjected to a waiting period
bound by the availability of free resources denoted in the model as Free Nursing Home Beds.
The number of free resources is governed by the number of Used Nursing Home Beds within the
quota of beds available as per policy targets. Consequently, the model captures the accumulation of
the general population waiting for available resources to be made available in the Wait for Nursing
Home variable. Where entries are possible, a feeder group is selected at random to provide the
flow of people entering the Nursing Home system.

Outflows from Nursing Homes arise only from death. This is based on the assumption that patients
utilising this form of care are sufficiently frail and incapacitated that they are unable to enter
another form of care.

The final area shown in the Nursing Home sub-model captures cost information pertaining to each
of the various categories of Nursing Home accommodation and care services. The Nursing Home
Cost array variable captures the cost information for the following categories of Nursing Home
care service:

Category 1 Care at $120.86 per day;

Category 2 Care at $110.57 per day;
Category 3 Care at $98.85 per day;
Category 4 Care at $79.79 per day;
Category 5 Care at $68.05 per day.

These categories of Nursing Home care are denoted in the model as numeric subranges 1 through to
5.
 Simulating Aged Health and Care Services

3.7 Hostel Care Model

Hostel care is based on the subsidisation of eligible organisations (Religious, Ex-Service,

Local/State Government, Charity and Commercial) providing hostel type accommodation for aged
and disabled people. The hostel accommodation and services are typically provided for persons
within the community requiring health care assistance, however not at a level equivalent to the
services provided by Nursing Homes. The flows into the hostel come from two main sources:
General Population; and
People within the community currently being cared for through the HACC community
based program.

The demand for hostel based care is also bound by the availability of free resources denoted in the
model as Free Hostel Beds. Therefore, the model captures the accumulation of the general
population waiting for resources to be made available in the Wait for Hostel variable. Again,
where entry into the Hostel system is permitted a random selection from feeder groups is made.

The outflows from Hostel system consist of the following:

People requiring a greater level of health care assistance moving to a nursing home;
People moving to the community based health care programs, HACC and CACP; and
Death.

Each of these outflows are indicated as a rate capturing the numbers within the population by age
cohort. Except for the death outflow, all outflows are constrained by the availability of spare
capacity within respective care programs. Two exit methodologies have been provided for the
HACC and CACP programs. The method used for HACC is simplified, determined by the total exit
rate and availability of free HACC resources denoted as beds. The CACP method incorporates the
same data with the addition of an age distribution breakdown for entrants to CACP. The choice of
method is dependent upon the availability of age distribution data.

Figure 8: Nursing Home Model (Powersim graphical interface)

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Modelling the Future - Techniques & Directions
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The final area shown in the Hostel sub-model captures cost information pertaining to each of the
various categories of hostel accommodation and care services. The Hostel Cost array variable
captures the cost information for the following categories of hostel care service:
Permanent Care at $3.45 per day;
Personal Care Low at $25.90 per day;
Personal Care Intermediate at $31.20 per day; and
Personal Care High at $34.00 per day.

The respite care categories associated with hostel services are not captured because of ambiguities
associated with capturing this information separate from the other categories.

3.8 Home And Community Care Program (HACC) Model

The Home And Community Care Program (HACC) helps frail elderly and younger people with
disablilities to live independently in their own homes and engage in the community. The services
provided include delivery of meals, home help, home nursing, and transportation. The program
also provides support to the carers of these people, chiefly by periodic relief from their caring
duties.

By offering a range of basic support services, HACC enables people to live at home for as long as
possible, where otherwise they would move to a hostel or nursing home. Funding for the HACC
program is sourced jointly between the Commonwealth and each State and Territory Government.

Figure 9 shows the HACC sub-model. The model does not differentiate between respite or
domiciliary care and is centred around the HACC stock variable which captures population
numbers, by age cohort, in receipt of HACC funding. The inflows to the HACC program consist of
the general population and Hostel patients. The population inflow is regulated by a waiting list
which is governed by available HACC resources, shown as Free HACC Beds, as for the Nursing
Home and Hostel models. A random selection criteria is used as the basis for entry direct from the
population and from the other feeder groups. The maximum number of HACC recipients is
constrained by a monetary limit and an established HACC per capita expenditure.

The outflows from HACC are divided into the following streams:

* Patients who die whilst in receipt of HACC services; and

* Patients whose condition deteriorates, requiring transfer to a higher level of care, either
to CACP, Hostels, or Nursing Homes.

The basis for exits from HACC into these streams is a transfer rate obtained from historical data for
each care program. These specified rates are selected randomly from the source groups.
 Simulating Aged Health and Care Services

Figure 9: Home & Community Care Model (Powersim graphical interface)

3.9 Community Aged Care Package CACP Model

The Community Aged Care Package (CACP) service exists as a planned and coordinated range of
services aimed at assisting people with complex care needs. Specifically, the program targets frail
aged people who are assessed as requiring significant management of care service provision, are
eligible for residential care, and prefer living in their own homes.

Financial assistance provided by the Commonwealth is a subsidy toward the overall cost to the care
administrator of providing services and of establishing and operating the individual programs. The
complex care needs may include a range of interacting physical, medical, social and emotional
areas requiring a highly skilled assessment and a comprehensive case management approach. The
prospective recipients will also have a need for assistance with the activities of daily living related
to personal hygiene, dressing and grooming, meal preparation and consumption, administration of
medication, transfer and mobility. As well, recipients will generally have a preference to remain
living at home with appropriate and reliable supports; thereby creating a further requirement for
ongoing monitoring and review of the day to day care needs.

These specific features of the CACP program distinguish it from the HACC program which may be
considered more mainstream within the general community. Hence, the CACP program is
significant within the overall scheme of aged health care for a number of reasons. In particular, its
capacity to provide assistance to:

* Areas where residential facilities are considered inappropriate approaches to meeting

local needs, such as some Aboriginal and Torres Strait Islander communities;
* Areas where residential facilities would be difficult to establish or sustain, such as rural
and remote communities with small populations or inner city areas where land costs are
cost prohibitive; and
* Areas which do not have an adequate level of existing community aged care alternatives.

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Modelling the Future - Techniques & Directions
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As a pivotal component of the aged care system, CACPs are considered a major area in which
burdens on other higher level forms of care (particularly hostels) may be transferred. CACPs are
currently being phased in at the rate at which the hostel places would have been introduced.
The CACP sub-model as shown at Figure 10 has a similar structure to the Hostel and HACC sub-
models. Flows into the CACP system originate from the general population and persons in receipt
of HACC funding. As for the other models the CACP entry is governed by a waiting period
dependent upon the availability of resources. A random selector is used as the basis for selecting
patients from the population and the other feeder groups. The maximum number of CACP
recipients is constrained by a monetary limit, set as Max CACP Beds, reflecting an established
CACP per capita expenditure. The current level of Commonwealth recurrent subsidy for CACPs is
approximately $25.00 per day multiplied by the approved number of care packages provided by the
program administrator.

The outflows from CACP are divided into two streams; patients who die whilst in receipt of CACP
services, and patients whose condition deteriorates and require a transfer to Nursing Home care.
The basis for exits from CACP into Nursing Homes is a transfer rate obtained from historical data
for exchanges between HACC and CACP programs. The patients are selected randomly from the
source groups.

Figure 10: Community Aged Care Program Model (Powersim graphical interface)

4 User Interfaces

The model offers a number of customised interactive features. In addition to the users prerogatives
in regard to manipulating data to examine particular scenarios, the user is able to vary the following
inputs: target nursing home beds, target hostel beds, and target date. This is simply achieved
by adjusting the slider controls to the desired settings, then performing a new simulation
corresponding to the new settings. A fresh run can then be performed by selecting the run option
under the Simulation Menu. The model will track the performance over time (displayed as graphs)
for the new simulation, also displaying the accumulations across the various models.
 Simulating Aged Health and Care Services

Figure 11 below shows slider controls for the some key policy parameters:

Figure 11: Illustration of User Interface for Model

In addition to the above interactive features of the model, two supplementary modules have been
developed. The first melds expenditures across all care programs into one auxiliary variable simply
called Tot_Cost. The second module enables the input of the Target Planning Benchmarks for all
care programs. By manipulating the planning targets and timeframes for bed allocations, the user
can monitor the systems resultant effect upon Max_NH_Beds, Max_CACP_Beds and Max_Hostel
Beds. The two modules are shown below in Figures 12 and 13:

Figure 12: Total Cost Module (Powersim graphical interface)

Figure 13: Policy Variables Module (Powersim graphical interface)

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Australian Institute of Health & Welfare - Feb 1996

5 Tests Of Model Structure And Behaviour

5.1 Validation

The initial simulation of the demographic sub-model revealed strong behavioural consistency
between the population output of the model and observed real-world behaviour. Since the basis
of our data input for population stock was 1991 Bureau of Statistics Census figures, covering birth,
death and migration rates, we can closely reconcile predictions with present facts.

Owing to the unavailability of key data, complete validation of the aged care sub-models is not
possible. The deficiencies mostly involved patient movements between the various care programs,
in particular, HACC and CACP. The development of the model has served to direct the
Department of Finance officials in relation to gathering this kind of information in a form
appropriate to the model. This will enable a more definitive validation process to occur in future
model development. As regards the structural aspects of the model, the authors have been guided
closely by Departmental officials. This has given the authors an assurance that the model structure
adequately reflects the real world connectivities and flows.

5.2 Trial Simulation

As a consequence of the inadequacy (and absence in some cases) of critical data, the behavioural
outcomes of simulation runs are imprecise. Notwithstanding the lack of data, a trial run showing
typical simulations are presented below (Figure 14) for illustrative purposes.

These simulation results portray the development of the variables: Used_HACC_Beds,

Used_CACP_Beds, Used_Hostel_Beds, Used_NH_Beds over time. Multiple generations are used to
reflect three different scenarios. They are to examine the effect of the following actions upon the
system variables:
No Policy Change
Target Nursing Home Beds = 40 per 1000, Target Hostel Beds = 50 per 1000 (aged in excess of
70 years of age); Timestep = 20 years
Target Nursing Home Beds = 40 per 1000, Target Hostel Beds = 50 per 1000 (aged in excess of
70 years of age); Timestep = 10 years

Figure 14: Illustrative Simulation Outputs for Alternative Policy Scenarios

 Simulating Aged Health and Care Services

The first action represents a do nothing approach to the problem, whereas actions 2 and 3
compare the effects of compression upon the system variables. As well, development of the
variables: Total_Cost and Used_Acute_Beds is simulated over a ten year timespan.

With the appropriate refinements and additions of data, such simulations will provide a more
representative portrayal of behaviour. In particular, the process by which costs are accumulated is
of interest in the context of shaping future expenditure policy.
5.3 Discussion

While the fulfillment of our initial objective of assessing the long term impact of Australias aging
population on health care resources was impaired by the availability of data, the model creation and
data acquisition phases of this project were extremely useful in many respects. Principally, our
consultations with the Department of Finance Officials during the model creation phase was
mutually beneficial in resolving previously obscure relationships between care programs. By
explicitly establishing the models structural connectivities, an enhanced understanding of the aged
health care system was obtained.

As well, the information phase and subsequent acquisition of requisite facts, figures and other
historical information for the model was invaluable. The understanding of what significant events
have shaped the present situation with aged health care is equally important in the evaluation of
how it should be shaped for the future. It also helped contextualise the setting of the overall
problem. The model validation phase also highlighted a need for gathering vital information
relating to patient transfer statistics on movements of patients between care programs (especially
exchanges between HACC and CACP programs).

Importantly, the model enables the comprehensive study of what-if? scenarios, like the effect of
reductions in discharge rates for say the acute care stream of aged care. Here, the model signals
Counter-intuitive results, since the number of patients in hospitals would be expected to rise to
the maximum permitted bed capacity. As a result, waiting lists would grow, particularly if doctors
reduce the admission rate in an attempt to ease acute care congestion. In some cases, patients who
actually need treatment and care will be denied it. Hence, patients assigned to waiting lists for acute
care will be forced to remain in the community, but many of them will require domiciliary care
while they wait. They in turn become another drain on the HACC and CACP services program
budgets. As the waiting list for acute care grows further, more money will have to be expended on
domiciled patients (since it is more inefficient to treat them in the community), leaving less money
available for patients already in care. This will in turn affect the acute care services resulting in
even fewer admittances to hospitals.

It was apparent to us in undertaking the project that overall, there is a consensus of opinion that a
steady shift in emphasis from the provision of Nursing Home and Hostel care to greater reliance on
HACC will help to ease excessive strain on Commonwealth and States financial resources in the
future. However, it is the subject of much debate whether such a shift is socially desirable and
whether funding should be flexible enough to ensure that genuine choice can be exercised by the
aging community and their carers. Hence, the use of this model as an executive decision-making
tool must be tempered with a sound recognition of the intangibles, such as the impact of
sociological influences upon the systems behaviour.

It was also apparent that waiting lists and other delay mechanisms provide a major source of
flexibility to the Government. Clearly, across a diversity of aged care functions, delay is a very
natural way to influence demand and hence to ration a limited amount of resources. Other
strategies may be worth pursuing, such as reducing the emphasis on curative and restorative
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Modelling the Future - Techniques & Directions
Australian Institute of Health & Welfare - Feb 1996

approaches to care, in favour of preventative approaches. The effectiveness of such strategies

cannot be borne out by our model simulation, but are of interest in terms of the intuitive
possibility. Particularly the payback period required for such strategies to deliver significant
returns.

6 Conclusion
This modelling study has provided a formative insight into the aged care resourcing problem.
Although the data limitations of the model at this stage precluded its use for tailoring specific policy
responses to the problem, illustrative simulations were presented and they demonstrate the
robustness of the models structure, and its fitness for purpose in providing the Governments IDC
with a strategic decision support tool.

6.1 Recommendations for Further Model Development

It was beyond the scope of this study to examine socio-economic and various demographic
influences upon the supply and demand for aged health services. In addition to other aspects
considered relevant and important, the authors recommend students or system dynamics
practitioners address the following points in any future modelling activities:
* The effects on Government Budget outlays caused by the introduction of user charging (after
means-testing clients) for all forms of aged care.
* The costs and benefits to the Government associated with the introduction of a health promotion
of a particular financial dimension if it is likely to alter life expectancy by a certain amount.

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