Senator the Hon. Mitch Fifield
Assistant Minister for Social Services
PARLIAMENT HOUSE
CANBERRA ACT 2600
Dear Minister
I am pleased to attach the Aged Care Financing Authority’s (ACFA’s) report on the impacts
of the 1 July 2014 financing reforms for the month of August 2014.
This report includes analysis of the first round of data concerning accommodation payments,
collected through ACFA’s survey of aged care providers and also reflects additional
feedback provided to ACFA including from sector representatives, providers and the
Department of Social Services.
Future reports will aim to further build an understanding of the scale and impact of the
reforms in both the residential and home care sector, by examining:


The impact of the accommodation payment changes – including the impact on and
reaction of both providers and consumers;
The impact of the means testing changes – including the impact on and reaction of
both providers and consumers.
ACFA’s analysis will consider whether impacts and issues are transitionary, as may be the
case with some means testing process issues that have arisen to date, or systemic and
likely to continue.
I am available, along with the other members of ACFA, if you would like to discuss the
Report further.
Yours sincerely
(Authorised for electronic transmission)
Lynda O’Grady
Chairman
9 September 2014
Report on the impact of the 1 July 2014
financial reforms on the aged care sector
August 2014 Report
Introduction
This is the Aged Care Financing Authority’s (ACFA’s) report on the impacts of the 1 July 2014
financing reforms for the month of August 2014.
This report includes analysis of the first round of data concerning accommodation payments,
collected through ACFA’s survey of aged care providers. To complement the data collection, ACFA
has also continued to engage with sector representatives, providers and the Department of Social
Services to obtain information and feedback on the impact of the reforms.
This report is split into three parts:



Part 1 – Accommodation Payments
Part 2 – Access to Care
Part 3 - Support for the sector and consumers in transition
Key Findings
1. Accommodation Payments
Key findings from the analysis of accommodation payment data provided to ACFA are that, to date:

consumer choice of accommodation payment options is slightly in favour of lump sum
Refundable Accommodation Deposits (RAD) (42% of choices) over periodic Daily
Accommodation Payments (DAP) (35% of choices) and combination RAD/DAP options
(24% of choices);
1

there has been a slight increase1 in the value of the overall pool of lump sum
accommodation payments held and receivable by providers, with the value of new RAD’s
paid since 1 July 2014 for incoming residents slightly exceeding the value of pre 1 July 2014
accommodation bonds paid out for departing residents. At the aggregate level there were
increases across all geographic areas and both high and low care providers. Government
providers and providers with seven or more homes had small decreases.
Lump sums held/receivable*
$20.0 b
$15.0 b
$10.0 b
$5.0 b
$0.0 b
30 June 2014
31 July 2014
Bonds held/receivable
RAD/RACs held/receivable
*Including bonds receivable at 30 June 2014 of $3.2 billion.
2. Access to Care
The report also notes that there have been some concerns raised with ACFA by sector
representatives over delays in access to care in certain cases. These concerns appear to stem
from a combination of factors, including:



delays in issuing of means test assessments by the Department of Human Services;
changes in provider admission behaviour (more providers are now requiring prospective
care recipients to have completed means test assessments before they will commence
providing care); and
changes in consumer behaviour (consumers taking more time to understand financial
implications before making choices).
To some extent some of these issues are likely to be transitional and dissipate as the reforms bed
down. However, ACFA will examine these impacts and other access to care issues more closely as
more data on entrants to care becomes available over coming months.
3. Support for the sector
The Transitional Business Advisory Service continues to provide support for providers with the
transition to the new accommodation payments arrangements. Relevant departments have also
been updating and distributing additional information materials to clarify reform implementation
issues. The Department of Human Services has made available a dedicated phone line for persons
concerned over delays in means test assessments.
1
For the voluntary sample group of 1801 services (122,000 places), representing 67% of services and 65% of places:
 As at 30 June 2014, Bonds were $9.9b which extrapolates to $15.4b for the total industry.
 As at 31 August 2014, Bonds & RADS were $10.0 b which extrapolates to $15.7 b for the total industry
2
Part 1.
Accommodation Payments
Survey of residential care providers
This report presents data collected from residential aged care providers through a voluntary survey.
Residential aged care providers were invited to participate in a voluntary survey which collected
information on the choice of accommodation payment method and the changes in the lump sum
accommodation payments held and receivable. Forms were sent to all providers, with responses
submitted to a third party who de-identified the results before providing them to ACFA.
The survey specifically collected data on:
1. the numbers of accommodation bonds held and their value at 30 June 2014;
2. the numbers of bonds/RADs held and their value at the end of the month (July 2014);
3. the numbers of RAD, DAP and combination payment options chosen by residents in the month
of July 2014.
Survey forms were received from 1801 services (122,000 places). While the results cover a
significant proportion of the sector (67% of services; 65% of places), ACFA notes that care should
be taken when interpreting the survey results as the providers who responded to the survey may not
necessarily be fully representative of the structure of the aged care sector. Results from the survey
have been extrapolated in the following analysis to provide the estimated overall sector impacts.
Proportionally scaling up of lump sums reported held at 30 June 2014 by providers in the survey
($9.9 billion) provides an estimated sector-wide lump sum pool of $15.4 billion.
Choice of accommodation payment and changes to the lump sum pool
Key findings are summarised below in aggregate and by various sector segments. Further detail is
provided at Attachment A.
Aggregate results for total sector
The results from the survey indicate that for July 2014:

Choice regarding accommodation payment favoured RADs (42%) over DAPs (35%) and
combination payments (24%).

There was an increase in the lump sums held or receivable of 0.7% or approximately
$125 million. It should be noted that given the survey covered only the first month of the reforms
and residents have 28 days to choose their method of payment, and a lump sum receivable or
paid would not arise until this choice is made, that this amount is likely to understate the ongoing
regular monthly impact.
3
Geographical analysis
There were relatively minor differences in payment choices and lump sum holdings by geographic
location, as summarised in the table and chart below.
Service
location
(Attachment A,
Table A)
Choice of payment
Change to the lump sum pool
Compared to the other areas, there
was a greater preference toward RADs
in major cities. Around a quarter of
residents chose a combination
payment across all geographic areas.
There was a small increase in the
amount of lump sum payments held or
receivable across all geographic areas.
Service ownership analysis
There were relatively minor differences in payment choices and lump sum holdings by facility
ownership, as summarised in the table and chart below.
Service
ownership
(Attachment A,
Table B)
Choice of payment
Higher preference for RADs in
the For-profit segment and a
higher preference for DAPs in
the government segment.
Change to the lump sum pool
A small increase in lump sums for the not-forprofit and for-profit segments. There was a
small decrease reported in the lump sums held
or receivable for government providers.
4
Care type2 analysis
The impact of accommodation payment choices is likely to vary between providers by the type of
care traditionally offered, noting that former low care places would have been characterised by
payment of lump sum bonds prior to 1 July 2014 and (non extra service) high care facilities by daily
accommodation charges.
Care type
(Attachment A,
Table C)
Choice of payment
Relatively even RAD/DAP split for high care
providers. Marked preference for RADs for
mixed care providers. Low care providers were
almost evenly split across the three options.
Change to the lump sum pool
There was an increase across
all categories, with low care
providers having a very small
increase.
Facility size analysis
There were relatively minor differences in payment choices by facility size, though it was
predominantly larger facilities which recorded growth in lump sum accommodation holdings.
Number of
places
(Attachment A,
Table D)
Choice of payment
Slight preference for DAPs for
those services with fewer than
50 places. Slight preference for
RADs in services with more than
50 places
Change to the lump sum pool
The growth in the lump sums held or receivable
was dominated by the facilities with over 100
places with over 97 per cent of the growth
attributable to these facilities. There was a very
small decline in the 50 to 99 place facilities.
2
High and low care classifications are based on over 70% of care days being delivered with an ACFI classification of high
or low care respectively.
5
Provider size analysis
There were relatively minor differences in payment choice, a small decrease in the amount of lump
sum payments held/receivable for providers with 7 or more homes and a small increase for
providers with fewer homes.
Provider size
(Attachment A,
Table E)
Choice of payment
Slight preference for RADs in single
homes, and those providers with seven
or more homes. Slight preference for
DAPs for providers with two to six
homes.
Change to the lump sum pool
A small decrease in the lump sums
held and receivable for providers with
seven or more homes, and a small
increase for single home providers and
providers with two to six homes.
Extra service v non extra service3
Under the previous arrangements, a resident entering a high care extra service place could be
asked to pay a lump sum bond. There is a clear preference toward RADs in extra service facilities.
Extra service
(Attachment A,
Table F)
Choice of payment
There was a strong preference to pay
a RAD for residents entering extra
service homes with 79% of residents
choosing this method of payment
3
Change to the lump sum pool
There was a small increase in the
amount of lump sum payments held or
receivable across all extra service
categories.
Extra Service and Non-extra service classifications are based on over 70% of care days being delivered to residents
occupying an Extra Service place or a Non-Extra Service place respectively.
6
Part 2.
Access to Care
Advice on the impacts of the means testing changes on access to care will be reliant on two factors:


Detailed analysis undertaken using administrative Departmental data on persons entering
care; and
Information obtained through the Authority’s engagement with the sector.
It will take some time to build a suitably robust data set in this area, which will rely on collation of
data concerning trends on entering care analysed against income and wealth information. It is likely
that it will be some months before the Authority is able to start reporting in any detail in this area.
In the absence of comprehensive data, ACFA has continued to engage with the sector and the
Department to obtain early feedback on implications in this area.
Concerns over delays in access to care
There have been some concerns raised with ACFA by sector representatives over delays in access
to care in some cases, both in residential and home care. These concerns appear to stem from a
combination of factors, including:



delays in issuing of means test assessments by the Department of Human Services;
changes in provider admission behaviour (more providers are now requiring prospective
care recipients to have completed means test assessments before they will commence
providing care); and
changes in consumer behaviour (consumers taking more time to understand financial
implications before making choices).
Other issues
ACFA has also been advised of some cases of errors in means test assessments, concerns by
some consumers over the levels of fees that apply and the added need for consumers to obtain
financial advice in some cases.
A number of providers have also advised of both an increase in entrants to care pre 1 July 2014,
reflecting a desire by some to enter care before the new arrangements took effect, and a
consequent slow down in permanent entrants in the initial month post 1 July 2014. Some providers
have also reported increased use of respite care where consumers are still settling their financial
arrangements
Comment
To some extent some of these issues are likely to be transitional and dissipate as the reforms bed
down. It is also not clear at this stage how widespread and significant some of these concerns are.
For example, ACFA is also aware that many providers have not changed admission practices and
continue to accept care recipients without an income or means test. Others are using the fee
estimators available on My Aged Care to guide what they charge as an interim fee pending the
means test outcome. However, where providers are requiring completed income or means
assessments ACFA has been advised that the delays in DHS processing are causing some delays
in access to care, including for individuals in hospitals. ACFA understand that both DSS and DHS
are working closely with the sector to understand and resolve DHS processing issues.
7
ACFA will continue to examine these impacts and other access to care issues more closely as more
data on entrants to care becomes available over coming months. A key consideration will be the
extent to which any issues are transitional implementation matters or more systemic issues.
Part 3.
Support for the sector and consumers in transition
Transitional Business Advisory Service (TBAS)
The Government subsidises a free advisory service for aged care providers, with a particular focus
on the impact of the new accommodation payment arrangements applying from 1 July 2014. A
summary of the current usage of the service is below:


From commencement of operations on 3 April 2014 until 31 August 2014, there were 617
Tier 1 queries (basic advice provided over the telephone).
As at 31 August 2014, there were 40 applications for the more detailed Tier 2 services
involving a desk audit of the provider’s position and readiness for the reforms and 18
applications for Tier 3 services providing a more highly detailed examination of their position
and readiness, along with the provision of accompanying support and advice.
The most frequently asked questions (received as Tier 1 queries) will be collated with more general
observations about transitional issues being faced by the sector and published on the Department of
Social Services website, and referenced in the reform implementation updates currently distributed
to providers. This will make the information provided through TBAS available to the sector more
broadly.
Reform Information
Information on the reforms has been updated and made available on both the Department of Social
Services website and the MyAgedCare website, including a fee estimator on
www.myagedcare.gov.au. Consumers and providers can also contact the MyAgedCare call centre
for information and assistance.
There have been some concerns expressed by the sector that some providers were unaware of
certain new requirements around income testing and means testing arrangements. The relevant
Departments have been updating information materials and sending additional communication
materials to providers to address these concerns.
The Department of Human Services has made available a dedicated phone line for providers and
consumers concerned over delays in means test assessments who can seek updates and
expedition of urgent cases.
8
Attachment A
Accommodation payment choices and changes to the bond pool
Table A: by service location, July 2014, per cent
Major cities
Inner regional
Services
Places
RAD/RAC
DAP/DAC
Combination
Outer regional/remote/very
remote
Survey response rate
65%
69%
63%
67%
Choice of accommodation payment
45%
32%
33%
41%
23%
26%
Increase in lump sums held and receivable
0.6%
1.1%
Table B: by service ownership type, July 2014, per cent
Not for profit
For profit
Survey response rate
Services
70%
56%
Places
69%
57%
Choice of accommodation payment
RAD/RAC
38%
48%
DAP/DAC
37%
31%
Combination
25%
20%
Increase in lump sums held and receivable
0.5%
0.9%
75%
72%
35%
42%
23%
0.4%
Government
70%
67%
28%
43%
29%
-0.2%
Table C: by care type*, July 2014, per cent
High care
Mixed Care
Low Care
Survey response rate
Services
65%
68%
63%
Places
64%
67%
64%
Choice of accommodation payment
RAD/RAC
39%
55%
35%
DAP/DAC
38%
21%
32%
Combination
23%
24%
32%
Increase in lump sums held and receivable
0.6%
1.0%
0.0%
*High and low care classifications are based on over 70% of care days being delivered with an ACFI
classification of high or low care.
1
Table D: by number of places, July 2014, per cent
1-49 places
50-99 places
Survey response rate
Services
71%
68%
Places
70%
67%
Choice of accommodation payment
RAD/RAC
34%
44%
DAP/DAC
44%
33%
Combination
22%
22%
Increase in lump sums held and receivable
0.2%
0.0%
100+ places
57%
59%
42%
32%
26%
1.4%
Table E: by provider size, July 2014, per cent
Single home
Providers
Places
RAD/RAC
DAP/DAC
Combination
Two to six homes
Seven or more homes
Survey response rate
66%
64%
73%
67%
64%
66%
Choice of accommodation payment
47%
33%
43%
33%
40%
33%
21%
27%
24%
Increase in lump sums held and receivable
1.7%
1.1%
-0.3%
Table F: by extra service, July 2014, per cent
Extra Service
Services
Places
RAD/RAC
DAP/DAC
Combination
Mixed
Survey response rate
54%
59%
55%
59%
Choice of accommodation payment
79%
38%
10%
28%
11%
35%
Increase in lump sums held and receivable
0.4%
1.4%
2
Non-Extra Service
67%
65%
36%
40%
25%
0.6%