WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Aged Care Amendment (Omnibus) Bill
1999
Date Introduced: 10 June 1999
House: House of Representatives
Portfolio: Aged Care
Commencement: With the exception of Schedule 4
and items 3 and 4 of schedule 5, the Act commences on proclamation
or within six months after the day on which the Act receives Royal
Assent. Schedule 4 is taken to have commenced immediately after the
commencement of Schedule 2 to the Veterans' Affairs Legislation
Amendment (Budget and Simplification Measures) Act 1997. Items
3 and 4 of Schedule 5 are taken to have commenced immediately after
the commencement of Schedule 1 to the Aged Care (Consequential
Provisions) Act 1997.
The purpose of
the Aged Care Amendment (Omnibus) Bill 1999 is to
introduce measures to address administrative and procedural issues
arising from the introduction of the aged care structural reforms
in 1997. The measures include:
-
- clarification of provisions for 'pre-entry leave' (available to
intending residents before they enter a service);
-
- strengthening the revocation action which can be taken by the
Secretary of the Department, where a provider is no longer
considered suitable;
-
- formalising the daily accommodation charge for people entering
high level residential care;
-
- formalising arrangements to reduce the qualifying period of
co-residence (for a carer or close relative of the person occupying
the family home, and in receipt of an income support payment) from
5 years to 2 years;
-
- providing authority for residents who have already paid a bond
in a hostel to rollover the bond on entering a nursing home instead
of paying an accommodation charge;
-
- enabling provisions for legal representation of people with a
mental impairment, so that accommodation payment agreements can be
entered into within a defined period;
-
- extending and clarifying definitions for 'close relation',
'concessional resident' and 'assisted resident' in recognition of
wider carer roles and responsibilities;
-
- amending consequential provisions in relation to sanctions for
service providers who have breached responsibilities and extending
the period of approvals for additional recurrent funding where
facilities are being constructed or upgraded.
This Bill provides a means of 'tidying' a range
of measures already in operation under subordinate legislation
(with the exception of the proposed new 'rollover' provision for
residents moving from a hostel to a nursing home).
The Aged Care Act 1997
In general, the Aged Care Act 1997 (the
ACA) provides for the Commonwealth to provide financial assistance,
through the payment of subsidies, for the provision of aged
care.
The objects of the Act include:
-
- the provision of funding of aged care
-
- promoting a high quality of care and accommodation
-
- ensuring that aged care services are targeted towards the
people with the greatest need for those services, and
-
- encouraging diverse, flexible and responsive aged care
services.
Before the Commonwealth can pay a subsidy to a
provider of aged care, they must be approved.
Approved providers have particular
responsibilities relating to accountability, quality of care
provided and user rights of care recipients.
Failure to meet these responsibilities can lead
to the imposition of sanctions affecting the status of approvals,
and may, therefore, affect the amounts of subsidy paid to an
approved provider
One of the responsibilities of an approved
provider relates to resident fees charged for, or in connection
with, the provision of care and services.
Aged Care Structural Reforms
The structural reforms for residential aged care
introduced in the context of the 1996-97 Budget extended the user
pays system in the form of accommodation charges to help raise the
funds to provide adequate nursing home/hostel accommodation and
upgrade existing facilities. The new arrangements mean that aged
people with 'sufficient' means are expected to contribute more
towards their care than was formerly the case. The main features of
the reforms include:
-
- a single resident classification scale (eliminating the
distinction between nursing homes and hostels) to determine the
amount of subsidy for each resident,
-
- introduction of resident entry contributions for all
residential care, essentially ceasing Commonwealth capital funding
for residential aged care (with the exception of provisions for
rural and remote facilities). It is expected that future capital
works will be funded by revenue raised from the accommodation
charges and from the internal funds of residential aged care
providers. Special provisions apply for financially disadvantaged
people classified as 'concessional residents',
-
- an accreditation system emphasising quality assurance, and
-
- income testing of residential care benefits for all
residents.(1)
The capital underfunding of the residential aged
care sector is an ongoing concern, in spite of the introduction of
the user pays system. The 1994 Gregory Report estimated there was a
need for an additional $125m per year to fulfil the capital
requirements of the nursing home sector.(2) Government estimates
have suggested that the new accommodation charge will raise that
amount by the fourth year of its operation. However, another
estimate has predicted a large ($1.3-2 billion) capital shortfall
in the residential aged care industry(3) up to the year 2000. If
this prediction proves accurate, there is likely to be a decline in
the standard of residential aged care, placing further demands upon
residents or the community at large. The Australian National Audit
Office in its 1998 audit report The Planning of Aged Care
suggested measures to address the lag in provision of places
(including the extension of provisional allocations to become
operational, which is part of the proposed package of measures in
this Bill), but noted that this would not eliminate entirely the
lag in the provision of places required.(4)
Schedule 1
Schedule 1 amends the Aged Care Act
1997 (the ACA). In 1997 the Government announced that
accommodation charges would be payable by residential care
recipients. These charges were contained in regulations made under
the ACA and this Bill will incorporate them into that
legislation.
The schedule also deals with some of the
administrative and procedural issues that have arisen since the
commencement of the charge.
Changes to the Residential Care Subsidy
The first set of items of importance
(items 11 - 23) amends the part of the ACA dealing
with the amount of the residential care subsidy payable by the
Government to care service providers.
Concessional Residents
Item 14 amends Section 44-7 of
the ACA which defines persons who qualify as concessional
residents. Currently a home-owner can only be a concessional
resident if their home was occupied for the past 5 years by their
partner or dependent child, or by their carer or close relation,
who at the applicable time, was eligible to receive an income
support payment.
Proposed subparagraph
44-7(1)(b)(ii) reduces from 5 years to 2 years the time
for which a resident's carer must have been occupying the
resident's home in order for the home not to be counted in the
value of the residents assets. The period of co-residence for close
relatives remains 5 years.
Item 15 makes clear that
concessional residents are not liable to pay an accommodation bond
or an accommodation charge.
Assisted Residents
Item 17 has a similar to
purpose to Item 14. It amends section 44-8 which defines an
'assisted resident'. It provides that a resident's carer must have
been occupying the home for at least 2 years in order for the
resident's home not to count as an asset when determining their
status as a concessional resident. In the case of co-residence of a
close relation, the relation must have been occupying the home for
at least 5 years in order for the resident's home not to be
included as an asset.
Item 18 clarifies that an
assisted resident may be required to pay an accommodation
charge.
Charge Exempt Resident Supplement
Item 19 inserts new
section 44-8A which creates the 'charge exempt resident
supplement'. The explanatory memorandum states that the purpose of
the supplement is to compensate providers for not receiving an
accommodation charge from charge exempt residents in permanent
residential care.(5) New subsection 44-8A(3) sets
the daily amount of the supplement. New subsections
44-8A(5) and (6) enable the Secretary to determine, in
circumstances specified in the Residential Care Subsidy Principles,
that the supplement be paid to the recipient or their estate or
legal representative, or another person, rather than to the service
provider.
Items 25 and
26 extend the obligations on residential care providers
and community care providers respectively, in relation to care
recipients who have left the service of the provider or have died,
and who have paid an accommodation charge while they were exempt
residents. Under the amendments, the care provider must take
reasonable steps to find the care recipient or their legal
representative, and, if the Secretary so directs, to refund the
accommodation charge to them.
The definition of a charge exempt resident is
contained in new section 44-8B.
Calculation of Value of Care Recipients' Assets
Item 20 has a similar purpose
to items 14 and 17. It provides that, if the care recipient owns a
home, then a recipient's carer must have been occupying the home
for at least 2 years in order for the home not to count towards
their assets. In the case of co-residence of a close relation, the
relation must have been occupying the home for at least 5 years in
order for the resident's home not to be included as an asset.
Item 21 enlarges the definition
of 'close relation' in section 44-11(1) to include a grandchild in
addition to a sister, brother or child. Item 22
broadens the definition of 'dependant child' in section 44-11(2) by
changing the focus from whether or not the child is earning or
receiving an income, to whether or not the adult on whom the child
is dependant is legally obliged to provide financial support for
the child. Items 21 and 22 affect in turn the
definitions of 'assisted resident' and 'concessional resident', and
in the calculation of the value of a care recipient's assets.
Accommodation Bonds and Charges
Accommodation bonds and accommodation charges
are the two types of fees that may be charged by a residential care
provider. People entering a service with nursing home level of care
may be asked to pay an accommodation charge, while people entering
a service with hostel level of care (a higher level of care), or an
'extra service' place, may be charged an accommodation bond. An
important difference between the two fees is that the charge
accrues daily, whereas the bond does not accrue.(6) At present, the
accommodation charge is implemented through subordinate
legislation. The Bill seeks to embody the charge in primary
legislation.
Accommodation Bonds
Item 28 tightens the rules
contained in section 57-2 concerning charging a person an
accommodation bond upon entry into a residential care service.
Under the new rules, a service provider cannot charge an
accommodation bond where the person is a charge exempt resident.
The item also inserts new section 57-2(2), which
extends the time available to a care provider and recipient to
enter into an accommodation bond agreement in the case of a
recipient who has a mental impairment.
Accommodation Charges
Item 34 inserts new
Division 57A, dealing with accommodation charges.
'Accommodation charge' is defined in the
Dictionary to the Act (as amended by item 46) to
mean an amount that accrues daily and is payable to an approved
service provider, being for a person's entry into a residential or
flexible care service.
The new Subdivision 57A-A sets
out the basic rules which apply to charging of an accommodation
charge by a service provider. The following criteria, contained in
new paragraph 57A-2(1)(a), must be satisfied at
the time a person enters a residential care service: the person
must require a high level of residential care, and be approved as a
recipient of such care; the service (or a distinct part thereof)
must not have 'extra service' status, and the service provider must
not be able to charge an accommodation bond for the service under
new section 57-23. Otherwise, many of the basic
rules for accommodation charges are the same as those listed in
section 57-2, that apply to accommodation bonds.
Upon entry into a residential care service, the
care provider and recipient must enter into an accommodation charge
agreement. New Subdivision 57A-B specifies the
matters which may be subject of an accommodation charge agreement.
Accommodation charge agreements may be incorporated into other
agreements: new section 57A-4.
New section 57A-6 explains how
the accommodation charge is calculated. The charge is either the
amount specified in the accommodation charge agreement, or an
amount related to the recipient's assets, or an amount worked out
in accordance with the User Rights Principles.(7)
New section 57A-7 limits the
period over which the accommodation charge can accrue to 5 years
from the date a person enters the care service, or the service
becomes certified.(8) New section 57A-8 makes it
clear that the accommodation charge does not accrue during any
period for which the residential care service is not certified.
New section 57A-9 gives the
Secretary power to determine, in accordance with the User Rights
Principles, that the accommodation charge does not apply to a care
recipient on the grounds of financial hardship. A person seeking an
exemption must apply in writing and the Secretary must reply,
normally within 28 days.(9) The reply must be in writing and may
specify a date or occasion on which the determination will cease to
apply. The determination of the Secretary is reviewable, in the
first instance internally, and in the second instance by the
AAT.(10)
The Secretary may also revoke a determination
made under section 57A-9: new section 57A-10.
However, natural justice applies - the person must be given an
opportunity to respond to the notice of revocation - and the
Secretary's decision to revoke is reviewable, in the manner
described above.(11)
New Subdivision 57A-D deals
with the payment of accommodation charges. New section
57A-11 provides that a care recipient may be required to
pay an accommodation charge up to one month in advance of the date
that the charge accrues. New section 57A-12 allows
a service provider, if permitted by the accommodation charge
agreement, to charge interest on any overdue amount of an
accommodation charge.
Accommodation Bonds instead of Accommodation Charges
Item 33 inserts new
section 57-23, which enables a care recipient, who has
entered into an accommodation bond agreement with a residential
care provider and subsequently ceases to be cared for by that
provider, to enter into a new care service and with the agreement
of the new provider, to pay an accommodation bond, rather than an
accommodation charge, for the new service. The amount of bond
payable for the new service cannot exceed the amount refunded to
the care recipient by the original service provider, or the amount
agreed with the original service provider less any retention
amounts if the bond was not paid as a lump sum.
Schedule 2
Schedule 2 amends the Social Security Act
1991 (the SSA).
Exclusion of Rent from Income and Asset Tests when
Person Liable for Accommodation Charge
The Bill excludes from the asset test a person's
principal home prior to their entry into a residential care
service, and from the income test, rent paid by a third party now
living in the principal home, if the person is liable to pay an
accommodation charge.
Item 7 inserts a new
subsection 11(6A), extending the definition of 'principal
home' for the purposes of the income test. The subsection deems a
residence to be a 'principal home' even although a person is not
living there if the Secretary is satisfied that the residence was
previously the person's principal home but that the person left it
for the purpose of going into a care situation. In addition the
person must be accruing a liability to pay an accommodation charge
and the person or the person's partner must be receiving rent for
the residence. The subsection provides that if the residence is
deemed to be a principal home, then it is also the principal home
of the person's partner.
The subsection will ensure that persons who rent
out their principle home and pay an accommodation charge will not
have their home included in the income test.
Item 6 adds to the list of
'excluded amounts' for the purposes of the income test (section 8)
any rent that a person receives from another in respect of their
principal home, while they are liable to pay an accommodation
charge.
Refunds of Accommodation Bonds and Refunds to Charge
Exempt Residents not to count in Ordinary Income Test
Item 13 inserts two new
divisions into Part 3.10 of the SSA, dealing with the ordinary
income test.
Refunds of Accommodation Bonds
New Division 1D must be viewed
in the context of the change in the Government's policy with
respect to the charging of accommodation bonds that occurred on 6
November 1997. When the ACA came into force on 1 October 1997, it
provided that all residential care service providers could charge
an accommodation bond. In response to a public outcry over the
charging of bonds for entry into nursing homes, on 6 November 1997
the Government, in subordinate legislation, reduced the amount of
the accommodation bond for high level residential care to a nominal
amount.
At the same time, again in subordinate
legislation, the Government introduced a daily fee for residential
care, the accommodation charge. However, this left without support
a group of people who in the intervening period had paid the bond,
and in some cases, had sold, or arranged to sell, their homes in
order to so. So as not to disadvantage those people in relation to
the pension, the Department of Health and Aged Care (DH&AC)
came to an administrative arrangement with the Department of Social
Security (DSS) whereby people in the group were given an ex-gratia
payment to compensate them for the fact that they were adversely
affected in the income test, by the Government's change in
policy.
Having now elevated the accommodation charge to
the status of primary legislation, the Bill also puts the
administrative arrangement between DH&AC and DSS on a
legislative footing, to ensure that people in the group referred to
above will not be disadvantaged under the SSA.
New section 1099E states that
the new subdivision will apply to two classes of people. In the
first class are people who, at any time between 1 October and 5
November 1997, entered a residential care service and became liable
thereon to pay an accommodation bond, but subsequently agreed with
the service provider to pay an accommodation charge instead, and
had the bond refunded. The second class includes those who had
sold(12) their homes prior to 5 November 1997 for the principal
purpose of entering a residential care service.
In each class, new section
1099F provides that the money received, from either the
refund or the sale (less the costs incurred incurred in the course
of the sale), is not to count as income for the purposes of the
ordinary income test. The new subdivision applies to an
accommodation bond paid by, or a home owned by, a person jointly
with their partner. However, unless the partner is deceased, half
the amount obtained from the refund or sale will be included in the
income test. This is the effect of new sections 1099E(3) and
1099H(6).
Refunds to Charge Exempt Residents
New Division 1E ensures that a
refund of accommodation charges paid to a charge exempt resident is
not included in the income test. New section 1099J
states that the division applies to people who were or are charge
exempt residents, or other people to whom an charge exempt
resident's refund is paid. New section 1099K
states that refunds are not to count as income for the purposes of
the ordinary income test.
Refunds of Accommodation Bonds and Refunds to Charge Exempt
Residents Not Financial Asset for the Purposes of the Ordinary
Income Test
New sections 1099G and 1099L
respectively ensure that people who invest the money they obtained
from a refund of their accommodation bond (or sale of their home)
or a refund because they are charge exempt residents, will not be
penalised vis a vis those who do not choose to invest the money:
the money obtained is to be treated as a financial asset for the
purposes of the income test.
Refunds of Accommodation Bonds and Refunds to Charge
Exempt Residents to be counted in Assets Test
Having excluded refunds of accommodation bonds
and refunds to charge exempt residents from the ordinary income
test in Divisions 1D and 1E, the Bill amends Part 3.12 of the SSA,
to also exclude them in the assets test. Item 15
inserts new sections 1118AB and
1118AC which reduce the value of a person's assets
by the amount obtained from a refund of their accommodation bond
(or sale of their home) or a refund because they are a charge
exempt resident.
Schedule 3
Schedule amends the Veterans' Entitlements
Act 1986 (the VEA). The amendments to the VEA mirror the
amendments to the SSA in Schedule 2.
Exclusion of Rent from Calculation of
Income
Item 5 adds to the list of
items excluded from the definition of 'income' in section 5H rent
derived from a person's principal home while the home is occupied
by another party and the person is liable to pay an accommodation
charge.
Item 12 amends the definition
of 'principal home' in section 5L to exactly match the definition
in new section 11(6A) of the SSA.
Refunds of Accommodation Bonds and Refund to Exempt Charge
Residents not to be be included in Calculation of Assets
Item 21 inserts new parts into
Schedule 5 of the VEA, dealing with Savings and Transitional
Provisions.(13) The purpose of the new parts as disclosed in the
Explanatory Memorandum is to:
...ensure that certain amounts relating to the
bond refunded or the proceeds of the sale are excluded from the
income and assets tests to be applied to the assessment of the
person's (and the person's partner's) service pension or income
support supplement.(14)
New Part 2 applies to the same
two classes of people referred to above in relation to new Division
1D of the SSA, namely those who sold or arranged to sell their
homes prior to 5 November 1997, and those to whom an accommodation
bond has been refunded, in accordance with agreement with the
service provider. New clause 15 provides that the
amount obtained from the sale or refund is not to be included in
the assets test under the VEA (cf. new section 1118AB of the SSA).
The VEA contains provisions similar to the SSA concerning amounts
obtained by the partner of a person, and ensuring that people who
choose to invest the money are not disadvantaged vis a vis those
who don't.
New Part 2A applies to charge
exempt residents. New clauses 17B - 17D ensure that a refund paid
to such a resident (or another person in lieu) is not included in
the assets test under the VEA, and in this regard the clauses
achieve the same objective as new sections 1009J, 1099L and 1118AC
of the SSA.
In is curious that Bill does not amend the VEA
in the same way that it amends the SSA (see new sections 1099F and
1099K) in order to achieve the object of excluding from the income
test money refunded to a charge exempt resident, or money obtained
from the refund of an accommodation bond. Apparently, the
Department of Veterans' Affairs intend to achieve this objective
through subordinate legislation: a determination will be made that
money refunded to a charge exempt resident, or money obtained from
the refund of an accommodation bond is an 'exempt lump sum'. Exempt
lump sums do not count as income by virtue of new
subparagraph 5H(12) (item 6). It seems
regrettable that the mirror symmetry between the amendments to the
SSA and the VEA has been lost.
New clause 17A exempts from the
income test under the VEA rent received prior to 1 July 1999 by a
charge exempt resident or their partner from a third party in
respect of their principal home. The definition of principal home
is temporally limited in this section to times during which a
person is, up until 1 July 1999, a charge exempt resident.
Schedule 5
This amends the Aged Care (Consequential
Provisions) Act 1997. (the ACCPA). The Explanatory Memorandum
explains that the amendments 'remedy unintended effects and
oversights' in the ACA.(15)
Items 1 and 2 have the effect
of making subject to the provisions of Pt 4.4 of the ACCPA (which
deal with the consequences of non-compliance), nursing homes that
do not comply with any conditions on their approval as residential
care service providers, and do not declare such non-compliance,
prior to the commencement of the ACA.
The annual report on the operation of the ACA
will address issues such as unmet demand for places, adequacy of
subsidies, compliance of providers, amounts of accommodation bonds
charged and the imposition of sanctions for non-compliance. As
well, these measures will be reviewed as part of the Two Year
Review of Aged Care Reform, commenced in 1998 and due for
completion in July 2000.
-
- McIntosh, Greg: "The 'Boomer Bulge': Ageing Policies for the
21st Century", Research Paper No 4, 1998-99,
Department of the Parliamentary Library
- Gregory, R G: Review of the Structure of Nursing Home
Funding Arrangements: Stage 2, Aged and Community Care Service
Development and Evaluation Reports, Number 12, May 1994
- HESTA Report Into Strategic Capital Needs of the
Residential Aged Care Industry 1997-2003, Tasman Asia Pacific
in association with Economic Insights, June 1997
- Australian National Audit Office: 'The Planning of Aged Care',
Audit Report No 19, 1998
- Explanatory Memorandum, pp 18 - 19.
- This distinction is emphasised by an amendment to the
definition of 'accommodation bond' effected by item 45.
- The User Rights Prinicples are a statutory instrument made
under section 55-2 of the ACA. The Principles contain some of the
responsibilities of approved care providers to the users, and
proposed users, of their aged care services, and the corresponding
rights of those users and proposed users. Other users' rights and
providers' responsibilities are contained in Part 4.2 of the ACA.
- Section 44-2 and new section 57A-7(3). Days on which a
recipient attends hospital for treatment (together with an
additional 52 days of leave each year) are included in the 5 year
period.
- The Secretary has the power to request further information from
the applicant if necessary: new section 57A-9(5).
- Item 39 of the Bill and Part 6.1 of the Act.
- Item 39 of the Bill and Part 6.1 of the Act.
- 'Sell' is defined in section 1099E(4) in the following way:
'... the time at which a person sells his
or her home is the time when he or she comes under a legal
obligation to transfer the home to the buyer'.
- Schedule 5 is not actually divided into parts.
- Explanatory Memorandum, p 41.
- ibid., p 47.
Andrew Grimm, Mark Tapley and Jackie Ohlin
19 August 1999
Bills Digest Service
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ISSN 1328-8091
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