Aged care and the 2021-22 Federal Budget

From

Louise Biti

Aged care featured as a centrepiece of the 2021-22 Federal Budget handed down by Government on 11 May. The Budget outlined a 5-year aged care reform plan, at a cost of $17.7 billion.

This Budget followed the release of the final report from the Royal Commission into Aged Care Quality and Safety earlier this year, which highlighted the need for significant reforms and funding injections to bring aged care standards up to community expectations. Of the 148 recommendations in that report, the Government has:

  • Accepted fully, or in principle, 126 recommendations
  • Suggested alternatives for 4 recommendations
  • Flagged 12 recommendations as requiring further consideration and consultation, and
  • Not accepted 6 recommendations. Interestingly, at this stage, the focus of reforms is on improving the system, with no changes to consumer funding obligations for either home care or residential care. Increased costs are proposed (for now) to be funded in full by the Government. The Government has not taken up the Royal Commission recommendations to increase tax to cover the increased costs.[1]

1. The plan for reform

With an ageing population and baby boomers heading towards care years, the Budget included a major focus on aged care aimed at restoring consumer confidence and increasing the quality of care.

Today over 1.3 million people access aged care services. The number of people over age 65 is expected to double to more than 7 million people by mid-century. This provides a great opportunity (and need) for financial planners to focus on supporting clients with aged care needs and discussions.

Key to successful reform, is the need to create an aged care system that has quality and safety of older Australians at its core. It needs to become a system in which consumers have confidence to provide the care services that they want and need. Quality of living services as well as quality of care are high priorities going forward.

The Government has responded quickly to the Royal Commissioner report, with plans to follow a five-year reform plan covering the five pillars of:

  1. Home care
  2. Residential care services and sustainability
  3. Residential care quality and safety
  4. Workforce
  5. Governance.

The Budget announcements are the first step in this process to reform.[2]

2. Home care

More home care packages

Demand for government-funded home care packages is increasing but the wait for a package to be allocated is long. The Royal Commission highlighted this as a key problem and recommended clearing the waiting list as an urgent priority.

There are currently around 100,000 people on the waiting list, but some of these people have declined support and many others are receiving care at a lower level than approved. Therefore, the true waiting list is possibly smaller.

The Government has announced an additional 80,000 home care packages to be released over the next four years (at a cost of $6.5 billion), with half to be released in 2021/22 and the other half in 2022/23. By June 2023, this will bring the total home care packages to 275,598 – an increase of 160,000 packages since the 2018 Budget.

Proposed rollout: From 1 July 2021

Merging home care programs

It has been an objective of the Government for several years to combine the home care programs, and this commitment has been renewed with a target date of July 2023.

The aim is to combine the Commonwealth Home Support Program (CHSP), Home Care packages and respite services into one program. Further industry consultation is required in relation to design principles, with the objectives to:

  • Improve assessment
  • Modernise funding
  • Increase choice of providers
  • Reduce red tape and administration to minimise administration fees
  • Simplify understanding and access.

Proposed commencement: July 2023[3]

3. Residential care

A key reform for aged care is the need for a funding boost. The government currently spends around $23 billion on aged care, but analysts have been recommending that at least $7 billion further injections were needed as a starting point.

Increase in Basic Daily Fee

More than half of residential care providers are reported to be running operational losses. In particular, the cost of “hotel services” such as food, linen, cleaning and electricity are reportedly more than the basic daily fee which is supposed to cover these services.

The Government announced a $10 increase in the basic daily fee, to be paid by the Government as an additional supplement to providers. To receive this amount, care providers will need to meet reporting requirements on daily living services.

Proposed commencement: 1 July 2021[4]

New care funding model

The Government has been working for several years to develop a new funding model to determine the cost of care for aged care residents. This has been based on findings from a University of Wollongong report released in 2017.

The current Aged Care Funding Instrument (ACFI) model will be replaced by the Australian National Aged Care Classification (AN-ACC) model from 1 October 2022.

Currently the ACFI assessment is undertaken by the care provider staff after the person moves into care. The assessment process will move to independent assessors to free up the time of care staff as well as to create a more consistent approach. The assessors will be the same team that conduct the entry assessments for residents (replacing the current RAS and ACAT assessments).

Proposed commencement: 1 October 2022.[5]

Mandating personal care times

The new Aged Care Act will mandate minimum personal care times for residents in residential care. Providers will need to ensure that each resident is provided with an average of 200 minutes of care time per day, including an average of 40 minutes from a Registered Nurse.

Residential care services will also need to have a registered nurse on site for a minimum of 16 hours per day.

The cost of this extra time will be accounted for in the new AN-ACC funding model that sets the level of government subsidies and the client’s cost of care.

Care providers will have the following reporting requirements:

  • From July 2021 – annual reporting to the Department of Health will need to report on overall staffing minutes
  • From July 2022 – a monthly care statement will need to be provided to residents and their families and care staffing minutes will need to be published on MyAgedCare
  • From December 2022 – data will be used for recording a staffing star rating
  • From October 2023 – the mandated minutes per day must be provided.

Proposed commencement: October 2023

Refundable accommodation deposits (RADs)

Some providers experienced higher than normal Refundable Accommodation Deposit (RAD) outflows since the start of the COVID outbreak. The Government has proposed a zerointerest loan program to help providers with limited liquidity to meet their refund obligations.

From 1 July 2024, new design standards will be implemented to encourage more innovation in the design of residential care premises, including encouraging smaller group homes and more dementia-friendly services.

The Government has also indicated an intention to consult with the aged care sector on the use of RADs to investigate alternative ways to raise capital for property investment and development. This may develop options to encourage providers to move away from a reliance on RADs.[6]

4. Workforce

One of the greatest challenges for aged care is workforce. By 2050, the aged care workforce is expected to grow to over 1 million workers. Over the next two years, an additional 3,600 registered nurses and 34,200 personal care workers will need to be attracted into the aged care workforce.

Measures announced in the Budget aim to address training, recruitment and pay issues for care workers, with measures including:

  • Bonuses over a two-year period to eligible care workers
  • Scholarships to attract new workers
  • Increased training programs (including in dementia support), and
  • Recruitment programs.

The Government also proposed establishing a single register of aged care workers to help aged care providers with employing appropriate and qualified workers.

5. Governance and aged care system

Measures announced in the Budget aim to create more transparent and independent oversight of aged care, in line with Royal Commission recommendations.

New Aged Care Act

The existing Aged Care Act was implemented in 1997 and focussed on rules for funding aged care. A new Act was recommended by the Royal Commission and the Government has committed to rewriting the Act, with focus on person-centred care, governance and quality.

Proposed commencement: mid-2023

New Governance and advisory structures

New governance standards will apply from 2022 to lift the leadership and skills of aged care boards. Quality standards will also be reviewed with a focus on governance, dementia needs and nutrition.

The following governance and advisory structures will be established:

  • National Aged Care Advisory Council – to provide guidance to government on a range of aged care issues
  • Council of Elders – giving older people a direct voice to government
  • Inspector General of Aged Care – an independent oversight body.

Decentralisation of some Department of Health staff will be undertaken to get more localised understanding and support to people accessing care services.

Proposed commencement: mid-2021

The independent Hospital Pricing Authority will be expanded to become the Hospital and Aged Care Pricing Authority with responsibility for reviewing the funding levels for aged care and the conduct of costing studies.

This will feed through to the level of Government subsidies and aged care fees.

The Aged Care Quality and Safety Commission will be boosted to strengthen its capacity to regulate and review the aged care sector, including home care.

Proposed commencement: 1 July 2023

6. Assessment and access to care

Information services

The aged care system is confusing and difficult to navigate. In a previous Budget, the Government funded an Aged Care Navigator system to help fund information services to help consumers with basic information.

The complexity continues to be a problem, as was evidenced in the Royal Commission findings. The Government announced funding to provide the following face-to-face services for people accessing aged care services who need:

  • Minor help – located in 325 Services Australia centres to provide basic information and help with accessing online services
  • Extra help – Aged Care Specialist officers in 70 Services Australia centres to provide information and help with connections to local services, financial information services, social workers and advocacy support
  • Specialist help (vulnerable persons) – 500 Community Care Finders.

Proposed commencement: 2023

Assessment and access to care

Under current rules, aged care providers need to apply for bed licenses to create subsidised aged care places in residential care. Application is made through the Aged Care Approval Rounds which make available new or reassigned bed licenses.

In an attempt to increase competition and better reflect consumer demands, this application process will be disbanded from 1 July 2024. Instead, places will be attached to the client when that person receives approval for residential care.

A single assessment process will be established from October 2022 to replace the current:

  • Regional Assessment Service (RAS) for CHSP approvals
  • Aged Care Assessment Team/Service (ACAT/ACAS) for home care package and residential care approvals (including respite care)
  • Care workers who conduct the ACFI funding assessments (which is to be replaced by AN-ACC).

Proposed commencement: October 2022

Greater support will be provided to people diagnosed with dementia to help them access services required to maintain health, wellbeing and independence. Primary Health Networks will develop local dementia care pathways to support General Practitioners (GPs) to refer clients to support services. GPs will also be provided with additional dementia training.

The National Dementia Support Program and the National Dementia Helpline will both receive boosts to help connect people living with dementia with services and access supports such as counselling, education and support groups. This includes support for the carers.

Star-rating systems

Aged care star ratings will be introduced to help clients assess and evaluate aged care providers to make more informed choices. The Government will develop an Aged Care Mandatory Quality Indicator program and the star ratings will be published on MyAgedCare.

Proposed commencement: end 2022

7. Pension Loan Scheme

Many retirees are asset-rich and income-poor, particularly with rises in house values.

The Pension Loan Scheme is an equity release loan offered by the Government which helps retirees turn equity in their home into a regular income stream. This income could be used to meet living expenses or pay for services such as home care.

The current scheme allows part-pensioners and some self-funded retirees to borrow regular fortnightly payments up to 150% of the maximum pension entitlement (less the pension amounts they receive). For example, a single person who receives a part-age pension of $400 per fortnight could borrow up to $1,029 per fortnight ($26,755 per year) to bring their payments up to 150% of the maximum single age pension.

The scheme is proposed to be extended, so that from 1 July 2022, retirees will have the option of accessing up to two lump sum advances (within any 12-month period). These lump sum advances will be capped at 50% of the maximum annual rate of age pension and count towards the 150% overall cap.

Based on current rates, this would allow a single person to receive lump sum payments up to $12,380 per year and $18,670 combined for a couple.

The Government also introduced a ‘no negative equity guarantee’ to ensure the loan balance repayable cannot exceed the market value of the secured property.

Proposed commencement: 1 July 2022[7]

By Louise Biti, Director

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[1] The measures included in this paper are currently proposals as announced in the Federal Budget. The analysis and interpretation is based on information in the Budget release and may be limited in available details. Further information may be needed to clarify the rules and impacts. Changes may also be made as the measures progress through Parliament.
[2] Client conversations: Financial advisers should start to introduce frailty planning and aged care into conversations with retiree clients, and accumulators who have older parents.
[3] Client conversations: Home care can help clients who need support, to remain at home instead of moving into residential care, but it can also be a preventative measure to help reduce declining independence. The opportunity exists for financial advisers to proactively raise aged care conversations with clients and help clients with information to navigate accessing the appropriate levels of care. Cashflow planning should include an assessment of care costs, now and in the future. This might also be a conversation to have with younger clients who are worried about ageing parents.
[4] Client conversations: The increase in this fee will not impact consumers at this stage as it is proposed to be fully funded by the Government. It is possible that future Budgets may see the cost shift back to consumers. In the 2017 Five Year Legislated Review of Aged Care, a recommendation was made to allow aged care providers to set their own basic daily fee to cover the cost of different standards of living. This has not been adopted by Government and was not taken up in the Royal Commission report.
[5] Client conversations: This is unlikely to have a direct impact on the fees paid by most clients. However, as it aims to match the funding paid to providers more closely to the needs of residents, it may mean that providers are able to improve care standards and quality of services provided. All residents will be reassessed and this may see their underlying cost of care increase or decrease. For most clients this will not impact the contribution they make towards the cost through a means-tested fee under current rules, but it may impact cashflow timing for clients who are means non-disclosed or who pay their full cost of care (until annual cap is reached) if their cost of care increases. The annual and lifetime caps still apply.
[6] Client conversations: The Royal Commission report included a recommendation to cease using RADs, with all clients required to pay accommodation costs as a daily fee. This has not yet been adopted by Government, due to a desire to consult more widely on this measure. The removal of RADs would minimise the funding choices for clients and may disadvantage clients who choose to sell their homes.
[7] Client conversations: The ability to access lump sums (rather than just fortnightly income payments) may help clients to fund lump sum needs such as home modifications. This may help more clients remain safely in the home with home care support.
Disclaimer: The information contained in this article is based on the understanding Aged Care Steps Pty Ltd has of the relevant Australian legislation and Federal Budget proposals as at the date shown in this publication. The information contained in this publication is of a general nature only and is intended for use by financial advisers and other licensed professionals only. It must not be handed to clients for their keeping nor can any copies of sections of this publication be given to clients. Aged Care Steps Pty Ltd ABN 42 156 656 843 AFSL 486723.

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