Bills Digest No. 39, 2020–21                                                                                                                                      
PDF version [480KB]

Alex Grove and Elliott King
Social Policy Section
17 December 2020

Contents

Purpose of the Bill
Background
Committee consideration
Policy position of non-government parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human Rights
Key issues and provisions

 

Date introduced:  21 October 2020
House:  House of Representatives
Portfolio:  Health
Commencement: Sections 1 to 3 on Royal Assent. Schedule 1, Parts 1 and 2 on Proclamation, and Part 3 immediately after. However, if Schedule 1 does not commence within six months after Royal Assent, then the provisions in Schedule 1 are repealed

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at December 2020.

Purpose of the Bill

The purpose of the Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 2) Bill 2020 (the Bill) is to amend the Aged Care Act 1997 (the Aged Care Act) and the Aged Care (Transitional Provisions) Act 1997 (the Transitional Provisions Act) so that home care providers will be reimbursed for the amount actually spent providing care in the payment period, with the balance of any subsidy to be held by the Commonwealth. The balance will be available to draw against for future care.

The Bill also amends the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act) to provide that the supply of home care will continue to be GST-free.

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 (CHSP) 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 $9,000 for a Level 1 package to around $52,000 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)[9]
• adding any other supplements (for example, viability supplement).[10]

Phased changes to payments

According to the Aged Care Financing Authority (ACFA), the Government was considering changes to existing payment arrangements to be conducted in three phases:

• phase 1 would involve home care subsidies for consumers being paid after the month (in arrears) rather than at the start of the month (in advance)
• phase 2 would operate so that providers would only be paid the subsidy for the goods and services they actually provide to the consumer rather than receiving the full monthly subsidy amount for the recipient. Any unspent package funds for the recipient would be held by the Department of Human Services (DHS) and
• phase 3 would operate so that subsidy payments to providers for a consumer would be reduced by a portion of the unspent package funds held by the provider for that recipient.[11]

The Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 1) Bill 2020 (No. 1 Bill) will change the payment period of the home care subsidy from payment in advance to payment in arrears. This arrangement enacts Phase 1 of the Government’s implementation plan for the new home care payment arrangements.[12]

The Bill will provide payments for services rendered during the payment period. Unspent funds will be held by the Commonwealth. This enacts Phase 2 of the implementation plan. The Government is no longer referring to implementing Phase 3.[13] However, the Bill still includes a provision for providers to return unspent funds to the Government (which was originally part of Phase 3). Further discussion of this change is detailed in the ‘Key issues and provisions’ section of this Digest.

The No. 1 Bill passed both Houses on 8 December 2020. The Act it creates will commence on proclamation or six months after Royal Assent—whichever occurs first.

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.[14]

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.[15] 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.[16]

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.[17]

As at June 2020, the pool of unspent funds was around $1 billion in total, or an average of around $8,841 per client.[18]

The current Bill changes arrangements for unspent funds. Payments will be based on actual care and services delivered in the previous month. The Government intends to become the holder of unspent funds. The Explanatory Memorandum to the Bill states that the Bill will also:

… introduce a mechanism whereby providers who elect to return unspent funds can start doing so within six months of the Bill coming into effect. Providers who elect to return unspent funds will do this through a 100 per cent subsidy reduction until the unspent funds are exhausted.[19]

This is discussed in the ‘Key issues and provisions’ section of this Digest.

Federal Budget announcements

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.[20]

The 2020–21 Federal Budget included additional support for the transition to the new payment arrangements:

$21.0 million over four years from 2020-21 to delay the implementation of payment in arrears and on invoice for home care services as well as provide transition support to providers to adjust to these arrangements[21]

The 2020–21 Budget measure appears to address some of the recommendations from the ACFA report, Consideration of the Financial Impact on Home Care Providers as a Result of Changes in Payment Arrangements.[22] The recommendations are detailed in ‘Consultation on the potential impact of the new payment administration process’ section of this Bills Digest.

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.[23] 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.[24]

The ACFA report, Consideration of the Financial Impact on Home Care Providers as a Result of Changes in Payment Arrangements, summarised the proposed Government plan to introduce the payment changes as three distinct phases over two timelines. Phase 1 was due to commence in June 2020 and Phases 2 and 3 were planned for introduction in April 2021 (see Table 1 below).[25]

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

Phase 1 (to commence in June 2020)	Phase 2 (to commence in April 2021)	Phase 3 (to commence in April 2021)
Subsidies and supplements will be paid in arrears at the full rate of subsidy based on package level and days in care, through the usual monthly claim.	Payments will be based on services provided to consumers and unspent funds will be held by the Government.	Commencing with the March 2021 claim lodged in April, DHS will reduce a payment for a consumer by a portion of the available funds held by the provider for that consumer.
Practical application 1.    The ‘advance’ payment made at the start of May 2020, for the month of May, will be the last ‘advance’ payment made. 2.    Providers will then lodge their May claim in June as per normal. The usual reconciliation will occur for the month of May. 3.    There will not be an ‘advance’ payment at the start of June (or any subsequent month). 4.    In July, providers will lodge their claim for June and receive payment of the full subsidy for which each consumer is eligible (i.e. based on their full entitlement and number of days in care).	Practical application 1.    Providers lodge their March claim in April based on the amount of services provided for each consumer in March. 2.    DHS determines the amount to be paid for each consumer considering: a.   the amount of the claim; b.   the full entitlement for which that consumer is eligible for that month; c.   any income-tested care fee payable by that consumer; and d.   [In future months] available funds held by DHS for that consumer. 3.    Any amount of subsidy, less any income-tested care fee, that is not paid to a provider for a particular consumer accrues and is held by DHS to be drawn down in future.	Practical application 1.  In February 2021 providers advise the amount of available funds held for each consumer. 2.  In addition to the matters taken into account when determining an amount of payment for a claim, DHS will reduce a payment for a consumer by a percentage amount (yet to be determined) in recognition of available funds held by the provider for that consumer. 3.  This will occur until the provider no longer holds available funds for that consumer. 4.  The portion of the consumer’s subsidy that is not paid to the provider during the drawdown will be accrued by DHS.

Source: ACFA, Consideration of the financial impact on home care providers, op. cit., p. 7.

Due to the COVID-19 outbreak, implementation of these reforms has been delayed. The updated timeline for Phase 2 is discussed in the ‘Implementation’ section below.[26]

The ACFA report identified the main concerns held by approved providers (APs) with regard to Phase 2 and Phase 3. The main issue raised for Phase 2 concerned ‘the capacity for DHS [Department of Human Services, now known as Services Australia] to implement the required changes to their systems to deal with the new payment arrangements, along with the costs to providers of having to change their payment systems’.[27] Providers were of the view that reconciliation issues between provider data and DHS data would arise should the new payment arrangements not be introduced smoothly.

The main issue raised for Phase 3 concerned potential liquidity problems for some providers during the transition to the new payment system.[28] Some providers viewed unspent funds as a buffer to the liquidity impacts which would be encountered during the transition. These issues were not universal as some providers were ‘seeking to return their unspent funds as soon as possible’.[29]

The ACFA report made three recommendations for Phase 2 and one recommendation for Phase 3 to address these concerns:

Phase 2 recommendations

Recommendation 4: All aspects of how the new payment arrangements will operate need to be settled as quickly as possible to determine the system changes required by both DHS and providers. In settling this detail, the focus should be on minimising the costs to providers and avoiding any reduction in the flexibility of the current system in providing goods and services to consumers as they need them.

Recommendation 5: Once the details of the new arrangements are settled, there need to be consultations between DHS, providers and software developers to determine an appropriate time frame to ensure a smooth change to the new funding scheme, and also what can be done to minimise the administrative burden on providers. There should be a reasonable trial period of the new systems before full implementation. The current time frame for the introduction of Phase 2 (April 2021) should be reviewed following these consultations between DHS, providers and software developers.

Recommendation 6: Consideration should be given to providing financial support to providers operating in thin and difficult markets who may find it particularly challenging to adjust their systems to deal with the requirements of the new payment arrangements.

Phase 3 recommendation

Recommendation 7: Do not proceed with the proposed proportional return of existing unspent funds under Phase 3. Instead providers should have a choice to either:

a. return the unspent funds of all existing consumers immediately when Phase 3 commences; or

b. retain the unspent funds of existing consumers and allow those funds to be drawn down by the recipient or returned to the Government when the recipient leaves home care. Consideration should be given to setting a maximum period that providers can retain existing unspent funds.[30]

The report prepared by StewartBrown concluded:

… over 95% of APs could cater for a monthly reduction in subsidies equivalent to 20% of their monthly claim to DHS for services actually provided to care recipients (clients), to repay the unspent funds they currently hold. 23 APs out of the total of 525 appear to have insufficient liquid asset levels to meet these criteria…

At a subsidy reduction rate of 7.5% that percentage rises to 97.6% with only 13 of 535 APs having insufficient liquid asset levels as reported on the ACFR home care segment note.[31]

StewartBrown recommended that payments in arrears be calculated on aggregated information for an AP rather than by amounts claimed for services for each care recipient.[32] In doing so, the administrative burden placed on providers as they adjusted their internal operating and payment systems would be reduced.[33] Similar views were expressed by providers, as detailed in the ‘Position of major interest groups’ section of this Digest.

Implementation

Implementation for all phases has been delayed due to the COVID-19 pandemic. In October 2020, the Department of Health updated the timeline for phases 1 and 2, stating:

The changes to how we pay home care subsidies and supplements to providers will occur in 2 phases. Instead of paying the total in advance, we will pay in arrears for services delivered. We will hold unspent funds for care recipients.[34]

The updated timeline indicates that Phase 1 would now begin on 1 February 2021 and Phase 2 would begin on 1 September 2021.[35]

Committee consideration

Senate Community Affairs Legislation Committee

The Bill (together with the No. 1 Bill) was referred to the Senate Community Affairs Legislation Committee for inquiry and report by 27 November 2020. Details of the inquiry are at the inquiry homepage.

The Committee received four submissions, which are briefly described below in the section ‘Position of major interest groups’. The Committee recommended that the Bills be passed. The Committee stated that the Bills would modernise business practices and reduce the administrative burden on providers. The Committee noted stakeholders’ views that further communication and consultation were needed and expressed confidence that the Department of Health would continue to work with providers to provide support during the transition.[36]

The Australian Greens (the Greens) made additional comments on the Bills. The Greens shared the concerns of the Senate Standing Committee for the Scrutiny of Bills regarding item 16 of the Bill (discussed below), as it includes a power for delegated legislation to modify primary legislation and could operate retrospectively. The Greens will seek reassurance from the Minister regarding the application of item 16. The Greens will also seek assurances from the Minister that the Bills won’t result in providers passing on additional fees or charges to consumers. The Greens urged the Government to have a robust transition plan for implementing the changes. The Greens recommended that the Government provide additional home care packages to clear the waiting list by the end of 2021.[37]

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills (Scrutiny of Bills Committee) expressed concerns about the power (in item 16 of the Bill) for delegated legislation to modify primary legislation and the retrospective application of the item. While noting the explanations provided in the Explanatory Memorandum, the Scrutiny of Bills Committee requested the Minister’s advice as to why such rules need to be able to modify any Act or instrument. The Committee also asked whether the Bill could be amended to ensure that any modifications to legislation made by the rules, and the retrospective application of the rules, can’t operate to disadvantage any person.[38]

The Minister advised that the power in item 16 was considered necessary to respond to any unanticipated negative consequences of the new payment arrangements, and that any rules made under item 16 would be transitional, relate only to home care subsidy, and would be disallowable. The Minister stated he had considered the Scrutiny of Bills Committee’s concerns but was satisfied that item 16 was reasonably necessary and appropriate, without further amendment. The Committee noted the Minister’s advice but reiterated its scrutiny concerns. The Committee asked that the key points of the Minister’s advice be tabled as an addendum to the Explanatory Memorandum.[39]

Policy position of non-government parties/independents

To date little comment has been made about the operation of this Bill. However, the response to the No. 1 Bill is noteworthy. For instance, the Australian Labor Party’s (ALP’s) Shadow Minister for Ageing and Seniors, Julie Collins, noted that the ALP had concerns with the ‘further changes down the track’ (presumably mooted phased changes to payments) and the ‘possible impact on regional and rural providers’.[40]

Rebekha Sharkie of the Centre Alliance party has stated that, with regard to the reforms enacted by the Bill, the Government should ensure ‘a smooth transition for approved providers, which may require not only financial support but some additional time for providers to adjust to the new system’.[41]

Additional comments made on the Bill by the Greens are discussed above in the section ‘Senate Community Affairs Legislation Committee’. At the time of writing, no other comments by non-government parties or independents specifically in relation to 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.[42] 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 Phases 2 and 3.[43]

ACSA viewed the original implementation timeline for Phases 2 and 3 as insufficient, and suggested commencing Phase 2 in July 2021, followed by a ‘transition period’ before the implementation of Phase 3.[44] ACSA raised a number of issues which it wanted addressed before the introduction of the payment for services rendered and the drawing down of unspent funds. 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 and noted the need for real-time invoicing and payments.[45]

LASA stated the original implementation timeline did not allow sufficient 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).[46]

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, CHA recommended that an arrears payment system should be flexible and responsive with, for example, providers receiving funds within 48 hours of submitting a claim.[47]

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.[48]

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.[49] They noted that putting the administrative reforms on hold would allow them to focus on the health of their clients.[50]

In late August and early September 2020, the Royal Commission into Aged Care Quality and Safety held public hearings concerning home care.[51] During the first day of hearings, the Counsel Assisting commented on the potential of the proposed legislative changes for data collection. The Counsel Assisting stated:

If that legislation is enacted, home care payments will no longer be paid in advance but will be paid in arrears, and that should be an opportunity to collect data so that Government can understand the performance of the aged care system which is a necessary first step before necessary refinements can be made over time.[52]

Four advocacy bodies presented submissions to the Senate Standing Committee on Community Affairs regarding the Bill and the No. 1 Bill in November 2020.[53] ACSA, LASA and the Federation of Ethnic Communities’ Councils of Australia (FECCA) raised concerns with both Bills. COTA Australia did not comment on the specifics of either Bill, but noted that it supports the legislation without amendment.[54]

ACSA reiterated some of its concerns about provider and DHS payment systems as well as concerns regarding the potential for unintended consequences for providers and consumers which may arise without adequate consultation during implementation. For instance, ACSA highlighted proposed changes to the User Rights Principles 2014 and the Subsidy Principles 2014, which are not detailed in the Bill or the Explanatory Memorandum, as particular concerns.[55]

LASA mostly reiterated its recommendations from its submission to the ACFA consultation, with the addition of two new recommendations. Namely, that the Government publishes information concerning unspent funds for ‘active and exiting consumers across each financial year’, and that it reviews its approach to reconciling income tested fee determinations to ensure provider cash flows aren’t adversely impacted.[56]

FECCA raised similar concerns to the abovementioned provider groups with regard to the financial viability of providers and the need for further analysis of approved providers that would be negatively impacted by these changes. Like LASA, FECCA recommends that a pilot program for the new payment system be conducted before full implementation commences. Notably, FECCA ‘questions the timing of these Bills’ in light of the forthcoming final report of the Royal Commission.[57]

Financial implications

As noted above, the 2019–20 Budget measure to ‘improve payment administration arrangements for home care packages’ allocated $7.1 million over two years to implement all phases of the payment reforms.[58] The 2020–21 Budget allocated $21.0 million over four years ‘to delay the implementation of payment in arrears and on invoice for home care services as well as provide transition support to providers to adjust to these arrangements’.[59]

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 is compatible.[60]

The Government considers that the Bill engages the following human rights:

• the right to an adequate standard of living
• the right to the enjoyment of the highest attainable standard of physical and mental health
• the rights of equality and non-discrimination and
• the rights of people with disabilities.[61]

The Government considers that the Bill improves financial accountability and transparency regarding the actual use of funds in home care packages.[62]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights had no comment on the Bill.[63]

Key issues and provisions

Home care subsidy

The amount of home care subsidy payable to an approved home care provider for providing care in a payment period is currently calculated as follows:[64]

• the basic subsidy amount, which is determined by the Minister by legislative instrument[65]
• plus any primary supplements, such as supplements for care recipients who need oxygen therapy or enteral feeding, who have cognitive impairment, or who are veterans with a mental health condition related to their service[66]
• minus any reductions in subsidy:[67]
  • a compensation payment reduction where a care recipient is in receipt of a compensation entitlement that covers home care or[68]
  • a care subsidy reduction where a care recipient has income above a certain amount, and is required to pay an income-tested fee[69]
• plus any other supplements such as a hardship supplement for care recipients in financial hardship, or a viability supplement for care recipients living in regional and remote areas.[70]

The Subsidy Principles 2014 and the User Rights Principles 2014 also apply to the calculation of the amount of home care subsidy payable.

Payment for services provided

The Bill changes the way home care subsidy is paid. Rather than the provider receiving the full subsidy amount every month, providers will be paid for the services they have provided. Excess funds will be held by the Commonwealth in the client’s home care account.[71] The balance will be available to draw against for future care.[72]

It is intended that unspent funds held by providers may be gradually drawn down. In order for this to occur, it will be necessary to amend Division 3A in Part 3 of the User Rights Principles.[73] The Explanatory Memorandum describes the following mechanism:

The Bill will introduce a mechanism whereby providers who elect to return unspent funds can start doing so within six months of the Bill coming into effect. Providers who elect to return unspent funds will do this through a 100 per cent subsidy reduction until the unspent funds are exhausted.[74]

Calculating the amount of home care subsidy

Item 2 of the Bill repeals and replaces the amount of home care subsidy calculator in the Aged Care Act.[75] The proposed calculation for the amount of home care subsidy is as follows:

• the Commonwealth contribution amount (worked out using the Commonwealth contribution amount calculator in proposed section 48-1A inserted by item 3) plus the home care account balance (in proposed section 48-17 inserted by item 7) equals the maximum contribution amount[76]
• the lesser of the maximum contribution amount and the shortfall amount (in proposed section 48-13 inserted by item 7) is the unadjusted subsidy amount
• the unadjusted subsidy amount minus the provider held amount (as specified in, or calculated in accordance with, the User Rights Principles), if positive, equals the amount of home care subsidy payable to the provider.

Essentially then, the maximum amount available to be spent is the Commonwealth contribution for that client plus the client’s account balance. So long as the shortfall amount (the amount the provider is out of pocket for care provided in that month) does not exceed this maximum amount, then the shortfall amount is the unadjusted subsidy amount. If the provider is still holding unspent funds for the client, then the subsidy amount payable may be reduced. The Explanatory Memorandum acknowledges that:

… some approved providers hold significant amounts of unspent funds on behalf of home care recipients. The User Rights Principles will be amended to provide details of when the unspent funds held by approved providers will be taken into account.[77]

Item 3 inserts proposed section 48-1A into the Aged Care Act, which is the Commonwealth contribution amount calculator. The calculator is very similar to the home care subsidy calculator repealed by item 2. The Commonwealth contribution amount is equal to:

• the basic subsidy amount
• plus any primary supplements
• minus any reductions in subsidy
• plus any other supplements.

The Bill does not change the way in which the basic subsidy amount, supplements and reductions in subsidy are calculated. This means that the total amount of funds available for the client’s care does not change.

Item 7 inserts sections defining the shortfall amount and establishing home care accounts into the Aged Care Act.

Proposed section 48-13 defines the shortfall amount as:

• the price of home care provided during the payment period (worked out in accordance with the Subsidy Principles)
• minus the care recipient contribution amount, if any (specified in or worked out in accordance with the Subsidy Principles).

The Explanatory Memorandum does not provide further information on how the price and care recipient contribution amount will be calculated. It seems likely that the care recipient contribution amount will include any fees, such as basic daily fees and income-tested care fees, paid by the client.[78]

Proposed section 48-14 creates a home care account for each home care recipient. Proposed section 48-15 provides that a home care credit arises if the Commonwealth contribution amount exceeds the shortfall amount (that is, if the client is entitled to more funding than is spent in that month). Proposed section 48-16 provides that a home care debit arises if the shortfall amount exceeds the Commonwealth contribution amount (that is, if the amount spent in the month exceeds the funding entitlement).[79]

The home care account balance is the sum of the home care credits less the sum of the home care debits (proposed section 48-17). The home care account ceases when the care recipient dies (proposed section 48‑18).

The Transitional Provisions Act sets out grandfathering arrangements for people who have been receiving care continuously since before 1 July 2014.[80] Under the Transitional Provisions Act, the amount of home care subsidy payable to a provider is determined by the Minister by legislative instrument, or worked out according to a method determined by the Minister by legislative instrument.[81]

Item 12 amends the Transitional Provisions Act to provide that the amount of home care subsidy payable is the amount specified in, or worked out in accordance with a method specified in, the Aged Care (Transitional Provisions) Principles 2014.

The supply of home care under the Aged Care Act and the Transitional Provisions Act is currently GST-free under the GST Act.[82] Item 14 amends the GST Act to provide that the supply of home care will continue to be GST-free under both of those statutes.

Rule-making provision

Item 16 provides that the Minister may, by legislative instrument, make rules prescribing transitional matters relating to amendments made by the Bill.

The relevant rules may provide that, during or in relation to the twelve months after commencement, the Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 2) Act 2020 (when enacted) or any other Act or instrument has effect with any modifications prescribed by the rules. The intent is to ‘allow the making of subordinate legislation to deal expeditiously with matters which may have unintentionally unfairly affected home care recipients or approved providers’.[83]

Importantly subitem 16(4) states that subsection 12(2) of the Legislation Act 2003 does not apply to the rules made under item 16.

Section 12 of the Legislation Act deals with the commencement of legislative instruments. Subsection 12(2) states that if a legislative instrument, or a provision of such an instrument, commences before the instrument is registered, the instrument or provision does not apply in relation to a person (other than the Commonwealth or an authority of the Commonwealth) to the extent that as a result of that commencement:

• the person’s rights as at the time the instrument is registered would be affected so as to disadvantage the person or
• liabilities would be imposed on the person in respect of anything done or omitted to be done before the instrument is registered.

According to the Explanatory Memorandum to the Bill:

… it is intended that the rules made under item 16 should operate beneficially, so as to not affect the eligibility of home care recipients to home care subsidy or the amount of home care subsidy payable for eligible home care recipients.[84]

The terms of item 16 were the subject of some concern for the Scrutiny of Bills Committee. Whilst acknowledging the explanation provided, the Committee noted:

… there is no requirement on the face of the Bill that the retrospective application of the transitional rules must only be beneficial. In fact, it appears that the disapplication of subsection 12(2) of the Legislation Act as proposed in subitem 16(4) would only be required if there is a possibility that the retrospective application of the transitional rules may operate to disadvantage or impose liabilities on a person.[85]

Varying claims

A provider can vary a claim for home care subsidy within two years of the payment period.[86]

Items 17 and 18 amend subsection 47-4A of the Aged Care Act to provide that a provider can vary a claim either:

• during the period specified in the Subsidy Principles (which may specify different periods in respect of different types of variation) or
• if no such period is specified, then for two years after the payment period.

Items 19 and 20 make similar amendments to the Transitional Provisions Act, with any periods to be specified in the Aged Care (Transitional Provisions) Principles.

The intent of these items is to facilitate ‘the management of any unspent subsidy the Commonwealth may commence to hold on behalf of home care recipients and the calculation of the balance of a care recipient’s home care account’.[87]

Previous claims

Once the No. 1 Bill commences, home care subsidy will only be payable where the approved provider has made a claim in respect of the payment period.[88]

Item 22 amends the Aged Care Act to provide that home care subsidy will only be payable where the approved provider has made a claim in respect of the payment period, as well as a claim for each preceding payment period for which they were providing care to the recipient. Item 23 makes an equivalent amendment to the Transitional Provisions Act. These items will facilitate the management of unspent funds held by the Commonwealth, because claims for prior payment periods will be required to correctly calculate the recipient’s home care account balance.[89]

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[1].      A Grove, Aged care: a quick guide, Research paper series, 2018–19, Parliamentary Library, Canberra, updated 5 June 2019, p. 1.

[2].      Ibid., p. 2.

[3].      Australian Government, ‘Home Care Packages’, My Aged Care website.

[4].      Australian Government, ‘Home Care Package costs and fees’, My Aged Care website.

[5].      Ibid.

[6].      Department of Health (DoH), ‘Home Care Packages subsidy’, DoH website, last updated 22 January 2020.

[7].      DoH, ‘Schedule of subsidies and supplements for aged care’, DoH website, last updated 21 September 2020.

[8].      DoH, ‘Supplements for Home Care Packages’, DoH website, last updated 22 January 2020.

[9].      DoH, ‘Subsidy reductions for Home Care Packages’, DoH website, last updated 22 January 2020.

[10].    DoH, ‘Supplements for Home Care Packages’, op. cit.

[11].    Aged Care Financing Authority (ACFA), Consideration of the financial impact on home care providers as a result of changes in payment arrangements, ACFA, Canberra, December 2019, p. 2.

[12].    Information about the No. 1 Bill is in A Grove and R Storen, Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 1) Bill 2020, Bills digest, 93, 2019–20, Parliamentary Library, Canberra, 2020.

[13].    DoH, ‘Improved payment arrangements for home care’, DoH website, updated 7 October 2020.

[14].    Australian Government, ‘Home Care Package costs and fees’, op. cit.

[15].    DoH, ‘Unspent home care amounts’, DoH website, last updated 22 January 2020.

[16].    ACFA, Eighth report on the funding and financing of the aged care industry, ACFA, Canberra, July 2020, pp. 53–54.

[17].    Ibid.

[18].    StewartBrown, Aged care financial performance survey, aged care sector report for the year ended 30 June 2020, StewartBrown, Sydney, 2020, p. 49.

[19].    Explanatory Memorandum, Aged Cared Legislation Amendment (Improved Home Care Payment Administration No. 2) Bill 2020, p. 1.

[20].    Australian Government, Budget measures: budget paper no. 2: 2019–20, p. 102.

[21].    Australian Government, Budget measures: budget paper no. 2: 2020–21, p. 91.

[22].    ACFA, Consideration of the financial impact on home care providers, op. cit.

[23].    DoH, Information for the Aged Care Sector Newsletter, 16, 2019, 25 October 2019.

[24].    ACFA, Consideration of the financial impact on home care providers, op. cit.

[25].    Phase 2 is implemented by the Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 2) Bill 2020 and is therefore the focus of this Digest.

[26].    Grove and Storen, Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 1) Bill 2020, op. cit., p. 6.

[27].    ACFA, Consideration of the financial impact on home care providers, op. cit., p. 17.

[28].    Ibid., p. 18.

[29].    Ibid.

[30].    Ibid., pp. 20–22.

[31].    StewartBrown, Home Care Funding analysis, ACFA, [Canberra], December 2019, p. 2.

[32].    Ibid., p. 42.

[33].    Ibid., pp. 40–42.

[34].    DoH, ‘Improved payment arrangements for home care’, op. cit.

[35].    Ibid.

[36].    Senate Community Affairs Legislation Committee, Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 1) Bill 2020 and Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 2) Bill 2020 [Provisions], The Senate, Canberra, November 2020, p. 12.

[37].    Ibid., pp. 13–14.

[38].    Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 15, 2020, 11 November 2020, pp. 7–9.

[39].    Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 17, 2020, 2 December 2020, pp. 35–37.

[40].    J Collins, ‘Second reading speech: Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 1) Bill 2020’, House of Representatives, Debates, 5 March 2020, p. 2663.

[41].    R Sharkie, ‘Second reading speech: Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 1) Bill 2020’, House of Representatives, Debates, (proof), 27 October 2020, p. 51.

[42].    Aged & Community Services Australia (ACSA), Submission to ACFA consultation, Improving Home Care payment arrangements, November 2019; Leading Age Services Australia (LASA), Submission to ACFA consultation, Improving Home Care payment arrangements, 19 November 2019; Catholic Health Australia (CHA), Submission to ACFA consultation, Improving Home Care payment arrangements, 14 November 2019.

[43].    Although the Government no longer refers to implementing Phase 3, discussion of Phase 3 is included in this section as the Explanatory Memorandum for this Bill states that a mechanism which would permit the drawing down of unspent funds would be introduced by this Bill. It appears that the detail of this mechanism will be included in subordinate legislation.

[44].    ACSA, Submission to ACFA consultation, op. cit., p. 7.

[45].    Ibid.

[46].    LASA, Submission to ACFA consultation, op. cit.

[47].    CHA, Submission to ACFA consultation, op. cit.

[48].    LASA, ‘Payment in arrears legislation must include support for transition and more home care’, LASA website, 4 March 2020.

[49].    R Colbeck (Minister for Aged Care and Senior Australians), Aged care activities pause due to COVID-19, media release, 27 March 2020.

[50].    J Skatssoon, ‘Home care payment reforms put on ice’, Community Care Review website, 31 March 2020.

[51].    R Haupt, The Royal Commission into Aged Care Quality and Safety: a quick guide, Research paper series, 2019–20, Parliamentary Library, Canberra, 2019.

[52].    Royal Commission into Aged Care Quality and Safety (RCACQS), ‘Transcript of proceedings: Hearing 4, Sydney, 31 August 2020’, RCACQS, [Sydney], 2020, p. 8824.

[53].    Senate Standing Committee on Community Affairs, Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 1) Bill 2020 and Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 2) Bill 2020, Inquiry homepage.

[54].    ACSA, Submission to Senate Standing Committee on Community Affairs, Inquiry into Aged Care Legislation Amendment(Improved Home Care Payment Administration No. 1) Bill 2020 and Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 2) Bill 2020, 19 November 2020; Federation of Ethnic Communities’ Councils of Australia (FECCA), Submission to Senate Standing Committee on Community Affairs, Inquiry into Aged Care Legislation Amendment(Improved Home Care Payment Administration No. 1) Bill 2020 and Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 2) Bill 2020, 19 November 2020; LASA, Submission to Senate Standing Committee on Community Affairs, Inquiry into Aged Care Legislation Amendment(Improved Home Care Payment Administration No. 1) Bill 2020 and Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 2) Bill 2020, 20 November 2020; Council of the Ageing Australia, Submission to Senate Standing Committee on Community Affairs, Inquiry into Aged Care Legislation Amendment(Improved Home Care Payment Administration No. 1) Bill 2020 and Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 2) Bill 2020, 19 November 2020.

[55].    ACSA, Submission to Senate Standing Committee on Community Affairs, op. cit.

[56].    LASA, Submission to Senate Standing Committee on Community Affairs, op. cit.

[57].    FECCA, Submission to Senate Standing Committee on Community Affairs, op. cit.

[58].    Australian Government, Budget measures: budget paper no. 2: 2019–20, op. cit., p. 102. This is the consistent with the Explanatory Memorandum, see Explanatory Memorandum, op. cit., p. 2.

[59].    Australian Government, Budget measures: budget paper no. 2: 2020–21, op. cit., p. 91.

[60].    The Statement of Compatibility with Human Rights can be found at pages 14–16 of the Explanatory Memorandum to the Bill.

[61].    Explanatory Memorandum, op. cit., p. 15.

[62].    Ibid.

[63].    Parliamentary Joint Committee on Human Rights, Human rights scrutiny report, 13, 2020, 13 November 2020, p. 18.

[64].    Aged Care Act 1997, subsection 48-1(2).

[65].    Aged Care Act, section 48-2. Subsidy, supplement and care subsidy reduction amounts and formulae are set out in the Aged Care (Subsidy, Fees and Payments) Determination 2014. Matters relating to supplements and care subsidy reductions are set out in the Subsidy Principles 2014.

[66].    Aged Care Act, section 48-3.

[67].    Ibid., section 48-4.

[68].    Ibid., section 48-5.

[69].    Ibid., section 48-7.

[70].    Ibid., sections 48-9 and 48-10.

[71].    Ibid., proposed section 48-14.

[72].    Ibid., proposed section 48-15 provides for home care credits.

[73].    Explanatory Memorandum, op. cit., p. 18.

[74].    Explanatory Memorandum, op. cit., p. 1; Aged Care Act, proposed subsection 48-1(2) refers to the provider held amount.

[75].    Aged Care Act, subsection 48-1(2).

[76].    Unless the home care recipient has changed to a new provider within the period specified in the Subsidy Principles, or other circumstances which are specified in the Subsidy Principles apply, in which case proposed subsection 48-1(3) applies and the home care account balance is not included in the calculation. This recognises that in some situations an approved provider may need time to finalise the home care account balance, for example if the client has changed providers. Source: Explanatory Memorandum, op. cit., p. 18.

[77].    Ibid.

[78].    Australian Government, ‘Home Care Package costs and fees’, My Aged Care website.

[79].    Home care credits and debits can also arise in the circumstances specified in the Subsidy Principles.

[80].    See section 1-2A of the Aged Care (Transitional Provisions) Act 1997 and the definitions of ‘continuing care recipient’ in the Dictionaries at Schedule 1 to the Aged Care (Transitional Provisions) Act 1997 and the Aged Care Act 1997.

[81].    Subsection 48-1(3) of the Transitional Provisions Act.

[82].    A New Tax System (Goods and Services Tax) Act 1999, subsection 38-30(1).

[83].    Explanatory Memorandum, op. cit., p. 21.

[84].    Ibid.

[85].    Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 15, 2020, op. cit., p. 8.

[86].    Aged Care Act, subsection 47-4A(1). The Secretary may also determine a longer period for varying a claim.

[87].    Explanatory Memorandum, op. cit., p. 22.

[88].    Aged Care Act, proposed paragraph 47-1(1A)(b), inserted by item 1 of the Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 1) Bill 2020.

[89].    Explanatory Memorandum, op. cit., p. 23.

 

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