Purpose of the Bill

The purpose of the Aged Care Legislation Amendment Bill 2024 (the Bill) is to amend the Aged Care Act 1997 and the Aged Care (Transitional Provisions) Act 1997 (Transitional Provisions Act) to:

• allow the Secretary of the Department of Health and Aged Care (DoHAC) to conduct residential care data assurance reviews to ensure the completeness, accuracy and reliability of aged care data provided to the Secretary by approved providers
• allow for income and asset determinations made by the Secretary of DoHAC to be varied or revoked by written instrument with a view to addressing the issue of aged care fees being set on outdated income and asset information
• require aged care providers to give a statement setting out the refundable deposit balance held by the provider to assist in ensuring residential care fees are being set correctly
• provide that the higher maximum amount of accommodation payment approved by the Independent Health and Aged Care Pricing Authority applies in relation to an aged care resident who voluntarily moves to another room/part of a room within a service which attracts the amount.

Background

Section 83 of the Constitution

A key purpose of the Bill is to respond to potential breaches of section 83 of the Constitution, which have arisen in cases where the DoHAC has overpaid residential care subsidies as a result of changes in recipients’ circumstances (p. 78).

Section 81 of the Constitution creates the Consolidated Revenue Fund and requires all Commonwealth receipts to be paid into it. Section 83 of the Constitution requires all payments out of the Consolidated Revenue Fund to be supported by a legal appropriation.

As explained by the Australian National Audit Office (ANAO) in its 2018 report on the Management of Special Appropriations:

Appropriations ‘segregate’ or ‘earmark’ money from within the Consolidated Revenue Fund for the government to use, and allow the Parliament to exercise a level of control over government by attaching conditions according to which funds must be used.

A breach of section 83 may occur where spending does not align with the relevant appropriation (including any conditions):

4.3 Once a breach of section 83 has occurred, it cannot be reversed by legislation or through recovering an erroneous payment. However, relevant provisions in legislation could, for example, authorise payments even on the basis of incorrect or incomplete information submitted by recipients, so that overpayments will not be a breach of section 83. This depends on the individual Act. Having good internal systems to identify and recover such overpayments will otherwise ensure that they remain a low financial risk. (ANAO, 2018)

Identification of potential section 83 breaches

The ANAO delivered an audit report in December 2023 on the financial statements of government entities for the period ending June 2023. The relevant section of the report (Part 4.9, pp. 240 to 253) highlighted potential breaches of section 83 of the Constitution made by DoHAC.

The ANAO report observed that the potential section 83 breaches include residential aged care subsidies, as well as other payments not included in aged care:

4.9.23 The financial statements for DoHAC for the year ended 30 June 2023 make reference in the Overview section to potential breaches of section 83 of the Constitution in relation to:

• payments of the residential aged care subsidies in accordance with the Aged Care Act 1997

4.9.24 DoHAC has included in its Annual Report a statement of the significant issues reported to the Minister for Health and Aged Care during the reporting period that relate to the significant noncompliance with the finance law (p. 246).

The ANAO report recommended that DoHAC provide the ANAO with access to records and information for the purposes of audit and disclose to the ANAO all known instances of potential and actual breaches of section 83 of the Constitution (p. 247).

The ANAO also recommended that DoHAC take a range of operational and legislative actions to prevent further breaches of section 83:

4.9.30 In relation to legislative requirements, DoHAC should:

• conduct a risk assessment of programs in relation to compliance with legislative requirements, including section 83 breaches;
• for those programs identified at higher risk of non-compliance with legislative requirements, conduct further work to ensure payments to recipients are compliant;
• improve the system of control to identify, assess and report on non-compliance with legislative requirements including reporting of significant breaches to the Minister in accordance with Resource Management Guide 214 Notification of significant noncompliance with the finance law; and
• identify and develop further legislative changes to address situations where amendment to relevant legislation is the most appropriate response to a particular circumstance (p. 247). [emphasis added]

The DoHAC 2022–23 Annual Report provides further detail on the nature of the breaches in relation to the Aged Care Act:

During 2022–23, it was identified that the quarterly review process adopted by Services Australia to retrospectively validate recipients’ maximum entitlement for aged care subsidies paid in arrears is inconsistent with the relevant provisions of the Aged Care Act 1997. Section 83 breaches arise in cases where monthly subsidy payments are made in excess of maximum entitlement due to changes in recipients’ circumstances during the preceding quarter. At present, there are no quantified overpayments of aged care subsidy to approved providers. The Department is working with Services Australia to quantify the value of actual section 83 breaches incurred and consider mitigation strategies. [emphasis added] (p. 182)

Departmental Response

DoHAC issued a response to the ANAO report in March 2024, identifying improvement actions to address the issue of breaches of section 83. Actions include defining the roles and responsibilities of each agency in relation to the aged care Home Care Packages Program and the Commonwealth Home Support Program.  

In its submission to the Joint Committee of Public Accounts and Audit's inquiry into Commonwealth Financial Statements 2022–23, the Department stated:

The Department is reviewing appropriate corrective actions in relation to compliance with legislative requirements, including section 83 of the Constitution, and identifying and developing legislative or program changes to prevent breaches of section 83. [emphasis added] 

The transcript of the 24 April 2024 public hearing of the Joint Committee of Public Accounts and Audit, contains further information about the administrative changes that have been put in place to prevent breaches of section 83. A representative for DoHAC stated:

We've updated our accountable authority instructions to specifically instruct officers to advise the legal division when they become aware that advice has been sought or received on our behalf. We've got a financial assurance census process that we run through our SES band 1 at the soft-close process at the end of March each year and separately with our first-assistant-secretary cohort at year's end. That census goes across the breadth of financial governance and control, but one of the questions it specifically asks is in relation to their adherence to that new accountable authority instruction but also in relation to their awareness and how they've dealt with any section 83 or potential section 83 issues. (p. 2).

Aged care means assessment and payments

The reliable and accurate administration of aged care means assessment and payments is a key focus of the Bill.

Individuals entering residential aged care must have a means assessment to determine if they qualify for Australian Government support payments for their accommodation expenses. The means assessment considers a resident’s assets and income levels, and determines the level of Government subsidies and supplements they qualify for. The subsidies and supplements are then paid directly to the resident’s aged care provider on their behalf. A refundable deposit is a lump sum amount that may be paid for entry to residential aged care homes. The refundable deposits can be paid in full as a Refundable accommodation deposit (RAD) or in part as a Refundable Accommodation Contribution (RAC).

If an accommodation deposit is paid in full, as a RAD, the resident does not have to pay any daily accommodation payments. If the accommodation deposit is paid in part, as a RAC, then the resident will continue to make a proportionate daily accommodation payment in the form of a Daily accommodation contribution (DAC).

Differential treatment of principal house

Relevant to this Bill is that in some instances the aged care means assessment treats the principal house as a different sort of asset.

The principal house may be classed as an exempt asset for the purposes of means assessment.

However, this is not the only relevant way that the principal house may be treated differently in the aged care means assessment.

The former principal house may also be subject the home exemption cap. The home exemption cap is the maximum assessable value that will apply to a former principal home, regardless of its actual value. If the former principal house is valued at less than the home exemption cap, then the lower amount will be taken as the assessable asset amount. Any amount above the home exemption cap will be excluded from the resident’s assessable assets.

In contrast, the entirely of the RAD or RAC continues to be considered an asset under the aged care means assessment.

If a person entering residential aged care sells the principal house and makes an accommodation payment (RAD or RAC) from this sale, and the care recipient’s means assessment is not updated to recognise this payment, the resident may be incorrectly assessed as having lower assets than they actually do, and incorrect payments of aged care subsidies and supplements may ensue. The provisions of the Bill aim to ensure that such changes in circumstance are reviewed and updated in the payment calculations.

Timing with the Aged Care Bill 2024

There are two Bills relating to aged care currently before the Parliament:

1. the Aged Care Legislation Amendment Bill 2024, which is the subject of this Bills Digest, and
2. the Aged Care Bill 2024, which will create a new Aged Care Act 2024 (for further information, see the Bills Digest).

If the Aged Care Bill 2024 is enacted it will replace the primary legislation that this Bill (the Aged Care Legislation Amendment Bill 2024) aims to amend.

The Aged Care Bill 2024 is due to commence on 1 July 2025 or may commence earlier by way of proclamation. At the time of writing, the Aged Care Bill 2024 is currently before the House of Representatives. The Bill has been reported on by the Parliamentary Joint Committee on Human Rights (pp. 19-65) and the Senate Standing Committee for the Scrutiny of Bills (pp. 2-31), and has been referred to the Senate Community Affairs Legislation Committee for inquiry, with a report due 31 October 2024.

This means that this Bill may be passed into legislation before the Aged Care Bill 2024, providing a legislative basis to mitigate future breaches of section 83 in the interim months before the new Act is in place. The Aged Care Bill 2024 includes provisions similar to:

• the proposed income and asset determination powers in Part 1 of Schedule 2 of this Bill (see Subdivisions B and C, Division 2, Part 5 of Chapter 4 of the Aged Care Bill)
• the proposed requirements regarding provision of information about refundable deposit balances in Schedule 3 of this Bill (see proposed subclause 290(9) of the Aged Care Bill) and
• the proposed residential care data assurance review powers (see the broad powers for the Systems Governor to conduct assurance activities in Part 12 of Chapter 6 of the Aged Care Bill).

Financial implications

The Explanatory Memorandum states that the overall financial impact on the Consolidated Revenue Fund is difficult to predict:

While it is feasible that there may be a financial impact, an estimate of the overall financial impact on the Consolidated Revenue Fund is harder to predict. (p. 2)

Treatment of the principal house as an asset

The differential treatment of a care recipient's former principal home for the purposes of the aged care means assessment relative to the treatment of the RAD or RAC payment can change an aged care user’s means assessment outcome.

The Explanatory Memorandum (p. 2) explains that the principal house may be subject to a home exemption cap at the first asset threshold, while the complete RAD or RAC lump sum is fully included in a resident’s means assessment.

However it should be noted that the Explanatory Memorandum lists the first asset threshold according to an out-of-date figure of $197,735.20 as at 20 September 2023 (p. 2). The updated figure for the first asset threshold is $206,039.20 (as at 20 September 2024).

Implications for the Consolidated Revenue Fund

There are some scenarios in which an individual’s updated means assessment may alter drawings on the Consolidated Revenue Fund.

If the care recipient liquidates the principal house to enable the accommodation payment (RAD or RAC), and the care recipient’s means assessment is updated to recognise this payment, the overall impact would generally increase the means tested amount for the care recipient, causing a decrease of the Consolidated Revenue Fund drawings.

If the care recipient draws on other financial assets to enable the accommodation payment (RAD or RAC), and the care recipient’s means assessment is updated to recognise this payment, the overall impact would generally decrease the means tested amount for the care recipient, causing an increase of the Consolidated Revenue Fund drawings.

If the care recipient draws on non-financial assets such as other real estate holdings that are not the principal house to enable the accommodation payment (RAD or RAC), and the care recipient’s means assessment is updated to recognise this payment, the overall financial impact would generally be the same as these assets are assessed the same in the means assessment.

The degree to which this Bill will alter Consolidated Revenue Fund drawings will depend on the numbers of participants whose adjusted means assessments result in an increase, decrease or no-difference adjustment. As numbers of participants who are currently inaccurately means assessed are not known, or not public, is it difficult to further predict financial implications.

Key issues and provisions

Residential care data assurance reviews

Schedule 1 of the Bill will insert Part 6.6 into the Aged Care Act which allows the Secretary of DoHAC to conduct residential care data assurance reviews. The purpose of these reviews is to ensure the completeness, accuracy and reliability of aged care data provided to the Secretary by approved providers and to inform the development of aged care policy and education. Following a review, the Secretary may publish reports dealing with any findings, conclusions or recommendations as a result of the reviews.

According to the Explanatory Memorandum (p. 3), these reviews are directly modelled on home care assurance reviews permitted by Part 6.8 of the Aged Care Act. As with home care assurance reviews, approved providers that are corporations may be issued a notice to provide information or documents and/or a notice to answer questions. This can relate to information and documents provided, or required to be provided, by an approved provider before, on, or after the commencement of these provisions.

A failure to comply with notices, or to provide all reasonable facilities assistance necessary to reviewers, may incur a maximum civil penalty of 30 penalty units (a penalty unit will be equivalent to $330 from 7 November 2024, so the maximum penalty would be $9,900). All civil penalty provisions in new Part 6.6 are also subject to an infringement notice under Part 5 of the Regulatory Powers (Standard Provisions) Act 2014.

The Secretary will also have the power to request information or documents from a person/approved provider who is not a corporation, but they are not required to comply with the request.

Changes to income and asset determinations

Schedule 2 of the Bill amends the Aged Care Act and Transitional Provisions Act to reduce the likelihood of future breaches of section 83 of the Constitution resulting from aged care fees being set on outdated income and asset information.

As explained in the background to this Bills Digest, residents entering permanent care need a means assessment to find out whether they are eligible for Australian Government support with their fees and accommodation costs. The means test includes certain income and assets, and a RAD or RAC is considered an assessable asset.

The Secretary of DoHAC has the power to make determinations with respect to a person’s total assessable income (section 44-24) and the value of a person’s assets (section 44-26C). Services Australia (as a delegate of the Secretary (p. 32)) administers the aged care means assessment for most people. The Department of Veterans’ Affairs (DVA) (also a delegate of the Secretary (p. 32)) administers the assessment for DVA clients.

Part 1 of Schedule 2 of the Bill will amend the Aged Care Act to allow income and asset determinations made by the Secretary to be varied or revoked by written instrument. The Transitional Provisions Act sets out rules for persons who entered a residential aged care facility before 1 July 2014 and therefore is required to be amended to reflect the changes with respect to income determinations. As the asset determination in the Transitional Provisions Act is applied in a different manner than the asset determination under the Aged Care Act, similar amendments with respect to asset determinations are not required to be made to the Transitional Provisions Act (see p. 37 of the Explanatory Memorandum).

The power to vary and revoke these determinations on behalf of the Secretary will be able to be delegated to the following authorities (see items 36–43):

• Chief Executive Centrelink
• Chief Executive Medicare
• DVA Secretary
• Repatriation Commission
• Social Services Secretary.

The Secretary must provide the care recipient with a copy of the income or asset determination within 14 days after making the determination. Under the new provisions, a determination may be varied or revoked through an application made by the person or on the Secretary’s own initiative. If acting on their own initiative, the Secretary must provide notice to the care recipient that they are considering varying the determination and provide them with the opportunity to make a submission which the Secretary must consider. The Secretary can seek further information from the care recipient, but they are not obliged to provide the information. If the Secretary seeks further information from a person who has applied for a variation or revocation of the determination, the application is taken to be withdrawn if the further information is not provided. Within 14 days of having made a decision to revoke or vary a determination the Secretary must give written notice of their decision (which is reviewable under Part 6.1 of the Aged Care Act).

Timeframes in which the Secretary must make a decision about whether to vary or revoke a determination are not prescribed. This recognises the complexity of determinations relating to total assessable income and the value of a person’s assets and caters for the operational requirements of Services Australia and DVA (Explanatory Memorandum, pp. 14, 22). Key performance measures currently agreed with delegates of the Secretary for determinations related to total assessable income and the value of a person’s assets provide for 85% of assessments to be processed within 28 calendar days of receipt (Explanatory Memorandum, pp. 14, 22).

A variation or revocation of a determination takes effect on the day specified in the instrument. A revocation of a determination can take effect from a date before the instrument is made. For variations on application by the care recipient, the date of effect may be a date before the instrument is made. According to the Government, ‘generally, variations will only take effect on a date in the past if the result would be a reduction to the fees payable by the care recipient otherwise increases to fees will generally apply prospectively to mitigate against bill shock’ (Explanatory Memorandum, p. 16). If a variation to a determination occurs on the Secretary’s own initiative these changes can only apply prospectively, ‘including those that would otherwise result in a reduction to the care recipient’s total assessable income for a past period’ (Explanatory Memorandum, p. 16).

Provision of information about refundable deposit balances

A refundable deposit is a lump sum amount that may be paid for entry to residential aged care homes. The refundable deposit balance is the difference between the amount of the refundable deposit and amounts which are permitted to be deducted from the refundable deposit by the aged care provider.

When making a claim for the residential care subsidy, providers are already required under section 43-4 to give the Secretary any information relating to the claim that is required by the form, or that the Secretary requests.

Part 2 of Schedule 2 amends subsection 43-4(1) to specifically require providers to also give a statement setting out the refundable deposit balance held by the provider in relation to each resident in respect of whom the claim for residential care subsidy relates and for whom the approved provider held a refundable deposit balance during the payment period. This must be provided as soon as practicable after the end of each payment period. According to the Explanatory Memorandum, the amendment is intended to provide greater clarity of the legislative support for the use and collection of data by Services Australia as the administrator of aged care payments (p. 40).

Payments after voluntary moves within a service

Under sections 52G-3 and 52G-4 of the Aged Care Act, residential aged care providers seeking to charge a resident more than $550,000 as a refundable accommodation deposit or equivalent daily amount must apply to Independent Health and Aged Care Pricing Authority (Pricing Authority) for approval.

Schedule 3 inserts proposed subsection 52G-4(6A) which provides that the higher maximum amount of accommodation payment approved by the Pricing Authority also applies in relation to a person if:

• the person’s entry to the service occurred before the date of the approval
• the person had entered into an accommodation agreement with the approved provider before the date of the approval
• the person moves to another room (the new room), or to another part (the new part) of a room, in the service and the move is voluntary and
• the higher maximum amount of accommodation payment applies in relation to the part of the service that includes the new room or the new part of a room.

According to the Explanatory Memorandum, ‘this amendment is intended to permit a care recipient to voluntarily move to a renovated or new room within a residential care service and agree to pay a higher accommodation payment amount in their new room’ (p. 43). Currently residents are allowed to move rooms on a voluntary basis within a service but due to the operation of subsection 52G-4(6) the higher maximum amount of accommodation payment approved by the Pricing Authority does not apply to residents who have entered into an accommodation agreement with the approved provider.