Update on aged care reforms
Authors: Tal Williams, Partner & Dwana Walsh, Solicitor
26 June 2012
In April 2012, the Government introduced a $3.7 billion aged care reform package, “Living Longer, Living Better”. The reforms are introduced over 5 years in response to the Australian Government’s Productivity Commission Inquiry Report, “Caring for Older Australians”, released on 28 June 2011 . The package represents a graduated 10-year plan to reshape aged care, including initiatives to enhance choice by being consumer-directed, improving access to person-centred services, increasing affordability of services and providing incentives to facilitate the efficient use of aged care resources.
The reforms address a number of key issues in order to restructure the aged care system and to accommodate Australia’s ageing population. Importantly, the reforms streamline aged care financing arrangements for residential care to give aged care providers more certainty and to enable more aged care homes to be built. The reforms are also consumer focused and introduce a range of consumer protections, aiming not only to improve the viability and sustainability of the aged care sector, but to also attract new investment and allow the industry to improve and reform.
From 1 July 2012, the Government will deliver a number of reforms. Here are just some of the initiatives:
• The maximum level of the Government accommodation supplement for aged care residents will be increased from $32.58 to
$52.84 to recognise the true cost of providing aged care accommodation.
• Residents in aged care homes will be provided with more consumer protection and choice by having the option of paying for their
accommodation through a fully refundable lump sum or a rental style periodic payment, or a combination of the two. This will
include the removal of the outdated distinction between high and low level care, following a review of the Schedule of Specified
Care and Services. The charging of retention amounts on accommodation bonds will also be abolished. Residents will also be
granted more security by virtue of a “cooling off period”, allowing them to delay their decision of how they will pay for their
accommodation until they enter care and are protected by the security of tenure provisions.
• Means testing arrangements for Australians entering residential care will also operate to ensure a consistent fees policy by
combining the current income and asset tests. This will prevent residents with a poor income and high assets from paying for all
their accommodation but not care and those residents who are asset-poor and income-rich from paying for their care but not
accommodation. A lifetime cap of $60,000 on care fees will also ensure that no person will pay more than this amount during their
• The Aged Care Funding Instrument will be refined such that the level of care being offered by aged care providers is better
matched to the funding claimed by providers. It will be applied more easily by independent assessors and outside residential
settings, to determine funding levels for residential and home care packages. This will give consumers greater flexibility and
choice as to how they spend their subsidy and is a move towards entitlements being attached to consumers rather than
• The Better Health Care Connections measure will promote the development of partnerships across health and aged care sectors.
Initiatives will be introduced to encourage aged care providers to develop new models of service with public and private health care
providers and medical insurers. The intention is to remove the current barriers to short term and complex health care posed by
regulatory road blocks and lack of funding.
• A $75.3 million national Commonwealth Home Support Program will also be introduced to assist older Australians to remain in
their homes, which will provide a range of improved support services for older Australians in their home.
• The operational home care packages will be increased from 40,000 to 100,000. This will include the Consumer Directed Care in
Home Care packages, placing the individual at the centre of care decisions.
• A new means care income testing fee on top of the current basic fee will apply for some care recipients, which will require some
care recipients to contribute more to the cost of their care but ensuring those who cannot afford to contribute will be protected.
• A new Aged Care Reform Implementation Council comprised of industry, consumer and workforce stakeholders and experts in
the industry, will drive and further develop the implementation of the aged care reforms.
• A new Aged Care Financing Authority will provide independence and transparency by providing advice on pricing and financing,
while also representing taxpayers, aged care providers, consumers and aged care workers.
From a legal point of view, the regulation of the industry and the plethora of compliance issues is already a major impost on suppliers. While welcoming change in the sector the government will need to be careful to ensure that these reform initiatives (that seem to be designed to encourage innovation and competition) do not just add to the obligations on an already overregulated system. This overregulation of supply seems to be an issue that has not yet been addressed. Suppliers need freedom to be innovative if they are to meet the ever changing needs of the community. While the reforms do seem to be a step in the right direction, they fall well short of some of the more pertinent recommendations from the Productivity Commission.
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