Purpose of the Bill

The purpose of the Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 1) Bill 2020 (the Bill) is to amend the Aged Care Act 1997 (the Act) and the Aged Care (Transitional Provisions) Act 1997 (the Transitional Provisions Act) to change the payment of Australian Government subsidies for home care packages from payment in advance to payment in arrears.

Background

The aged care system supports older people who can no longer live without assistance in their own homes. Care is provided in people’s homes, in the community and in nursing homes by a range of not-for-profit, for-profit and government providers. The Australian Government is the primary funder and regulator of the aged care system.[1]

There are two main programs providing care in people’s homes. The Commonwealth Home Support Programme provides entry-level home help for older people, as well as respite services to relieve carers. For older people who need a greater level of help at home, the Home Care Packages Program offers coordinated packages of care from an approved home care provider. Home care packages assist older people to stay living at home and provide ongoing personal and support services and clinical care. Each package of services is customised to meet the individual’s care needs.[2]

This Bill makes changes to the way that home care package payments are made to approved providers under the Home Care Packages Program.

Home care package subsidy and payment

There are four levels of home care packages ranging from Level 1 (supporting people with basic care needs) to Level 4 (supporting people with high care needs).[3] Annual Australian Government subsidies range from around $8,900 for a Level 1 package to around $51,600 for a Level 4 package.[4]

Clients also contribute to the cost of their home care package. Anyone receiving a home care package can be asked by their provider to pay the basic daily fee (up to $10.75, depending on the package level). Part pensioners and self-funded retirees can also be asked to pay an income-tested care fee (up to $30.86 per day, subject to annual and lifetime caps).[5]

An approved provider can claim the home care package subsidy on behalf of each client receiving government-subsidised home care.[6] Currently, home care package daily payments are calculated by:

• starting with the basic subsidy amount[7]
• adding any primary supplements the person has been assessed as being eligible for (for example, veteran supplement)[8]
• minus any reductions (such as the income-tested care fee paid by some clients)
• adding any other supplements (for example, viability supplement).[9]

The approved provider submits a claim form every month to Services Australia.[10] The payment for a particular month can be made in two parts:

• the first payment is made to the approved provider at the beginning of the month, which is estimated from the previous claimed amount
• a second payment may be made after the lodged claim form for that month has been assessed for any extra payments owing. Overpayments may also be recovered.[11]

Unspent funds

The total funding available to spend as part of a client’s home care package is made up of the Australian Government subsidy plus the fees paid by the client. These funds are used to pay for the care services received by the client, as well as the provider’s package management costs.[12]

If a client’s funding is not spent in full each month, then unspent funds can accrue. These unspent funds are currently held by the provider, but must be returned to the client and the Australian Government (less any exit amount retained by the provider) if the client ceases to receive a home care package.[13] Unspent funds may be accrued intentionally to pay for future care needs, but may also accrue for other reasons such as lack of available care or care not being required:

Unspent funds may accumulate for a variety of reasons, including that consumers wish to save a proportion of their budget for future events; the services that the consumer wants are not available; the consumer is reluctant to allow people into their home; misconceptions that the money not spent under the package belongs to the consumer; or because the consumer does not require all the funds allocated to them.[14]

The Aged Care Financing Authority (ACFA) has noted that unspent funds could be used more effectively elsewhere, such as to meet unmet need for home care packages. ACFA has also noted that unspent funds raise prudential issues as they need to be available if the consumer transfers to another provider or leaves home care.[15]

As at June 2019, the pool of unspent funds was around $750 million in total, or an average of around $7,000 per client.[16]

The current Bill does not change arrangements for unspent funds. However, as part of Phases 2 and 3 of the home care payment administration reforms (outlined below), the Government intends to become the holder of unspent funds. This will require further legislation.

Federal Budget 2019–20

As part of the Federal Budget 2019–20, the Government announced a number of measures to improve access to aged care, including changes to the payment administration for home care packages:

$7.1 million over two years from 2018-19 to improve payment administration arrangements for home care packages to address stakeholder concerns regarding unspent funds and align home care arrangements with other Government programs, such as the National Disability Insurance Scheme. The Government will consult with stakeholders on the implementation of these improved payment administration arrangements. [17]

Consultation on the potential impact of the new payment administration process

ACFA was requested by the Minister for Aged Care and Senior Australians to consider the financial impact of the changes to home care payment arrangements. As part of this process, ACFA sought written feedback in response to a consultation paper in October and November 2019.[18] In addition, StewartBrown chartered accountants were engaged to support ACFA to undertake analysis on the financial impact for approved providers. The ACFA and StewartBrown reports were released in December 2019.[19]

The ACFA report, Consideration of the Financial Impact on Home Care Providers as a Result of Changes in Payment Arrangements, summarises the proposed Government plan to introduce the payment changes as three distinct phases over two timelines. Phase one would commence in June 2020 and Phases two and three would be introduced in April 2021 (see Table 1 below).[20]

Table 1: Government’s proposed implementation timetable for the new home care payment arrangements (December 2019)

ACFA, Consideration of the financial impact on home care providers as a result of changes in payment arrangements, (report prepared for the Department of Health), ACFA, [Canberra], December 2019, p. 7.

Implementation of the above reforms has since been delayed due to the COVID-19 outbreak, as discussed in the ‘Implementation of Phase 1’ section of this Digest.

The report prepared by StewartBrown concludes that for Phase 1, ‘… the HCP [Home Care Package] sector, and individual APs [Approved Providers], should, with few exceptions, be able to sustain their business while the payment arrangements transition to the subsidy reimbursement in arrears from June 2020’.[21]

ACFA made three recommendations for the implementation of Phase 1:

Recommendation 1: Providers who consider they would be financially vulnerable as a result of the change in payment arrangements should be encouraged to apply to the Business Advisory Service.

Recommendation 2: Transitional financial support should be available for providers in thin and difficult markets, such as regional and remote areas, or those providing specialised services to vulnerable consumers. Providers seeking transitional financial support should first utilise the Business Advisory Service.

Recommendation 3: All phases should commence at the start of a financial year for consistent reporting within a financial year and to minimise impacts on providers’ end of year financial reporting requirements.[22]

The Department of Health also undertook consultation on the non-financial impacts with approved providers in late 2019.[23]

Implementation of Phase 1

In February 2020, the Department of Health provided an update to the aged care sector stating that Phase 1 would commence on 1 June 2020. In addition, it informed approved providers that their final advance payment would be received at the beginning of May 2020. Approved providers would be asked to lodge their following claim, providing the same information they currently do, for June after 30 June 2020.[24]

However, the implementation of the home care payment reforms has since been ‘put on hold for at least six months’ due to the COVID-19 outbreak. On 27 March 2020, the Minister for Aged Care and Senior Australians announced:

The implementation of improvements to payment administration arrangements for home care packages to align with other Government programs, such as the National Disability Insurance Scheme, will also be placed on hold.

Minister Colbeck said consultations with the home care sector would help determine when this would recommence.

“In the meantime, the current advance and claim payment cycle with Services Australia will continue,” he said.[25]

Committee consideration

Senate Standing Committee for Selection of Bills

At the time of writing, the Senate Standing Committee for Selection of Bills had deferred consideration of whether to refer the Bill to a committee for inquiry.[26]

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills had no comment on the Bill.[27]

Policy position of non-government parties/independents

The Australian Labor Party supports the Bill, but has expressed some concerns about the payment reforms.

Shadow Minister for Ageing and Seniors Julie Collins said during the second reading debate in the House that ‘Labor do not want to hold up this bill, but we do have some concerns about the bill. We do want it to go through the parliament’.[28] She further noted:

This bill essentially just changes the home-care payment arrangement from advanced to arrears. It is the further changes down the track and, as I said, the possible impact on regional and rural providers that are our concern.[29]

Labor’s concerns about the payment reforms include:

• the tight timeframe originally envisaged for the transition to arrears payments
• potential cash flow issues for providers changing to arrears payments
• the risk to the viability of some providers, especially small providers and those operating in rural and remote areas and
• the potential for increased administration costs, which could lead to reduced service provision for consumers.[30]

Ms Collins also questioned the savings associated with the payment reforms, and how the unspent funds would be used if they were held by the Government. She questioned why the changes were being made in advance of the final report of the Royal Commission into Aged Care Quality and Safety, which is due to be handed down in November 2020.[31]

At the time of writing, no comments by other non-government parties or independents specifically on the Bill had been identified.

Position of major interest groups

Aged care provider peak bodies, Aged & Community Services Australia (ACSA), Leading Age Services Australia (LASA) and Catholic Health Australia (CHA) released their submissions to ACFA’s sector consultation paper in late 2019. The three peak bodies stated that they supported the proposed changes in principle but raised a number of concerns that they identify as needing to be addressed prior to the introduction of the proposed amendments. All three submissions raised concerns with the existing payment system and potential administrative and financial burdens that aged care providers would experience with the implementation of the home care changes. The following summary focuses on comments made in relation to Phase 1 only.

ACSA was supportive of the proposed June 2020 implementation timeline but raised a number of concerns it suggested need to be addressed prior to introduction of the payment in arrears system. ACSA noted concerns over issues experienced with the National Disability Insurance Scheme (NDIS) payment platform and noted that it is more modern and fit-for-purpose than the current aged care system. In addition, ACSA called on the Government to resolve outstanding payment issues prior to transitioning to new arrangements.[32]

LASA stated the implementation timeline allowed insufficient time for aged care providers to plan and implement necessary changes to ensure a smooth transition. LASA also identified concerns with the existing payment system and the ability of the Government payment system to successfully implement the required changes. LASA referred to a member survey undertaken with home care providers that identified concerns with cash flow for each phase of the proposed reforms and the need for expenditure to change systems and processes in response to new arrangements, which might place untenable strain on aged care providers operating in thin markets that have high overheads and low demand (for example, services in rural areas).[33]

CHA raised concerns that the existing issues with the payment system will be further exacerbated by the proposed amendments, noting outstanding problems with the system are somewhat lessened at the moment given payments are received in advance. CHA stated that many home care providers have developed business models based on advance payments. As such, they recommended that an arrears payment system should be flexible and responsive with, for example, providers receiving funds within 48 hours of submitting a claim.[34]

At the time debate on the Bill commenced in the House of Representatives in early March 2020, LASA raised concerns that the aged care sector had insufficient time to implement the required changes for the June 2020 timeline and noted that the sector was still waiting on the Government’s response to the ACFA recommendations to assist providers with the transition.[35]

Both ACSA and LASA welcomed the announcement from Richard Colbeck, Minister for Aged Care and Senior Australians, in late March 2020 postponing the home care amendments. They noted that putting the administrative reforms on hold will allow them to focus on the health of their clients.[36]

Financial implications

As noted above, the Bill implements Phase 1 of the 2019–20 Budget measure to ‘improve payment administration arrangements for home care packages’. The Government allocated $7.1 million over two years to implement this measure, which presumably includes phases 2 and 3 as well.[37] The measure has no other impact on government expenditure.[38]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill promotes the right to an adequate standard of living, the right to health, the rights of equality and non-discrimination and the right of persons with disabilities to choose their care. The Bill does not affect eligibility for home care nor the amount of subsidy payable for home care.[39]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights had no comment on the Bill.[40]

Key issues and provisions

The Australian Government pays a home care subsidy to approved providers for providing care to recipients of home care packages.[41] Home care subsidy is payable to a provider in respect of each payment period (currently a calendar month) during which they provide care to a person as agreed in a home care agreement, and otherwise meet the eligibility criteria set out in section 46-1 of the Act.[42]

Item 1 of Schedule 1 amends section 47-1 of the Act to provide that home care subsidy is not payable in respect of a payment period if the provider has not submitted a claim for that period to the Secretary of the Department of Health (or delegate).

Home care subsidy is currently payable in advance, at such times as the Secretary (or delegate) thinks fit. The Secretary (or delegate) estimates the subsidy that is payable, and then adjusts the amount to account for any previous underpayments or overpayments of subsidy.[43] Home care subsidy is not payable in advance if a claim has not been received for the period two months prior. For example, a subsidy is not payable for March if a claim has not been made for January of the same year, unless the service has only just started receiving home care subsidy.[44]

Items 2 and 4 of Schedule 1 repeal the above arrangements for advance payment of home care subsidy. This will mean that subsidies will be payable in arrears.

For people who have been receiving home care continuously since before 1 July 2014, subsidy arrangements are grandfathered in the Transitional Provisions Act.[45] The Transitional Provisions Act contains very similar provisions for the advance payment of home care subsidy to those described above. [46] Item 5 of Schedule 1 amends the Transitional Provisions Act to provide that a subsidy is not payable if a claim for the period has not been submitted. Items 6 and 8 of Schedule 1 repeal the arrangements for advance payment of home care subsidy in the Transitional Provisions Act.

Concluding comments

The Bill enacts Phase 1 of broader reforms to home care payment arrangements by changing subsidies for home care packages from payment in advance to payment in arrears. Phase 1 was initially due to commence in June 2020, but has been delayed for at least six months due to the COVID-19 outbreak. The Bill has in-principle support from Labor and from aged care provider peak bodies, although they have expressed concerns about potential cash flow and financial viability issues for smaller providers. Provider peak bodies have also highlighted existing issues with the current payments system, and have welcomed the postponement of the reforms to allow them to focus on the health of their clients.