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CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer and Copyright Details
Aged Care Amendment Bill
1998
Date Introduced: 5 March 1998
House: House of Representatives
Portfolio: Family Services
Commencement: The substantive changes
outlined below commence on the day on which the Act receives the
Royal Assent.
To amend the
Aged Care Act 1997 to:
- provide that instead of being required to pay a lump sum entry
contribution (referred to as an 'accommodation bond') at the time
of entering a nursing home, a resident will instead pay an annual
charge (referred to as an 'accommodation charge').
- reduce from five years to two years the period of time during
which a carer must have occupied a resident's home for the resident
to qualify as a concessional or assisted resident.
- provide for the reassessment of a resident's concessional or
assisted status upon the resident moving from one aged care
facility to another.
- make it clear that the fees provided for by the Aged Care
Act 1997 are the only fees that a care recipient can be
required to pay by a facility operator.
General
In the 1996-97 Budget, the Government announced
a major structural reform of residential aged care, scheduled to
take effect on 1 July 1997.
The reforms were proposed against a backdrop of
the increasing aging of the population and the pressures this will
impose on the community's ability to care for the aged. In the next
three decades, the proportion of the population aged over
sixty-five will grow from 11.2 per cent to over 19 per cent of the
population - from under two million Australians aged over
sixty-five in 1991, to over five million in 2030. (1)
In 1994 Professor Bob Gregory reviewed the
structure of nursing home funding arrangements and outlined options
to address the deterioration in the nursing home capital stock.(2)
Professor Gregory's report documented major deficiencies in capital
works and criticised the nursing home funding system as providing
neither the funding nor the incentive for providers to maintain
their buildings. The report estimated that ongoing funding of $125
million would be needed to allow a substantial level of immediate
building and upgrading to address existing problems as well as
providing continuing funding to maintain the quality of the
building stock.
The Government's announcement in the 1996-97
Budget responded to the financial situation outlined in the Gregory
report. The Government recognised that given the economic climate
it would not be feasible to provide substantial additional funding
needed to upgrade and maintain the building standards of nursing
homes. Instead, it adopted a user pays approach in the form of
accommodation bonds to be introduced with necessary protections for
financially disadvantaged people. The Department of Health and
Family Services estimated that the change for nursing homes would
raise $130 million in its fourth year of operation.
The Reforms
The reforms announced in the 1996-97 Budget
proposed the introduction of several major changes:
- a single resident classification scale which determines the
level of subsidy of each resident
- an accreditation system based on quality assurance and a
relaxation of the previous detailed acquittal requirements for
nursing homes
- income testing of residential care benefits
- adoption of the resident entry contributions (to be known as
accommodation bonds) across all residential care.(3)
Accommodation bonds
The introduction of accommodation bonds was the
most controversial aspect of the reforms. At the time, hostel
operators were able to charge entry contributions and the proposal
meant that nursing home operators could do the same. There was to
be no upper limit on the amount of bonds but residents had to be
left with assets of at least 2.5 times the basic age pension amount
(about $22,500).(4)
The accommodation bond was able to be paid as a
lump sum or by periodic payments or a combination of both.
Where a person was a full or part pensioner who
had not owned a home for the past 2 years (or owned a home occupied
by a carer or close relation who had been there for the past 5
years or by a partner or dependent child) and who had assets of
less than 2.5 times the basic age pension amount, that person would
qualify as a 'concessional resident'.(5) The calculation of assets
excluded the family home if, at the time, it was occupied by a
carer or close relation who had been there for the past 5 years or
by a partner or dependent child.(6)
Concessional residents would not have to pay an
accommodation bond and facility operators were to receive a daily
supplement (concessional resident supplement) from the Government
in respect of each concessional resident that the operator
accepted.
Where a care recipient would qualify as a
concessional resident but their assets exceeded 2.5 times the basic
age pension amount but were less than 4 times the basic age pension
amount, that person would qualify as an assisted resident.(7)
Assisted residents could only be requested to pay an accommodation
bond of a maximum of about $13,000 and operators would be paid a
small Government supplement in respect of assisted residents.
Income tested resident
fees
Prior to the 1997 policy changes all nursing
home residents paid a non-income tested rate of $26.30 per day
towards their daily living costs, the equivalent of 87.5 per cent
of a combination of their pension and rent assistance. Hostel
residents on maximum rate pensions generally paid 85% of their
combined pension and rent assistance towards the cost of their care
and accommodation. Non-pensioners and part rate pensioners may have
had to pay additional variable fees. It was common for hostel
operators to take half of each resident's non-pension income above
$49 a week.
From the date of commencement of the income
tested fees (which was delayed a couple of times - see below) under
the Aged Care Act 1997, no rent assistance is payable to
residents of approved aged care facilities. The resident fee for a
person who is not in receipt of a pension is $26.40 per day plus
25% of the person's income above $50 per week (to a maximum of
$63.30 per week for a person earning about $56 000 per year). The
resident fee for a person in receipt of a pension or part pension
is $21.10 per day (i.e. 85% of the basic age pension amount) plus
25% of the person's income above $50 per week.(8)
The residential care subsidy paid by the
government to facility operators in respect of each care recipient
is reduced on a dollar for dollar basis by the amount the operator
receives by way of the income tested component of the daily fee,
i.e. the 25% of the person's income about $50 per week.
Delays and modifications
As mentioned above, these reforms were to
take effect
from 1 July 1997. In May 1997, the Minister for Family Services,
the Hon. Judi Moylan MP, announced that the commencement of the
reforms would be delayed until 1 October 1997. The Minister also
announced that the concessional resident supplement would be $5 per
day per resident.
In June 1997, the Minister revised the
concessional resident supplement and outlined that the amount of
the supplement would be paid on a sliding scale dependant on the
number of concessional residents in the facility.
In September 1997, the Minister announced that
the commencement of income tested daily fees would be delayed until
1 November 1997.
As a result of community comment and concern, on
each of 27 October and 6 November 1997, the new Minister for Family
Services, the Hon. Warwick Smith MP (Minister) issued a press
release annexing amendments to the new arrangements, including:
- income tested resident fees to be deferred to 1 March
1998;
- for the purpose of income testing, assets gifted prior to 20
August 1996 are to be disregarded;
- the family home is to be excluded from an assessment of a
person's assets and from the determination as to whether the person
was a concessional resident where a carer has lived in the home for
two years instead of the current five years;
- residents who were in hostels prior to 1 October 1997, and who
suffered an increase in their basic daily fees are to have their
fees reduced to the level they were paying before 1 October
1997;
- Accommodation bonds for those entering nursing homes will no
longer be proceeded with. Accommodation bonds will continue to be
able to be charged by hostels. In respect of nursing homes,
accommodation bonds will be replaced by an annual payment capped at
$4,380, to be called an 'accommodation charge'. That charge will be
payable for a maximum of 5 years. Concessional residents will pay
no charge; and
- Rental from the family home will be exempted from the
assessment of a person's income for pension purposes and for the
purposes of calculating the income tested resident fees.
Amendments to the Aged Care Act
1997
Accommodation bonds
Accommodation bonds will only be able to be
charged in four circumstances:
- the care recipient is entering residential care and is
determined by the Secretary of the Department of Health and Family
Services (the Secretary) as suitable for hostel care as opposed to
nursing home care
- the Secretary has not made a determination as to whether the
care recipient is suitable for hostel or nursing home care and the
care recipient and provider agree that an accommodation bond is
payable.
- the care recipient is entering an extra service place (i.e. one
where the accommodation, services and food are of a significantly
higher standard than average and for which the care recipient pays
a significantly higher daily fee).
- the care recipient is moving from one care facility, to which
an accommodation bond has been paid, to another. In that
circumstance, the maximum bond payable is the amount which is due
to be refunded by the first facility (Items 32 and
37; proposed new section 57-23).
The accommodation charge
As mentioned above, accommodation bonds will not
be able to be charged by operators in respect of care recipients
who are to receive nursing home care. Instead the care recipient
who resides in a nursing home, having entered the home after on or
after 6 November 1997, will be obliged to pay an accommodation
charge. The accommodation charge is to be distinguished from the
daily income tested resident fees (see above) which will continue
to be payable.
Item 38, proposed new section
57A-2 sets out 13 rules relating to the charging of an
accommodation charge. The most significant of these are:
- the provider and the care recipient must have entered into an
accommodation charge agreement before or within 7 days after the
care recipient entered the service
- the rate of the accommodation charge must not exceed the lesser
of:
- the amount specified in the accommodation charge agreement (see
proposed new section 57A-3)
- (V - M) 1825 where V is the value of the care recipient's
assets and M is 2.5 times the basic age pension amount (about
$22,600 at present; $23,000 from 2 April 1998)) (1825 is the number
of days in 5 years). A page showing examples of the amount of the
accommodation charge based on certain asset levels is attached to
this Digest.
- the amount specified in the User Rights Principles. The
Minister has said that the accommodation charge will be capped at
$12 per day and $6 per day for assisted residents. That cap will be
imposed through specification in the User Rights Principles
(proposed new section 57A-6).
- the accommodation charge is payable for a maximum of 5 years
(proposed new section 57A-7).
- like the income and retention amounts which an operator would
receive from an accommodation bond, the accommodation charge must
be used to meet capital works costs relating to residential care or
to retire debt or improve the range and quality of aged care
services.
Carers residing
in the family home
As mentioned above, the present test as to
whether a person qualifies as a concessional or assisted resident
includes a requirement that the person has not owned a home for 2
years or that the home has been occupied by a carer or close
relation, for the past 5 years and that carer/relation is in
receipt of a pension. Further, the persons assets must be valued at
less than 2.5 times the basic age pension amount. The calculation
of assets does not include the family home where it has been
occupied by a carer or close relation for the past 5 years provided
that carer/relation is in receipt of a pension.
Items 16, 20 and
23 amend the concessional resident test, the
assisted resident test and the calculation of assets provisions
respectively, to provide that a carer need only have resided in the
care recipient's home for 2 years instead of 5 years. Note that 5
years is still the requisite time period for close relations and
the requirement that the person be in receipt of a pension
remains.
Time of
assessment for concessional and assisted resident
status
At present the time at which a person is
assessed for the purpose of qualifying as a concessional or
assisted resident is the time at which the person first enters a
residential care service. Consequently a person will not have that
status reviewed if they move to another facility even where their
circumstances have significantly changed.
Items 15 and
19 amend the concessional and assisted resident
provisions respectively to provide that the assessment is
undertaken each time a person enters a residential care facility
including where they move from one facility to another.
Charging other
fees
Item 27 amends the
responsibilities of approved providers in respect of residential
care to prohibit operators charging fees for:
- being placed or retained on a waiting list for entry to the
service
- the operator's costs of complying with its obligations under
the Aged Care Act 1997
- any other thing or in any other circumstance specified in the
User Rights Principles.
Amendments to the Social Security Act
1991 and the Veterans' Entitlements Act 1986
The Government has promoted the concept of
renting the family home with a view to the rental income providing
a sufficient stream to pay the accommodation charge. However, for
each $1 income a single pensioner receives in excess of $50 per
week the pension is reduced by 50 cents.
Item 3 of Schedule
2 and item 4 of Schedule
3 remedy this problem (under the Social Security Act
1991and the Veterans' Entitlements Act 1986
respectively) by exempting income earned from renting the family
home from the pension income test where the person is liable to pay
an accommodation charge.
Proposed sections 1099A to
1099D of the Social Security Act 1991
(Item 13 of Schedule 2) and
proposed sections 12 to 17 of the
Veterans' Entitlements Act 1986 (item 19
of Schedule 3) apply where either:
- after the introduction of the accommodation bond scheme but
before it was announced that it would be abolished in respect of
nursing home residents (i.e. from 1 October 1997 to 5 November
1997), a nursing home resident paid an accommodation bond but has
subsequently agreed with the operator that the bond be refunded and
an accommodation charge be paid instead.
- on or before 5 November 1997, a person sold his or her home to
raise the money to pay an accommodation bond for entry into a
nursing home.
Where those provisions apply, the amount of the
refunded bond or the house sale proceeds are deemed not to be
income and not to be an asset for the purposes of the income and
assets tests under the respective Acts. Further, the person's
income is taken to be reduced by the amount that they would
otherwise be deemed by the respective Acts to earn on the refunded
bond or house sale proceeds (i.e. 3% on the first $30 400 and $5%
on the balance).
The abolition of the accommodation bond in
respect of nursing home residents seeks to address the concerns of
prospective residents of those facilities. However, in respect of
payment of the accommodation charge there is an issue which
requires attention. The Minister has said that there are four
options available for payment of the accommodation charge,
namely:
- making a monthly payment presumably out of the existing assets
of the care recipient
- renting the family home and using that income stream, given
that such income will no longer affect the person's entitlement to
a pension or their income tested fees
- a charge against the person's estate
- a reverse mortgage against the family home.
Whilst the first two of these four options are
quite clear, the latter two need clarification.
A point to note in respect of deferring payment
until the care recipient's death or 'charging the estate' is that
this option is only available with the agreement of the operator of
the facility. The legislation does not require a facility operator
to accept this method of payment if the care recipient chooses it.
Under this option the operator will have to wait until the death of
the person before they receive payment (unless they are able to
borrow against the future income). It may be the case that an
operator simply won't accept that delay. In those circumstances,
the operator may not be prepared to consider accepting the
prospective resident unless he or she agrees to pay in advance on a
monthly basis.
At present the legislation mandates that a
person be given the option of paying the agreed accommodation bond
by periodic instalments (this will continue for the benefit of
hostel residents who may still be obliged to pay an accommodation
bond).(9) Perhaps consideration could be given to mandating that a
person be given the option of deferring payment of the
accommodation charge until their death, providing there is a
reasonable expectation that the value of person's estate will be
adequate to cover the debt.
A reverse mortgage is a loan (by way of a lump
sum or instalments) which a person makes, secured against a
property that he or she owns, with the intention that the loan and
interest will be repaid from the proceeds of the sale of the
property on the death of the borrower. At present there appear to
be no reverse mortgage facilities available which would be suitable
for use by an intending nursing home resident. The writer
understands that the facilities of this type which are currently
offered by a small number of banks require that the borrower
continues to reside in the mortgaged property. This facility would
be unsuitable to a prospective nursing home resident.
In early November 1997 the Prime Minister
announced that the government would be talking to the banks about
reverse mortgage facilities presumably with a view to encouraging
the development and promotion of an appropriate banking product. At
the time of writing this Digest neither the government nor
the banks had made any announcement in relation to the availability
of such a product.
- Steps to Better Care: Implementation of the Government's
Residential Aged Care Structural Reform Package, Statement by
the Minister for Family Services, 10 February 1997, p. 1.
- Gregory, R.G., Review of the structure of nursing home
funding arrangements, 1994.
- Aged Care Bill 1997, Explanatory Memorandum.
- Aged Care Act 1998, section 57-12.
- Aged Care Act 1997, section 44-7.
- Aged Care Act 1997, section 44-10.
- Aged Care Act 1997, section 44-8.
- Aged Care Act 1997, section 58-2.
- Aged Care Act 1997, section 57-17.
Lee Jones
17 March 1998
Bills Digest Service
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ISSN 1328-8091
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