Aged care reforms – March 2013


Aged care reforms

Almost a year after the Government announced its response to the Productivity Commission Report on aged care reform legislation has been introduced into Parliament to effect the proposals.

Five Bills were introduced on 13 March which will impact residents who enter residential aged care from 1 July 2014. Residents in care before this date will continue to be assessed under the old rules. If they move services, they can choose to have the new rules apply or continue to be assessed under the old rules.

The reforms will impact both residential and at-home care, with an increasing focus on providing sustainable and accessible at home services. The number of home care places will increase to almost 100,000 over the next five years with four levels of care. This is in line with many people’s desire to stay in their own homes and the difficulty with bringing new residential facilities to market.

The key areas of reform include:

  • Removal of the distinction between low care and high care.
  • The income-tested daily care fee will change to a means-tested care fee using both assets and income testing. These fees will be capped at the current level of $25,000 (indexed) per year and $60,000 (indexed) over a lifetime. This fee continues to be in addition to the basic daily care fee (which is set at 85% of the basic single age pension).
  • Entry fees for residential care will be calculated as a fully refundable lump sum (with no retention amount) and residents will have 28 days after moving in to decide whether to pay a lump sum, periodic interest payments or a combination.
  • Facilities will have greater ability to offer extra-service packages for an additional fee. These packages can be made available to all residents and residents can choose to opt-in or opt-out of these services.
  • Increased funding to care for dementia patients.
  • Introduce home care as a new care type to replace the current at-home packages (currently the Community Aged Care Packages (CACP) and Extended Aged Care at Home (EACH) packages).
  • Home care recipients will be asked to pay a basic daily fee of up to 17.5% of the single basic age pension and may also have to pay an income-tested fee (based on income only, not assets). The income-tested fee is capped at $5,000 or $10,000 a year (depending on resident’s income) with a lifetime cap of $60,000 (indexed).
  • If an aged care facility becomes insolvent and is unable to repay a bond to a departing resident the government will make the repayment. In this way, the government effectively guarantees repayment of the bonds.

New proposed legislation will allow the government to recover these amounts (plus administration costs) from aged care facilities through the charging of a levy. The levy could be charged over a number of years to minimise the impact on providers but would impose further burdens on the aged care industry.

A new Aged Care Pricing Commissioner will be established to make decisions on pricing issues for entry fees and extra-service fees. An independent review will also be schedule in 2016 with a report due on 30 June 2017 to review the effectiveness of the new rules.

A new Australian Aged Care Quality Agency will be introduced to replace the current Accreditation Agency. This new Quality Agency will be responsible for monitoring the quality of both residential and home care services.

Advice implications

  • Some of these changes aim at creating better flexibility in aged care by removing complications and anomalies with the low care/high care assessment process.
  • There is no reduction in care fees as daily care fee continues to apply and the means-tested care fee is capped at the current maximum limit for income-tested fees. However, residents with very long-term care needs may benefit from the lifetime cap.
  • Some of the current opportunities for clients may no longer be effective for those entering care on or after 1 July 2014 due to the removal of the ability to negotiate higher bonds in exchange for fee reductions. Some income-test reduction strategies may also be less effective. At least the good news is that strategies put in place before 1 July 2014, should continue to be effective as these residents can choose to be assessed under current rules.
  • Hopefully the changes provide greater clarity for residents around the negotiation of entry fees, but the full operation of this system and the impact is yet to be seen.

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