Chapter 1

Referral of the Living Longer Living Better reform Bills

1.1 On 14 March 2013, the Senate referred to the Aged Care (Bond Security) Amendment Bill 2013, the Aged Care (Bond Security) Levy Amendment Bill 2013, the Aged Care (Living Longer Living Better) Bill 2013, the Australian Aged Care Quality Agency (Transitional Provisions) Bill 2013, and the Australian Aged Care Quality Agency Bill 2013 (the Living Longer Living Better Bills) for inquiry and report by 17 June 2013. The committee elected to report by 31 May 2013.

Conduct of inquiry

1.2 The committee advertised the inquiry in The Australian newspaper. Details of the inquiry, the Bills and associated documents were also placed on the committee's website.

1.3 The committee wrote to over 200 organisations and individuals seeking the submissions by 22 April 2013. Submissions were received from 112 individuals and organisations, as listed in Appendix 1.

1.4 Public hearings were held between 29 April and 2 May 2013. A list of witnesses who appeared at the hearings is in Appendix 2.

1.5 The committee thanks those organisations and individuals who made submissions to the inquiry, and those who gave evidence at the public hearings. The committee is particularly grateful to both the Department of Health and Ageing and other witnesses who responded to an unusually large number of questions on notice.

Background

1.6 According to a survey conducted by Australian Bureau of Statistics, 7.7 million Australians were aged 45 years or older in 2007. Of these, 3.1 million Australians were retired and over 1 million planned to retire in the next decade. Of the 3.9 million employed Australians aged 45 years or over, one in seven had not yet begun planning for retirement.[1] Four years on, 3.2 million Australians aged 45 years and over were retired. Approximately half were aged 70 or more years (50 per cent of retired men and 41 per cent of retired women). The average age of retirement in 2011 was 53.3 years. The number of Australians aged 45 years or over in the workforce had increased from 3.9 million to 4.9 million.[2]

1.7 The Productivity Commission has also reported that the number of older persons as a percentage of Australia's population is projected to increase. Commenting in 2011, the Commission reported that it is estimated that the number of Australians aged 85 or more years will increase from 0.4 million in 2010 to 1.8 million by 2050. It is anticipated that by 2050, every year over 3.5 million Australians will access aged care services.[3]

1.8 The Government has concluded that the current aged care system is 'ill–equipped to meet the needs of retiring baby boomers and their parents who are living longer and healthier lives'.[4] Announcing its intention to redesign the delivery of aged care services in Australia, in April 2012 Government reported that the current system is flawed, undermined by pricing inequalities, complex care service structures, and the limited availability, and therefore limited choice, of services for older Australians.[5]

1.9 The proposed aged care reforms would establish a new administrative and pricing structure for the delivery of aged care services in Australia. It is intended that the legislative and non–legislative measures proposed to redesign the aged care system will increase access to services, streamline the system so that it is easier to navigate, and improve service delivery standards.[6] It is projected that the reforms will be implemented over a 10 year timeframe from 1 July 2012,[7] and will cost $3.7 billion over five years from 2012–13.[8] As indicated in the April 2012 announcement of the aged care reforms, this will be comprised of:

$1.9 billion to improve access to aged care services;
$1.2 billion over five years to address critical shortages in aged care workforce;
$80.2 million to 'improve aged care linkages with the health care system';
$54.8 million to support carers;
$268.4 million for dementia services; and
$19.2 million 'to support the diverse care of Australia's ageing population'.[9]

1.10 Key components of the reform package include the introduction of the Home Care Packages Program, designed to assist people to remain in their homes if they so choose. It is expected that $880.1 million will be allocated to the program over five years, to increase the total number of Home Care packages from approximately 60,000 to 100,000. From 2017–18 to 2021–22, is anticipated that an additional 40,000 home care packages will be introduced.[10] The Government has undertaken to review the adequacy of the number of home care packages after five years.[11] The program will provide 'four levels of home-care options covering basic home care all the way through to complex home care'.[12]

1.11 The reforms also target the delivery of aged care services in residential care facilities. In contrast to current practice, the reforms will remove the distinction between low-level residential care and high-level residential care, and existing barriers to purchasing additional services and amenities. It is intended that from 1 July 2014, approvals for placement in residential care will not distinguish between high and low care. Residents will, however, be given the option of purchasing additional services.[13]

1.12 The Government also announced its intention to overhaul the pricing structure for aged care services, through introducing an 'income tested care fee' for home care services and a 'means tested fee' for residential care.[14] The fee structures are intended to give effect to the Government's policy of providing a fair and equitable aged care payment system.[15]

1.13 To oversee the transition to the new arrangements, the Government has established an Aged Care Reform Implementation Council. The independent Council is responsible for advising the Minister on the progress of the reforms, to ensure that the reforms are implemented 'coherently and consistently'. The Council will also oversee a formal evaluation of the implementation of the reforms, to be conducted from 2013 to 2015.[16]

Productivity Commission report

1.14 The Government has advised that the reforms respond to concerns identified by older Australians and their families, as well as to the findings of the Productivity Commission's review of the aged care system.[17]

1.15 In April 2010, the then Assistant Treasurer, Senator Nick Sherry, and the then Minister for Ageing, Justine Elliot MP, tasked the Productivity Commission with developing options to redesign Australia's aged care system to meet the needs of older Australians in the coming decades.^{^[18]} Over the course of the approximately 18 month inquiry, the Commission received 925 submissions and held 13 public hearings.[19] The Commission's analysis also drew on previous reviews of Australia's health care system, including the 2004 Hogan Review, the 2009 National Health and Hospitals Reform Commission Report, and the 2010 Henry Review of Australia's taxation system.[20]

1.16 Reporting in August 2011, the Commission concluded that Australia's aged care system is plagued by 'many weaknesses', and will be unable to meet future challenges arising from an ageing Australian population.[21] Accordingly, the Commission found that there is an established case and a clear need for 'fundamental and wide-ranging reform'.[22] The Commission reported that the aged care system is complex and difficult to navigate, and is perceived by older Australians as unresponsive to their changing care needs. Key weaknesses were identified with residential care services, community care services, and the current administration of the aged care system.

1.17 Weaknesses identified with residential care included excessive waiting times, limited choice of care providers, variable quality of services and lack of incentives for providers to improve service delivery. Providers also reported challenges accessing finance, in particular, finance to build additional high care residential facilities.[23] The practice of charging low level fees for high care accommodation was also identified as an area of concern.[24]

1.18 Problems with community-based care services were also highlighted, with the Productivity Commission identifying a lack of continuity of care. Rather than seamlessly responding to changing care needs, the Productivity Commission found that 'changes in an older person's care needs can lead to a change in the "care package", care provider, and personal carer'.[25] The review also found that community-based care is predominantly provided on an informal basis from family, friends and neighbours, with approximately 80 per cent of community-based care provided by informal carers.[26]

1.19 While noting that the aged care workforce is 'generally appropriately skilled', deficiencies were also identified. It was concluded that service delivery is currently undermined by the variable quality of staff training and staff shortages, which were attributed to low wages, strenuous work environments, limited employee-development opportunities and high administrative workloads.[27]

1.20 The current governance and administrative framework for the aged care system was also criticised, with the Productivity Commission particularly noting the burden imposed by 'complex, overlapping and costly' regulations.'[28]

1.21 To address these weaknesses, the Productivity Commission endorsed an objectives-based framework for the aged care system. The Commission recommended that the aged care system should aim to support the following objectives.

Promoting the independence and wellness of older Australians, and their continuing contribution to society.
Ensuring that all older Australians needing care and support have access to person–centred services that can change as their needs change.
Consumer directed, allowing older Australians to have choice and control over their lives and to die well.
Treating older Australians receiving care and support with dignity and respect.
Being easy to navigate, with older Australians knowing what care and support is available and how to access those services.
Assisting informal carers to perform their caring roles.
Affordability; being affordable for those requiring care and society more generally.
Providing incentives to ensure the efficient use of resources devoted to caring for older Australians and broadly equitable contributions between generations.

1.22 To give effect to these objectives, the Productivity Commission made a further 57 recommendations for change to Australia's aged care system.[29] The recommendations aimed to improve the cost of aged care, access to aged care services, the quality of aged care and aged care accommodation, including at–home accommodation, provide additional support to carers, strengthen the aged care workforce, and streamline the regulation and administration of aged care system.[30]

Government response

1.23 In its 48 page response to the Productivity Commission's report, the Government accepted in principle the Productivity Commission's findings about the state of Australia's aged care system. However, as noted in the May 2012 government response, the Government concluded that the widespread structural reforms recommended by the Commission were not financially feasible in the current fiscal environment.[31] The Government disputed the Productivity Commission's estimate that the proposed reforms would reduce the cost of aged care, arguing that the costings were based on 'problematic assumptions'.[32]

1.24 Accordingly, the Government did not accept all recommendations. Rather, the Government drew on the Commission's findings and analysis of the aged care system to develop the Living Longer Living Better aged care reforms.[33] As the Government's response indicates, the Living Longer Living Better reforms are intended to give effect to the principles underpinning the Productivity Commission's report while having due regard to the practicalities of implementing major health care reforms:

The Government's aged care reform package, Living Longer Living Better, seeks to address the problems identified by the Commission but gives greater weight to the potential difficulties the sector would face in absorbing and responding to significant structural changes in the short to medium term...While the proposed reform package moves in the same direction as that proposed by the Commission, it adopts a more graduated approach that seeks to significantly enhance the well-being of Australians and their carers and better position the aged care sector for the possibility of further reforms in the future.[34]

1.25 Of the Productivity Commission's 58 recommendations, the Government did not support nine, namely:

the creation of an Australian Age Pensioners Savings Account scheme;[35]
the inclusion of the relevant share of the person's former principal residence in the total assets test;[36]
the creation of a government backed Australian Aged Care Home Credit scheme;[37]
Australian government set scheduled fees for the delivery of certain subacute residential care services;[38]
independent review of the Medicare rebate for residential care medical services provided by general practitioners;[39]
the creation of the new independent regulatory agency – the Australian Aged Care Commission;[40]
a new independent statutory Community Visitors Program for residential aged care facilities;[41]
amendments to the missing resident reporting requirements;[42] and
the provision of grants to existing small approved residential care providers to assist the transition to the proposed new aged care system.[43]

Purpose of Bills

1.26 Collectively, the five Bills would introduce the legislative aspects of the Government's proposed Living Longer Living Better aged care reforms.

The Aged Care (Living Longer Living Better) Bill 2013

1.27 The Aged Care (Living Longer Living Better) Bill 2013 would amend the Aged Care Act 1997 to introduce reforms in the following three key areas: residential care, home care, and governance and administration. The Bill would also make minor and technical amendments to address current drafting anomalies and inconsistencies in the Aged Care Act.[44]

Residential care

1.28 The Bill would introduce the following key changes to the provision of residential care services.[45]

Removal of the distinction between low-level and high-level residential care: Under the reforms proposed, approval for permanent residential care would entitle a person to access any residential care service appropriate to his or her needs.
A new system for contributing to the cost of residential care: Currently, aged care recipients living in residential care may be charged an upfront accommodation bond. The Bill would introduce new payment arrangements for residential care. Residents may pay for their accommodation by periodic payment, known as the Daily Accommodation Payment (DAP), by lump sum, referred to as a Refundable Accommodation Deposit (RAD), or through a combination of both. The Bill would also introduce a means test combining income and asset tests, and new annual lifetime caps on means tested fees.
New subsidies: The Bill would introduce an additional dementia supplement, a new veterans' affairs mental health supplement and a workforce supplement available to eligible providers from 1 July 2013.
Transitional arrangements: For people currently in residential care, the Bill would provide for existing residents to continue their current service arrangements. However, the proposed new residential care framework would apply if existing residents leave residential care for more than 28 days or move between services and elect to adopt the proposed new aged care arrangements.

Home care

1.29 The Bill would also create a new category of aged care services, known as 'home care'. The following would be the key features of the proposed home care scheme.[46]

Repeal of existing community–based services arrangements: From 1 July 2013, home care services will replace existing Community Aged Care Packages and some forms of existing flexible care services delivered in a person's home.
New subsidies: The Bill would introduce an additional dementia supplement, a new veterans' affairs mental health supplement and a workforce supplement available to eligible providers from 1 July 2013.
Visitors schemes: The Bill would extend the existing community visitor scheme for residential care recipients to recipients of home-care services.
A system for contributing to the cost of residential care: For persons who receive home-care services from 1 July 2014, costs will be calculated according to an 'income tested care fee'. The Explanatory Memorandum notes that under the proposed new 'income tested care fee' some residents may be required to contribute more to the cost of their care. However, the Bill would introduce safeguards to ensure that full rate pensioners will not pay an income tested care fee. Further, the Bill would introduce new annual and lifetime fee caps.
Transitional arrangements: For people currently receiving care services in their homes, the Bill would provide for existing arrangements to continue. However, the proposed new home care framework would apply if existing recipients leave care for more than 28 days or move between services and elect to adopt the proposed new aged care arrangements.

Arrangements for persons currently receiving aged care services

1.30 The Bill would introduce the terminology 'continuing care recipients' to distinguish persons currently receiving aged care services from persons who enter the aged care system on or after 1 July 2014. As noted, for people currently receiving care services in their homes or residential care, the existing aged care system will continue to govern their receipt of aged care services. Effectively, the aged care reforms will not replace the current aged care system in its entirety. Persons currently receiving aged care services can elect to continue to receive services under existing arrangements. This policy is intended to ensure that changes do not disrupt established financial arrangements for continuing care recipients.[47]

1.31 To give effect to this policy, and the intended continuity, Schedule 5 of the Aged Care (Living Longer Living Better) Bill 2013 would introduce new legislation – the Aged Care (Transitional Provisions) Act 1997. This Act would substantially mirror the Aged Care Act in its current form, that is, prior to the amendments contemplated under the Aged Care (Living Longer Living Better) Act (if enacted). The new Act would govern arrangements for fees, subsidies and payments for continuing care recipients.[48]

1.32 To ensure that the proposed new legislation can be easily identified as a counterpart to the new aged care arrangements, the Bill would suspend the operation of section 39 of the Acts Interpretation Act 1901 which requires Acts to be numbered in sequential order according to the year they were passed. The new Act would be taken to have been enacted the same year as the Aged Care Act. Accordingly, both Acts will be dated as being passed by Parliament in 1997.[49]

Governance and administration

1.33 The Bill would also establish an Aged Care Pricing Commissioner, who would be tasked with making 'decisions on certain pricing issues within the legislative framework and broad policy frameworks set by the Minister.'[50] Additionally, the Bill would establish a mechanism for independent review of the reforms, requiring a report to be tabled in both Houses of Parliament by 30 June 2017.[51]

The Australian Aged Care Quality Agency Bill 2013

1.34 The Australian Aged Care Quality Agency Bill 2013 would establish the Australian Aged Care Quality Agency, the Aged Care Quality Advisory Council, and the Quality Agency Principles. It is intended that the Act (if enacted) would commence on 1 January 2014.[52]

1.35 Under the direction of the Chief Executive Officer, the Australian Aged Care Quality Agency would be responsible for:

accreditation of residential care services;
conducting quality reviews of home-care services from 1 July 2014;
registering quality assessors of residential and home care services;
promoting high quality care, innovation and quality management, and continuous improvement amongst approved providers of aged care services; and
providing information, education and training to approved providers of aged care.[53]

1.36 The Aged Care Quality Advisory Council would be responsible for advising the Chief Executive Officer of the Australian Aged Care Quality Agency about the agency's functions. Advice may be given at the Council's discretion, at the request of the Chief Executive Officer of the Australian Aged Care Quality Agency or at the Minister's direction.[54] To be appointed to the Council, members would be required to satisfy eligibility criteria focused on the candidates' knowledge or experience in relevant fields such as the evaluation of quality management systems, geriatrics, aged care consumer issues, and adult education.[55]

1.37 The Australian Aged Care Quality Agency Bill 2013 would also authorise the Minister to make, by legislative instrument, Quality Agency Principles about matters under the Act (once enacted) or necessary or convenient to give effect to the Act.[56] The Australian Aged Care Quality Agency is to have regard to these principles when undertaking its legislative functions.[57] The Explanatory Memorandum explains that the principles will include Accreditation Standards and Home Care Standards against which the Australian Aged Care Quality Agency will assess the performance of residential and home care service providers and register quality assessors.[58]

The Australian Aged Care Quality Agency (Transitional Provisions) Bill 2013

1.38 The Australian Aged Care Quality Agency (Transitional Provisions) Bill 2013 would establish a new framework for the administration of the aged care services registration and quality assurance scheme proposed under the Aged Care (Living Longer Living Better) Bill 2013 and the Australian Aged Care Quality Agency Bill 2013. The Bill would repeal the operation of the existing healthcare authority, the Aged Care Standards and Accreditation Agency Limited, and transfer its functions to the proposed Australian Aged Care Quality Agency. The Bill contemplates that the Australian Aged Care Quality Agency would assume functions for residential aged care services from 1 January 2014, and home care services from 1 July 2014. In the interim, functions relating to home care services would be performed by the Department of Health and Ageing.[59] It is intended that the Act (if enacted) would commence at the same time as the Australian Aged Care Quality Agency Act (if enacted).[60]

The Aged Care (Bond Security) Amendment Bill 2013

1.39 The Aged Care (Bond Security) Amendment Bill 2013 would amend the Aged Care (Bond Security) Act 2006 to extend the existing Accommodation Bond Guarantee Scheme to the new lump sum residential accommodation payments proposed under the Aged Care (Living Longer Living Better) Bill 2013. This would ensure existing protections are afforded to accommodation payments made on or after 1 July 2014.[61] It is intended that the Act (if enacted) would commence on 1 July 2014.[62]

The Aged Care (Bond Security) Amendment Bill 2013

1.40 The Aged Care (Bond Security) Levy Amendment Bill 2013 would amend the Aged Care (Bond Security) Levy Act 2006 to authorise the Commonwealth to recover the cost of guaranteeing the proposed new residential accommodation payments. To recover any payments made in the event that an approved residential care provider becomes insolvent and is therefore unable to refund a bond, the Commonwealth would be authorised to charge a levy against approved providers.[63] It is intended that the Act (if enacted) would commence on 1 July 2014.[64]

Views of Parliamentary legislative scrutiny committees

1.41 The Living Longer Living Better Bills have been the subject of comment by two Parliamentary committees tasked with examining proposed legislation to ensure compliance with established Commonwealth legislative principles and requirements.

Parliamentary Joint Committee on Human Rights

1.42 The Parliamentary Joint Committee on Human Rights is tasked with examining proposed legislation to ensure compatibility with human rights standards.[65] The committee examined the Aged Care (Living Longer Living Better) Bill 2013, noting its concern with two aspects of the proposed legislation.

1.43 First, the committee drew attention to the proposed means test for aged care services and the consequent potential reduction in the level of services provided to certain individual recipients. The committee advised that:

[a] reduction in the amount of subsidies or other support provided to individual recipients encroaches on a person's enjoyment of the relevant right, and may be viewed as a retrogressive measure.'[66]

1.44 The Minister's advice was sought regarding the impact of the proposed means test and justification for what the committee considered may be a retrogressive measure under the International Covenant on Economic, Social and Cultural Rights.

1.45 Second, the committee sought further information about the protections provided where a person faces a possible subsidy reduction if he or she fails to produce information or documents at the Minister's request. It was noted that compliance with directions to produce documents may be difficult for elderly persons, particular persons with poor health.[67]

1.46 As of the time of tabling this report, no response from the Minister had been published.

Senate standing committee for the scrutiny of bills

1.47 The Senate scrutiny of bills committee identified a number of issues for clarification with the Minister in its fifth alert digest of 2013.[68]

1.48 In relation to the Aged Care (Living Longer Living Better) Bill 2013, the committee noted:

The bill includes numerous provisions allowing determinations to be made by way of legislative instruments. Unfortunately, however, the explanatory memorandum does not contain sufficient information to enable a consideration of the appropriateness of these delegations of legislative power.[69]

1.49 In relation to the Australian Aged Care Quality Agency Bill 2013, the committee asked questions regarding the disclosure of personal information:

The Statement of Compatibility appears to conclude that the overall approach to personal information does limit the human right to protection against arbitrary interference with privacy but that any limitations ‘are reasonable, necessary and proportionate’. However, it appears to the committee that there is insufficient information included in the explanatory memorandum (at pages 15 to 17) to adequately assess this conclusion. In particular, the defences available to the offence for disclosing protected information in clause 48 are not explained. Similarly, the necessity of authorising the disclosure of protected information for other purposes pursuant to clause 48 is not elaborated. In addition, the bill envisages that important matters, in the form of further instances of authorised disclosure, will be able to be included in delegated legislation rather than being included in the primary act.

The committee therefore requests additional information from the Minister's about these matters and, in particular, about the appropriateness of allowing for the creation of further instances of authorised disclosure of personal information through the Quality Agency Principles (ie regulations) as envisaged by paragraph 49(j).[70]

1.50 In the same manner as was the case for the main bill, the committee also raised questions about the delegation of legislative power.[71] As of the time of tabling this report, no response from the Minister had been published.

Outline of report

1.51 This report comprises eight chapters:

Chapter 2 outlines the broad support for aged care reform and discusses public consultation.
Chapter 3 is about home care
Chapter 4 is about residential care
Chapter 5 concerns the bond levy guarantee
Chapter 6 concerns supplements and special needs groups
Chapter 7 covers the workforce supplement
Chapter 8 discusses governance.

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