Aged Care Amendment Bill
2 June 2004
House: House of Representatives
Portfolio: Health and Ageing
1 July 2004. If the
Bill is not enacted until after 1 July 2004, it will still
This Bill seeks
to make two amendments to the Aged Care Act 1997, which
regulates residential aged care in Australia. The first amendment
seeks to simplify the aged care assessment process and the second
seeks to impose ongoing accommodation charges for certain residents
in high care residential facilities (formerly called nursing
The amendments arise out of recommendations
from the recently released Review of Pricing Arrangements in
Residential Aged Care by W.P. Hogan(1) (the Hogan
Report). This comprehensive report contained many recommendations,
including the call for additional funding for residential aged
care. Many of the recommendations were addressed in the context of
the 2004-05 Budget.
Both of the amendments in the Bill are
essentially minor but the second one, relating to accommodation
charges, will have an adverse financial impact on certain elderly
people who enter high care residential facilities on or after 1
Before anyone is eligible to enter a
Commonwealth funded residential aged care facility they must be
assessed by an Aged Care Assessment Team (ACAT) as needing either
high level (nursing home) or low level (hostel) care. Residents are
classified into 1 of 8 categories on the so called Residential
Classification Scale (RCS) with categories 1 to 4 being classed as
high care and categories 5 to 8 being classed as low care. The
level of Commonwealth recurrent funding that the residential aged
care facility receives largely depends on the RCS rating for each
resident. The higher the RCS classification, the greater the level
of funding from the Commonwealth.
Assessment of residents by an ACAT team is
given before entry into a facility and the assessment remains
effective for 12 months or until the resident leaves the facility.
Under current arrangements, an ACAT must reassess a resident before
they can move from low level care to high level care in the same
The Hogan Report argued that there would be
greater clarity and better delineation of the relative
responsibilities if ACATs focused primarily on initial entry to
care and if the relevant Departmental and accreditation systems
concentrated on monitoring the appropriateness or otherwise of any
change in classification from low to high care.(2) The
Department operates a Residential Classification review program
which monitors resident classifications. Other measures, such as
auditing, would also be relevant to monitoring changes in
The proposed amendment in this Bill would see,
from 1 July 2004, the removal of the requirement for an ACAT
assessment before a resident can move from low level care to high
level care in the same facility.
Residents in residential aged care facilities
can be asked to pay two sets of fees, one to help cover ongoing
costs (daily care fees) and one to help cover capital costs
(accommodation payments). Accommodation payments are called
accommodation bonds (when applied to low level or hostel care) or
accommodation charges (when applied to high level or nursing home
care). These payments are designed to help ensure that residential
aged care facilities have enough funding to meet their various
capital needs including expansions, upgrading and maintenance.
The second amendment in this Bill relates to
accommodation charges that are paid by certain residents in high
level care. Residents who do not have to pay an accommodation
charge include - those with assets worth less than $29,000; users
of respite care; those who were living in a nursing home prior to
30 September 1997 and those receiving care on an extra service
basis. All other residents must pay an accommodation charge, the
amount of which varies according to the value of assets that they
own. People with assets between $29,000 and $54,386 pay an
accommodation charge that is based on a sliding scale, according to
the margin of assets above $29,000. At present, the maximum
accommodation charge payable is $13.91 per day (or about $5,080 a
year) and applies to residents who have assets of $54,386 or more.
However, as announced in the 2004-05 Budget the maximum
accommodation charge payable is to be increased to $16.25 per day
for all new residents entering high level care from 1 July 2004.
This change does not take effect as a result of this Bill.
Also included under the current arrangements
is the provision that the accommodation charge is limited to a 5
year period. The second amendment in this Bill removes the 5 year
limit so that new residents entering high level care on or after 1
July 2004 will pay the accommodation charge for the whole time they
are in the aged care facility. This change was also recommended in
the Hogan Report.
It should be noted that, apart from the
accommodation charge changes mentioned above, there have been other
funding changes as a result of the recent Federal Budget. The
residential aged care industry has been arguing for many years that
they do not receive enough capital funding, from either the
Commonwealth or via resident contributions, to meet their needs. In
recognition of this the Government, in the 2004-05 Budget, has
allocated additional capital funding to the sector, including
$438.6million for increases in the level of the concessional
resident supplement and the respite supplement and a one-off
payment to aged care providers of $3,500 per resident, totalling
The effect of item 1 of Schedule
1 is to remove the requirement for an ACAT assessment
where an approved provider has notified the Secretary that a
resident s care needs have increased.
The effect of item 3 of Schedule
1 is to remove those provisions that impose a five-year
limit on the requirement to pay an accommodation charge.
Item 4 of Schedule 1 provides
that the removal of the five-year limit on the requirement to pay
an accommodation charge will only apply to persons who first enter
residential care on or after 1 July 2004.
A possible concern with the removal of the
requirement for a further ACAT assessment before a resident can
move from low level care to high level care in the same facility is
the fact that some aged care providers may inappropriately classify
residents into more highly subsidised RCS classifications and
thereby receive additional funding from the Commonwealth. However,
in the Explanatory Memorandum it is contended that this risk will
be managed by additional resourcing of the Residential
Classification review program which will ensure that the
classifications based on those appraisals are correct
If passed, the second amendment will mean that
certain long term residents who enter aged care facilities after 1
July 2004 will have to pay substantially more for their care. For
those residents who stay more than 5 years and who pay the maximum
daily accommodation charge ($16.25 from 1 July 2004) it will mean
an additional impost of $5,915 ($16.25 x 7 x 52) per year after the
first 5 years of care. It is unclear just how many potential
residents may be affected by this change but the Hogan Report did
note a recent tendency for residents to stay longer in residential
aged care facilities. The Report stated that the proportion of
residents staying more than 5 years rose from 13.6% in 1999 to
14.6% in 2002.(4)
Increased accommodation charges resulting from
this amendment will not begin to flow to residential aged care
facilities until 1 July 2009. There will be no direct impact from
this amendment on the funding provided by the Commonwealth to the
aged care sector.
If this Bill is not enacted until after 1 July
2004, it will have retrospective effect from that date until the
date of Royal Assent.
WP Hogan Review of Residential Pricing Arrangements in
Residential Aged Care Report (presented to the Hon Julie
Bishop, Minister for Ageing, 5 April 2004).
(site visited 9 June 2004).
ibid. p. 173.
Explanatory Memorandum Aged Care Amendment Bill 2004 p. 2.
op.cit. n. 1 p. 156.
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Published by the Parliamentary Library, 2004.