Budget outlines aged care shake-up

The federal government will change the way it funds aged care in a move that will save $1.2 billion.

Treasurer Scott Morrison's 2016/17 budget says the government is refining aged care funding to address unsustainable spending.

It says expenditure on the aged care funding instrument would be expected to blow out by $3.8 billion over the next four years without action.

"Savings arising from better targeting of the funding that aged care providers receive will provide the ability to introduce new aged care initiatives and help meet the continued growth in aged care funding overall."

The government will reinvest $249 million to improve aged care, including $102 million to help providers in rural and remote areas better manage cost pressures they face due to their isolation and small size.

It's spending a further $136 million on the My Aged Care contact centre to meet increasing demand from consumers trying to navigate the system.

Health Minister Sussan Ley says the measures are part of the government's ongoing commitment to aged care reform.

It's about "putting consumers, not the aged care provider, in charge of their later years", she said.

There's also $10 million for unannounced compliance site visits of aged care providers.