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) first monthly report on the impacts of the 1 July 2014 financing reforms.
At this early stage there is not sufficient comprehensive data available from which to draw conclusions or clear trends. Reflecting this, the report focuses on:

Setting the context for the reporting;

Outlining ACFA’s approach to data collection and the more detailed reporting which will commence in our August report and build up over time;

Noting the very preliminary feedback received by ACFA from the sector during July.
ACFA intends to take a flexible response in undertaking its monitoring role. As ACFA monitors the reforms it will also consider if it needs to supplement or adjust its data collection, monitoring and reporting in any areas to ensure it is able to meet its reporting remit to Government.
ACFA ’s 31 July Report is attached.
Yours sincerely
(Authorised for electronic transmission)
Lynda O’Grady
Chairman
6 August 2014

This report is broken into 3 parts:

Background and context
 ACFA’s approach to data collection

Report on impacts on the sector
1. Background and context
There are 2 key parts to the advice requested from ACFA in monitoring the impacts of the reforms:

Advice on the impact of the accommodation payment changes on providers and residents.

Advice on the impact of the changes to means testing arrangements in residential and home care, including any impacts on access to care.
Accommodation Payments
The reforms provide consumers with the choice of how they pay for their accommodation.
They can pay either as a lump sum Refundable Accommodation Deposit (RAD), periodic
Daily Accommodation Payment (DAP) or combination of both. These choices will impact on the form of the accommodation payments received by providers and hence on their revenue, balance sheets and general financing.
The sector has expressed some concerns that any significant shift away from lump sums towards daily payments may be challenging, in particular for two types of providers. Firstly, those providers who, prior to 1 July 2014 received the majority of the accommodation payments in the form of lump sum accommodation bonds, and secondly for providers who may not benefit as significantly from the reform allowing lump sum accommodation payments to be made in ‘high care’ places, which will provide a potential increase in lump sum payments in that area.
To monitor the impact of the changes ACFA will be collecting from providers on a voluntary basis, commencing in August 2014, information on:

the numbers of bonds held and their value at 30 June 2014;

the numbers of bonds/RADs held and their value at the end of each subsequent month;

the numbers of RAD, DAP and combination payment options chosen by residents each month.
This will allow ACFA to report on the overall trends in lump sum accommodation payment holdings. Information will be collected at a facility level to enable any variations in trends across geographical areas and service provider type to be identified.
ACFA will also engage with the sector, including individual providers, peak bodies and other stakeholders in the sector, to supplement this data collection with industry feedback.

It will take some time for the full impacts of the reforms to be measurable and for their impacts to be felt.
The choice for residents to pay for their accommodation only applies to new residents and so the full impact of those choices on providers will take some time to build up, noting that:

of a total population of residents in aged care of approximately 180,000, there were approximately 67,000 residents who had lodged bonds with a total value of $14.3 billion as at 30 June 2013;

based on an analysis of length of stay data 1 (noting bonds are only currently payable in
‘low care’ or extra service) it could reasonably be expected that a quarter of residents who have paid a bond at 30 June 2014 would have left care after 12 months and a further one third would have left care over the following two years, leaving approximately half those residents still potentially in care in 3 years time; and

approximately 5,000 new residents on average enter residential care in any month.
Notwithstanding this, the Authority expects to be able to comment in coming months on indicative early trends on accommodation payments choices and their impacts on providers.
Impact of changes to mean testing
It will take some time for the full impacts of the reforms on access to care to be measurable and for their impacts to be felt as the reforms only apply to new care recipients in both home care and residential care. As noted approximately 5,000 new residents enter residential care in a month on a base of approximately 180,000 residents and in home care there are approximately 2,500 new care recipients a month on a base of approximately 60,000 home care package recipients.
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 on trends in 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.
2. ACFA’s approach to data collection
1 While the average length of stay for current ‘low care’ residents is approximately 3.5 years and ‘high care’ residents is approximately 2.5 years many residents stay for longer periods. If the 30 June 2013 bond data applied at 30 June 2014, then of the 67,000 residents who had lodged bonds it could reasonably be expected that:
 a quarter of those residents would have left care after 12 months – ie approximately 17,000 or 1400 per month;
 a further one third would have left care over the following two years – ie approximately a further 20,000 or 840 per month; and
 leaving around 30,000 still in place after 3 years.

The Authority has worked with sector representatives to develop a set of data on accommodation payments that providers can make available to ACFA to inform its work without imposing significant reporting burdens on the sector. Providers are being asked to voluntarily complete a survey form which collects data on lump sum amounts held by the provider, and the associated receivables, as well as the number of residents choosing to pay by RAD, DAP or a combination payment (Attachment A). Analysis of the changing lump sum balance held will give ACFA insight into the impact the new accommodation payment arrangements are having on providers. Providers will provide this information to a third party engaged on behalf of ACFA to collect and collate the information. The information will be able to be provided via a web portal to streamline reporting. The first report will be due in mid August. Collection of this information is critical to the Authority being able to report on a timely basis to Government and the sector on the reform impacts.
ACFA will also have access to departmental administrative information as it is reported and becomes available.
3. Report on July 2014
Early observations
In the absence, at this stage, of a reliable data set for July, ACFA engaged with key sector representatives and a small number of providers to determine if there were any early indications of trends in accommodation payment choices.
It was noted that at this stage the 28 day period for consumers to make choices would not have passed and that the sample size would be very small. ACFA did, however, take away from these discussions that early indications are that consumers are choosing a range of accommodation payment options, including payment of RADs, DAPs and combination options, though it is too early to determine the likely longer term split between these options.
In relation to access to care, ACFA heard of some cases where there were concerns about possible delays in access to care while providers waited for consumer means test assessments to be arranged. However, it is not clear that these issues apply universally across the sector and other providers and stakeholders have indicated no changes to admission practices and ‘business as usual’. ACFA notes that these concerns may be largely transitional as providers, consumers and other stakeholders adapt to the new system.
While feedback provided to ACFA does not indicate widespread serious concerns with the reforms to date this is in the context of the short time since 1 July and the limited information currently available and will need to be monitored as more data becomes available and further ongoing feedback is received. A particular focus will need to be on the extent to which any issues are transitional or have longer term implications and the extent to which impacts are varying across the sector.
Support for the sector in transition
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 current usage of the service is below:


From commencement of operations on 3 April 2014 until 30 June 2014, some
305 requests for transitional advisory services were received from 170 providers.

There have been 36 applications for the more detailed Tier 2 services involving a desk audit of the provider’s position and readiness for the reforms and 17 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.
Information on the reforms has also 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. Some concerns have been expressed to ACFA that delays in finalising legislation and communication materials has made implementation challenging. The sector itself has also been prominent in educating providers on the reforms.

Purpose of this form
Use this form to advise the Aged Care Financing Authority (ACFA) of the total number and amount of accommodation bonds and entry contributions held by the residential aged care facility as at 30 June 2014.
This information will assist ACFA in reporting to Government on the potential impact on providers of the aged care reforms commencing 1 July 2014.
An online version of the form can be completed at: https://web-address-example.gov.au
RACS ID:
RACS Name:
Contact Person Name:
Contact Phone:
Contact E-mail:
Non Extra Service Information on Bond Holdings
Number of accommodation bonds and entry contributions held
Number
Extra Service
Value of accommodation bonds and entry contributions held
$
Value of accommodation bonds and entry contributions receivable
$
*See over for Definition of Terms
Number
$
$

Returning your form
This would be a one-off report submitted by 14 August 2014. Submit the completed form via one of the methods below:
E-mail email@address
Post
Postal Address
Fax
Fax Number
Definitions
Accommodation Bonds
Accommodation bond, in relation to a person, means an amount of money that does not accrue daily and is paid or payable by the person for the person’s entry to a residential care service or flexible care service through which care is, or is to be, provided by the residential care service, and in respect of which the approved provider holds an allocation of places.
(as per the Aged Care Act 1997)
Entry contribution
In relation to a care recipient, means any payment, made before 1 October 1997, of money or other valuable consideration required by an operator to be given or loaned in return for, or in contemplation of, entry of the care recipient to a hostel
(within the meaning of the Aged or Disabled Persons Care Act 1954).
Number of accommodation bonds and entry contributions held
The count of accommodation bonds and entry contributions held on 30 June 2014.
Value of accommodation bonds and entry contributions held
The aggregate amount, in dollars, of accommodation bonds and entry contributions held on 30 June 2014.
Value of accommodation bonds and entry contributions receivable
The aggregate amount of accommodation bonds and entry contributions agreed by the residents for payment but not yet paid at 30 June 2014.

Purpose of this form
Use this form each month to advise the Aged Care Financing Authority (ACFA) of the total number and amount of:
 Accommodation bonds and entry contributions held by the residential aged care facility on behalf of pre
1 July 2014 residents; and

Refundable accommodation deposits and refundable accommodation contributions held by the residential aged care facility on behalf of post 1 July 2014 residents.
This information will assist ACFA in reporting to Government on the potential impact on providers of the aged care reforms commencing 1 July 2014.
An online version of the form can be completed at: https://web-address-example.gov.au
RACS ID:
RACS Name:
Contact Person Name:
Contact Phone:
Contact E-mail:
Accommodation Bonds: for people entering care pre 1 July 2014
Extra Service Non Extra Service
Number of accommodation bonds and entry contributions held
Number Number
Value of accommodation bonds and entry contributions held
$ $
Value of accommodation bonds and entry contributions receivable
$
$
$

Choice of Refundable Accommodation Deposit (RAD)/ Daily Accommodation Payment (DAP): for people entering care from 1 July 2014
Number of residents who made a choice to pay by RAD/RAC during the month
Number
Number of residents who made a choice to pay by DAP/DAC during the month
Number
Number of residents who made a choice to pay by combination during the month
N n
N
Refundable Accommodation Deposit (RAD)/ Refundable Accommodation Contribution (RAC): for people entering care from 1 July 2014
Extra Service Non Extra Service
Number of RADs and RACs held
Value of RADs and RACs held
Number
$
Number
$
Value of RADs and RACs receivable $ $
*See next page for Definition of Terms
Returning your form
This form is to be submitted by the 14 th day after the end of each month. Submit the completed form via one of the methods below:
E-mail email@address
Post
Postal Address
Fax
Fax Number

Definitions
Accommodation Bonds
Accommodation bond, in relation to a person, means an amount of money that does not accrue daily and is paid or payable by the person for the person’s entry to a residential care service or flexible care service through which care is, or is to be, provided by the residential care service, and in respect of which the approved provider holds an allocation of places.
(as per the Aged Care Act 1997)
Entry contribution
In relation to a care recipient, means any payment, made before 1 October 1997, of money or other valuable consideration required by an operator to be given or loaned in return for, or in contemplation of, entry of the care recipient to a hostel
(within the meaning of the Aged or Disabled Persons Care Act 1954).
Number of accommodation bonds and entry contributions held
The count of accommodation bonds and entry contributions held at end of each month.
Value of accommodation bonds and entry contributions held
The aggregate amount, in dollars, of accommodation bonds and entry contributions held at end of each month.
Value of accommodation bonds and entry contributions receivable
The aggregate amount of accommodation bonds and entry contributions agreed by the residents for payment but not yet paid at end of each month.
Refundable Accommodation Deposit (RAD)
RAD means accommodation payment that:
(a) does not accrue daily; and
(b) is paid as a lump sum.
Refundable Accommodation Contribution (RAC)
RAC means accommodation contribution that:
(a)
(b) does not accrue daily; and is paid as a lump sum.
Daily Accommodation Payment (DAP)
DAP means accommodation payment that:
(a) accrues daily;
(b)
(c) is paid on a regular basis; and is not refundable.
Daily Accommodation Contribution (DAC)
DAC means accommodation contribution that:
(a) accrues daily;
(b)
(c) is paid on a regular basis; and is not refundable.
Number of RADs and RACs currently held
The count of RADs and RACs held at end of each month.
Value of RADs and RACs held
The aggregate amount, in dollars, of RADS and RACs held at end of each month.
Value of RADs and RACs receivable
The aggregate amount of RADs and RACs agreed by the residents for payment but not yet paid at end of each month.