Rob Hankins - ECH Inc
20 December 2012
Ms. Kerrie Westcott
Director
Legislation Section
Transition Branch
Ageing and Aged Care Division
MDP 550
GPO Box 9848
Canberra ACT 2601
Dear Ms. Westcott,
RE: Implementing the Living Longer Living Better aged care
reform package Overview of proposed changes to the Aged Care Act
1997 and related legislation
We have considered the proposed changes to the Aged Care Act 1997 as outlined in the
consultation paper, and while the changes broadly reflect the intentions of the Living Longer
Living Better (LLLB) package of reforms announced in April of this year, there are matters that
we believe require clarification or reconsideration.
Our comments below follow the same structure as the consultation paper.
Overview of proposed changes
We believe that a fundamental principle underlying the reforms is a focus on consumers and
providing them with more choice by, among other things, making the aged care system more
flexible. Consistent with this principle is the right of an individual to choose the setting in which
they would like their care and services delivered (having first been approved as eligible for a
particular type(s) of care). Therefore, we recommend that the Overview explicitly state that the
assessment process will determine whether a person is eligible for Levels 1 - 2 of a Home Care
Package only, or all levels of care, not just all levels of Home Care. An approval for respite care
could simply be a time limited approval for either of the two aforementioned levels of care.
As a result, a consumer approved for all levels of care would be able to choose whether they
receive that care in a residential care facility or at home. This would obviate the need for a
separate residential care approval and paves the way in the future for portability of an approval,
if not an entitlement, to care. It would then at least be possible for a person to choose to move
from home care to residential care and vice versa, without the need for further external
assessments. The subsidy level would be determined by their choice of care (Home Care or
residential).
Proposed changes to residential care
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(page 7) the different treatment for low and high level residential care will be removed
Refer to comments above regarding assessment; there should only be two types of
approval for care (accepting that approvals can be time-limited).
(page 7) … care recipients will have a 21 day period after entering the aged care service
to decide how to pay their accommodation payment.
The Aged Care Financing Authority (ACFA) has provided advice to government that
care recipients should have 28 days to make this decision but we support the shorter
period.
Proposed changes to home care
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(page 8) approved providers who deliver home care at any level to care recipients will be
able to receive a behaviour supplement
The paper does not explain what eligibility requirements would have to be met, although
we note that details will be described in Principles.
There is a statement on page 32 of the paper that the behaviour supplement will be
indexed bi-annually but there is no such commitment to the value of the packages
themselves. We recommend that the government commit to bi-annual indexation of the
value of the four levels of Home Care Packages.
(page 8) some care recipients will be required to contribute more to the cost of their care
through an income tested fee.
The proposed arrangements for income tested fees are rather confusing and could be
regarded as potentially inequitable in relation to the application of the lifetime cap (refer
to comments below).
(page 9) … once a person reaches the applicable annual or lifetime cap, they will pay no
more income tested care fees.
We assume that once a person reaches either of the caps, the government Home Care
subsidy will revert to the full amount. We recommend that this be explicitly stated in the
amendments to the Act.
Residential care
Refer to comments above under Overview. We believe that care recipients should not only be
able to access the level of care they need but also have the choice of the setting in which the care
is delivered. Therefore, care recipients should be approved as eligible for Levels 1 and 2 of a
Home Care Package or for all levels of care. In the case of the latter, they should be approved
without any distinction between whether that care is to be delivered in a residential care facility
or at home. As suggested above, the subsidy rate would be determined by their choice of care
setting.
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(page 11) all approvals of care recipients for residential care are to become non-lapsing
(unless they are expressly time limited).
We are unaware of the reasons why an approval would be time-limited.
(page 15) … the detailed eligibility criteria for the various supplements should be in
Principles, with the rates described in Determinations (noting that these are indexed biannually).
According to the various Explanatory Memoranda for Determinations specifying the rate
of supplements, they are indexed ‘using a well-established formula based on the
Consumer Price Index as a measure of the movements in the non-labour costs of
providers’. We are not sure what the formula is but assume it may be COPO.
Confirmation of this would be appreciated.
Supported Resident Ratio
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(Page 17) A 25 per cent discount to the accommodation supplement rate is applied to
services that do not have a supported resident ratio of 40 per cent or more.
This is another matter that the ACFA has been asked to provide advice on by December
2013. Meanwhile, the 40 percent threshold remains as an arbitrary requirement. There
may be an historical justification for introducing the threshold and the discount rule but it
is difficult to understand why they are still warranted. Many years of government
planning and targeted allocation processes have resulted in a level and distribution of
supply such that a penalty based system of accommodation supplement is no longer
justified. The government has set the rate of accommodation supplement at $52.84 for
new and significantly refurbished facilities. This is still below what has been shown to be
the true cost of accommodation so there are no grounds for discounting. Providers who
operate in areas with high numbers of pensioners will naturally see that reflected in
admissions. Any attempts to cherry pick residents with higher wealth are likely to
backfire due to the profile of the local population. The Supported Resident requirement
should be that providers achieve a supported resident ratio that is, on average over time,
equal to or greater than the regional proportion of age pensioners. This is already
reflected in the conditions of allocation of places and should simply remain so. However,
there should also be the flexibility for providers to ‘trade’ their requirement with other
providers in the region who either wish to particularly target supported residents or in
situations where one provider simply cannot achieve the required regional ratio.
Whatever the ratio of Supported Residents a provider has at a given time, all should
attract the full value of the accommodation supplement.
Annual and lifetime caps
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(page 21) The caps will be calculated by reference to the care subsidy reduction. That is,
the maximum amount of means tested care fee … even if a lesser amount was actually
charged. We understand that this provision has been included because the Department
could not possibly know what level of fee is actually charged for each and every care
recipient. In any event, it is unlikely that providers would charge less than the applicable
means-tested fee. We assume the government will pay for a resident’s full cost of care
once they reach either of the caps but the legislation should include an explicit provision
to that effect.
Accommodation charges
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(page 24) If on entry to residential care the care recipient has insufficient means, the
Government will contribute towards the cost of their accommodation up to the amount of
the accommodation supplement. We understand this to simply be a continuation of the
existing Supported Resident provisions.
(page 26) If a care recipient agrees to pay an accommodation payment and fails to do so
We note that if a care recipient fails to make the agreed payments, they may be asked to
leave the service by following the procedure set out in the User Rights Principles 1997,
namely, that a care recipient may be asked to leave if they have not made the necessary
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payment within 42 days of the date when the amount was payable (subject to the
availability of suitable, alternative accommodation).
(page 27) amounts must not be deducted from the lump sum accommodation payment
except for …amounts of periodic accommodation payment. The paper does not specify
under what circumstances a resident’s periodic accommodation payment might be
deducted from the lump sum, or indeed, why a provider would want to enter into such an
arrangement. The options available to a resident will be a lump sum or a periodic
payment or a combination of the two. In the case of a combination, the resident must pay
both the (reduced) lump sum and a periodic payment equivalent to the balance of the
published lump sum. If the periodic payment were to be drawn down from the reduced
lump sum, the provider’s capital investment would simply be eroded. This would then
necessitate the provider increasing the periodic payment amount to compensate for the
reduced lump sum invested (i.e. the forgone interest earning capacity of the lump sum). A
situation that the government might be envisaging is an arrangement whereby the total
amount of periodic payment payable over the course of the resident’s stay is held over
and deducted from the amount of refundable lump sum at separation. However, if this
were the case the provider would have to charge an interest cost on the outstanding
periodic payment too. We would appreciate an explanation of the intention of this
proposed amendment.
(page 27) The prudential requirements will be substantially the same as those currently
detailed in the Act for accommodation bonds. Acknowledging this might be a reference
to the possible introduction of insurance on lump sums (i.e. the ‘substantially the same’
wording), some clarification of exactly what might change would be helpful for
providers.
Home Care
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(page 32) The value of the packages and the behaviour supplement (indexed bi-annually)
will be described in a Determination. We assume the value of the packages themselves
will continue to be set by Ministerial Determination in the Budget context but they should
also be indexed along with the supplements. Given the behaviour supplement is stated as
being 10% of the package value, if the supplement is indexed bi-annually so should the
package so that their relativity is maintained.
Means testing
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(page 33) The income test involves assessing the care recipient’s ‘total assessable
income’. At Attachment C of the paper, paragraph B. on page 53 states that ‘It is
proposed that the Act will describe an income testing calculator that will derive a
‘relevant income tested amount’ that can then be used in a range of other calculators.’
The income and assets tests for residential care are currently administered by Centrelink
and the Department has confirmed that Centrelink will administer all future income and
means tests. Nevertheless, there will be instances in the future where a care recipient has
been assessed as being liable for an income tested fee but refuses to or claims they cannot
afford to pay the basic fee of up to 17.5%. In such cases we assume the provider would
be within its rights to insist on the basic fee being paid or reduce the quantum of service
for the care recipient proportionately. There will also be cases where the care recipient is
not liable to pay an income tested fee and will not agree to pay or cannot afford the full
basic care fee of 17.5%. On page 34 there is a reference to hardship provisions if a care
recipient is unable to pay either part or the entire basic daily fee, or part or all of the
income tested care fee. How the hardship provisions would be applied to the basic fee is
unclear but the provision implies that the government will pay a subsidy equal to the part
or full basic fee that the care recipient is unable to pay. We understand therefore that
providers will be able to insist on part or all of the full 17.5%; or require the care
recipient to apply for hardship; or reduce the level of service. A measure that the
government may wish to consider is requiring care recipients to pay the required fee(s) to
be eligible to attract the applicable government subsidy. This would inextricably tie the
two together such that care recipients would have to pay the basic fee and the income
tested fee if applicable, in order to get a service. If the legislation does not require the
care recipient to meet their funding obligations as determined by Centrelink, providers
and care recipients must be free to agree on a reduced level of service in exchange for a
lower fee. The potential outcome risk associated with such a reduced level of service is
the care recipient needing to access higher level care earlier than might otherwise be the
case, at an increased cost to government.
Other minor or administrative changes
ACFI appraisals
(page 42) It is proposed that (the power to suspend an approved provider) be broadened to enable
the Department to take action in response to an approved provider giving false, misleading or
inaccurate information in appraisals and reappraisals. Such a provision could be unreasonably
harsh and open to abuse. A simple oversight or inadvertent error could render a provider subject
to suspension. We do not believe this is the intention of the power but the wording of the
provision should place the onus on the Secretary to show that an approved provider knowingly
gave false, misleading or inaccurate information. In any event, the proposed wording is
unacceptable and should be reviewed in the context of fairness or ‘natural justice’.
To put the power beyond doubt, it should also be limited to suspending the provider from
undertaking appraisals at the service or services in question and not to any other services
operated by the same approved provider. It is not the provider that undertakes appraisals but
employees of the provider. Other ‘innocent’ services operated by the same provider should not
therefore be subject to the suspension. Any suspension should be commensurate with the extent
of the breach of the legislated provision. For example, a single first-time instance should not be
punishable to the same extent as numerous, repeated instances. The Act or Principles should be
very specific about the period of suspension as it applies in different circumstances.
In the case of a suspension, the paper does not state who will then undertake the appraisals.
Sections 25-3 and 27-3 of the Act allow the Secretary to authorise a person or persons other than
the approved provider to undertake appraisals and reappraisals. If the authorised persons are
likely to be Departmental validation officers approved providers would consider such an
arrangement a conflict of interest. A decision to suspend a provider is a reviewable decision.
Therefore, the Secretary may reconsider a decision to suspend a provider. However, there does
not appear to be a period specified in the Act for giving notice of the Secretary’s decision on
review. Given the seriousness of a decision to suspend a provider, there should be such a period
and we believe it should be no longer than 30 days.
Attachment B
In the case of Supported Residents, the maximum accommodation supplement is indexed each
March and September in line with movements in the Consumer Price Index (CPI). The
maximum accommodation charge on the other hand is fixed for the period a resident is in care.
The example does not state whether the payment will be indexed or not in future. The periodic
payment should be indexed on the same basis as the accommodation supplement (i.e. twice
yearly using the CPI).
From 1 July 2014, the accommodation periodic payment paid by non-Supported Residents will
not be subject to a maximum, other than by virtue of the maximum lump sum equivalent
approved by the Aged Care Financing Authority (ACFA).
The example in Attachment B shows a $300,000 lump sum equating to $70 a day as a periodic
payment. The calculation therefore appears to be based on an interest rate of 8.52% ($70 a day =
[$300,000 x 8.52%] ÷ 365 days). However, industry submissions have argued for an interest rate
of at least 12% to produce a reasonable rate of return. We acknowledge that this matter is under
consideration by the ACFA and the Minister for Ageing.
Effect of periodic payments on lump sum refunds
Example calculation of accommodation payments and care fees
The Overview Paper is not clear about the relationship between accommodation payments and
care fees. In the absence of worked examples in the Overview, we have included the following
example as a means of eliciting from the Department the correct calculation and application of
accommodation payments and care fees, in the event that our understanding is incorrect.
Attachment A only deals with residential care subsidy and fees and not accommodation subsidy
and fees; and Attachment B only refers to accommodation payments with no reference to the
means tested care fee. However, according to the LLLB ‘technical paper’ released in April 2012,
The maximum means tested contribution is distributed first toward the resident’s accommodation
payment until the full cost of accommodation is paid and then toward their care fee. (page 48)
This is a critical omission from the Overview Paper as it needs to be covered by the proposed
amendments to the Act.
Using the lump sum and periodical payment figures from Attachment B, the following would
apply in 2014 to a full pensioner with assets of $244,000:
Published lump sum = $300,000
Periodical Payment = $70.00 a day
Assets = $244,000 Income = age pension
Asset free area = $ 44,000/$200,000 Income free area = age pension
1. Accommodation Payment
Asset threshold for Supported Resident status = $153,905
therefore Accommodation Supplement = $ 0.00
The resident would have the option of paying a lump sum of $200,000 and a periodical payment
of $23.40 a day (for the $100,000 balance) drawn down from their remaining $44,000.
2. Care Fee
As the resident’s assets would be fully distributed to their cost of accommodation, they would
not pay a means tested care fee.
Summary
1. Approval as a care recipient should be for Levels 1 -2 of a Home Care Package or all
levels of care ( Home Care and Residential Care) ;
2. We support the proposal for a 21 day period for deciding on the method of
accommodation payment;
3. The eligibility requirements for the behaviour supplement need to be discussed with
providers;
4. The value of the four levels of Home Care Packages should be indexed bi-annually;
5. The Home Care income testing and hardship arrangements are confusing;
6. The Act should contain an explicit provision that the government will meet the costs of a
person’s care once they reach the annual or lifetime caps;
7. The 40% rule for Supported Resident ratios should be rescinded; and the supported
subsidy rate should be the one rate of $52.84 a day;
8. The government needs to explain the circumstances under which a periodic
accommodation payment might be deducted from the lump sum;
9. In the absence of a hardship determination providers should have the right to reduce
Home Care services in cases where a (potential) care recipient cannot or refuses to pay
the full basic daily fee or income tested fee;
10. The government might consider a requirement that care recipients must first pay the
applicable fee before the government’s subsidy is paid;
11. The proposed changes to sanctions relating to ACFI claiming are potentially harsh and
unreasonable and open to abuse; and,
12. The Act needs to include clear provisions relating to the application of a person’s assets,
firstly to their accommodation costs, and only then to their care costs. The Department
should provide the sector (including consumer representatives) with worked examples of
the proposed means test as a matter of priority.
Thank you for the opportunity to comment on the proposed amendments. We would be very
willing to discuss our comments in more detail should the Department wish to do so.
Yours sincerely,
Rob Hankins Richard Hearn Klaus Zimmerman
Chief Executive Chief Executive Chief Executive
ECH Inc. Resthaven Inc. Eldercare Inc.
174 Greenhill Road 43 Marlborough Street 251 Young Street
Parkside SA 5063 Malvern SA 5061 Wayville SA 5034
Tel. 08 8407 5198 Tel. 08 8373 0211 Tel. 08 8291 1000
20 December 2012