By Kate Chapman of NZPA

Wellington, Sept 8 NZPA - Places in rest homes will run out in four years without increased investment in the sector, a new report shows.

The Aged Residential Care Service Review, released today, warns that by 2026 the over-65 population is expected to increase by 84 percent, from 512,000 to 944,000.

That would mean an extra 12,000-20,000 people needing aged residential care.

There were currently 34,000 total aged care beds and has not been new investment in new rest homes in the last 10 years.

The report said there was enough capacity until around 2014, but the lag time between policy changes and having the extra beds available meant work needed to start in the next year.

Dementia care was expected to be the area with the highest increase in demand.

New Zealand Aged Care Association chief executive Martin Taylor said if capacity was not increased those who should be in care would end up in hospitals.

"There'll be a huge impact on the public system and whether they could handle that would be a different issue, clearly nobody wants to build more public hospitals and one way of forestalling the amount of public hospitals is by having more private sector provided aged residential care hospitals."

There needed to be public discussion about whether the money to fund increased capacity in aged care residences should come from the Government or business, he said.

Part charges from those in care was another way to increase funds, he told NZPA.

Health Minister Tony Ryall said the Government was the primary investor in aged care and would continue to be so.

The asset test regime -- which allows those in aged care to keep around $200,000 of assets and still receive government funding -- would not be changed, he said.

The Government spends about $800 million a year on aged care residencies, residents contribute $400m.

"I suspect that over time our share of that will continue to increase," Mr Ryall told NZPA.

Health funding would be increased in the next budget but it was too soon to say how much of that would go to aged care, he said.

It was likely to be more than the $72m over four years increase in 2009 and $64m in 2010.

The Government and District Health Boards would have to work together to decide where funding increases were needed.

Much of the growth in demand for rest homes was occurring in and around Auckland.

Increased demand for aged care placements would also create the need for more staff in the sector, the report said.

Mr Ryall said Health Workforce New Zealand was likely to make an announcement on that in the next month.

"It's really about how we can help lift the nursing quality and supervision in rest homes, about giving people more skills and information and some training -- getting people to become aged care nurses, things like that."

Mr Ryall said it was no surprise the population was aging but this report provided the figures needed to help with planning and decision making.