Bills Digest no. 129 2006–07
Aged Care Amendment (Residential Care) Bill 2006
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
Financial implications
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Aged Care
Amendment (Residential Care) Bill 2006
Date
introduced: 13 September 2006
House: The Senate
Portfolio: Minister for Ageing
Commencement: Schedule 1 of the Aged Care Amendment (Residential
Care) Bill 2006 will commence on prospectively on 1 January
2007. Schedule 2 will commence upon the legislation receiving Royal
Assent.
The Aged Care
Amendment (Residential Care) Bill 2006 will make amendments to the
Aged Care Act 1997 to:
- harmonise age care pension requirements in relation to income
streams and asset disposals (Schedule 1 of the Bill), and
- make changes to the delegation powers of the Secretary
(Schedule 2).
The Bill amends the
Aged Care Act 1997 in relation to assets testing as it
applies to income streams and gifting so that there is equal
treatment of income streams and gifting provisions in both aged
care assets testing and pensions asset testing.
Prior to entry into residential aged care, an
assets test may be conducted to ascertain the prospective resident
s eligibility for subsidised accommodation costs and also to
ascertain the level of accommodation fees and charges that need to
be paid. At present, if prospective residential aged care residents
gift away assets, they are not counted in the aged care assets
test. However, such gifts are included in the general aged pension
assets test. This Bill brings the gifting provisions for both types
of assets testing into line.
In terms of income streams, there is currently
a similar anomaly. For the aged care assets test, income stream
products from which the capital component cannot be drawn down are
exempt, whilst for the aged pension assets test there is a 50%
assets test exemption from such complying income streams. As from 1
January 2007, income stream exemptions that apply to the aged
pension assets test will also apply to the aged care asset testing
arrangements.
The Bill also formalises a delegation of power
to Aged Care Assessment Teams (ACATs) to allow them to extend the
number of days that a person can get residential respite care.
Currently, this power rests with the Secretary of the Department of
Health and Ageing.
The Commonwealth Government is essentially
responsible for funding and regulating the formal residential aged
care sector in Australia. The framework under which this formal
residential aged care sector operates comes via the Aged Care
Act 1997 and the associated Aged Care Principles 1997
(the Principles).
The three main strands of residential aged
care are:
- high care places (formerly nursing home beds)
- low care places (formerly hostel beds), and
- Community Aged Care Packages (CACPs) and Extended Aged Care at
Home (EACH) packages these packages provide an alternative to
residential aged care and allow the elderly to stay in their home
or like environment.
In 1997, the Howard Government introduced
significant reforms to the aged care sector (the 1997 Reforms). The
main changes included the abolition of the distinction between
nursing homes and hostels and the increased emphasis on user pays .
This has meant that residents are now expected (within their means)
to pay more for their residential care. The main aspects of the
1997 Reforms were contained in the Aged Care Act 1997 and
the associated Principles.
In summary, the 1997 Reforms included:
- the integration of hostels/nursing homes into one residential
aged care system
- a new single residential classification system (formerly there
were two)
- the introduction of resident accommodation payments (entry
contributions) for all residential care (formerly applying to
hostels only)
- income testing of daily resident fees payable for all types of
care (formerly applying to hostels only)
- a new system of accreditation designed to ensure proper
standards of care
- less onerous paperwork requirements on residential facilities,
and
- improved consumer protection arrangements.
With respect to the funding of residential
aged care, the Commonwealth provides approximately three-quarters
of the total funds available (mainly via residential care subsidies
and capital grants to providers). The remaining funding comes from
permanent residents in aged care facilities paying accommodation
and daily living charges. Most of the funding comes via the
Commonwealth Department of Health and Aged Care but there is also
specific residential aged care funding via the Department of
Veterans Affairs for aged veterans.
Total Commonwealth funding for residential and
community aged care has been rising steadily as the aged population
in Australia grows. For example, according to the latest Department
of Health and Ageing Report on the Operation of the Aged Care
Act 1997, covering the financial year 2004-05, the
Commonwealth spent $6.7 billion in that year on funding for ageing
and aged care. This compares to a figure of about $3 billion in
1995-06.
Accommodation payments are one of the main
forms of resident contributions that are levied on people in
residential aged care facilities. These accommodation payments are
paid as either:
- accommodation bonds (for residents in low care or hostel beds),
or
- accommodation charges (for residents in high care or nursing
homes beds).
The amount of accommodation payment levied
essentially depends on the asset level of each resident and the
type of care utilised.
Accommodation payments are designed to help
provide a stream of capital income for operators of residential
facilities and enable to them to build facilities, carry out
maintenance and capital upgrades and the like.
The maximum accommodation charge that can
currently be levied on new entrants to high level care is $17.13
per day. Accommodation bond (for low level or hostel care) amounts
and payment methods vary and are negotiated with the residential
care provider. They can only be levied on residents who have assets
in excess of $32,000. The average accommodation bond being levied
in the 2004-05 financial year was about $127,000.
The changes to assets testing envisaged in
this Bill will mean that, as from 1 January 2007, new residents
into residential aged care will face a tougher asset test in
relation to any gifts that have may have made since 10 May 2006
(when the new arrangements were announced) as well as tightened
income stream exemption criteria.
All existing residents (that is, those who are
in aged care facilities prior to 1 January 2007) are not affected
by the changes in this Bill.
It is difficult to ascertain just how many new
residents will be adversely affected by the changes but the
government estimates that it will save almost $72m between 2006-07
and 2010-11 because of the changes to the asset test (see also
Financial Implications below).
There are two types of care fees. The level of
the fees is essentially dependent upon the resident s income and
the type of service chosen. There is a basic daily care fee
(currently of up to $29.98 per day for respite residents and
pensioners and up to $37.38 per day for other non pensioner
residents) and income tested fees (which can range from up to
$23.12 per day for part means tested pensioners to up to $52.56 per
day for non pensioner residents). Thus, the maximum daily care fees
that a wealthy person may have to pay is $89.94 per day made up of
$37.38 for the basic daily care and $52.56 for the income tested
fee.
This Bill does not make any changes to the
current arrangements for daily income tested fees. The changes only
apply to accommodation fees and charges as outlined above.
There are Aged Care Assessment Teams (ACATs)
in each State and Territory and their role is to assess a client s
need for residential aged care, community care (for example,
Community Aged Care Packages and often for Home and Community Care
services although this is not mandatory) or flexible care (for
example, Extended Aged Care at Home, Innovative Care Places and
Multipurpose Services places). According to the latest Report
on Government Services (Productivity Commission 2006) ACATs
across Australia undertook 190,203 assessments in 2003-04.
Commonwealth funding for aged care assessment in that year totalled
$47.1m.
Under current arrangements the Secretary has
the power to delegate to ACATs the power to approve a prospective
resident s entry into aged care. ACAT teams also currently assess
the merit of applications for extensions to respite care although
formally they do not have the delegated power to approve such
extensions. Residential respite care is limited to 63 days per year
but the Secretary may increase the maximum number of respite days
by periods of 21 days in certain circumstances. The passage of this
Bill will formally give ACAT teams the power to approve respite
care extensions as well as actually assessing applications for
extensions.
There has been very little public comment
about the Bill but both the National Seniors Association and the
Australian Medical Association (AMA) have supported the main
provisions. In submissions to the Senate Community Affairs
Committee (which is examining the Bill as part of a formal
reference from the Senate), both National Seniors and the AMA
indicated that the changes proposed in the Bill were sensible and
provided a simplified and more flexible approach to both assets
testing arrangements and how ACATs operated.
The National Seniors Association noted that
the changes contained in the Bill related to assets testing were
recommended in the 2004 Review of Pricing Arrangements in
Residential Aged Care (Hogan Report).
The main financial implication of the Bill is
net savings to the Commonwealth of the order of $71.7 m over the
period 2005-06 to 2010-2011. The savings are generated because the
stricter assets testing arrangements related to gifting and the
assessment of income streams will see, over time, more aged care
residents not receiving, or receiving less, Commonwealth assistance
with their accommodations costs. Net savings a a result of the Bill
are estimated to be $4.6m in 2006-07; $15.5m in 2007-08; $22.9m in
2009-10 and $28.8m in 2010-11. These estimated savings are net of
some small administrative and capital costs that are associated
with the changes.
Item 1 of Schedule
1 provides a new assessment system to calculate the value
of a person's assets where this person receives either a service
pension or an income support supplement. The new system is going to
be based on the inclusion of certain income streams into
the assessment. The term income stream for the purpose of the
assessment system will take the definition either from the
Veterans Entitlements Act 1986 (new subsection
44-10(1A)),(1) or the Social Security Act
1991 (new subsection 44-10(1B)) (as the case
may be).(2)
New subsection 44-10(1C)
provides that certain assets that had been disposed off by a
person, must be included when calculating the value of the person s
assets for the purpose of the Aged Care Act 1997.
Item 2 ensures that the new
assessment system will only apply to calculations performed on or
after 1 January 2007 and where the person enters an aged care
service as defined in the Aged Care Act 1997 on or after
that date.
Item 3 provides specific
rules relating to proposed paragraphs 44-10(1C)(a) and (b),
requiring the Secretary to take into account any assets a recipient
of income support supplements, service pensions or other
entitlements had disposed off on or after 10 May 2006.
Item 1 of Schedule
2 repeals current subsection 96-2(5) of the Aged Care
Act 1997 and substitutes a new version. The new provision will
enable the Secretary to allow certain delegates to extend the
maximum numbers of days a person can receive residential respite
care .(3)
Item 2 of Schedule
2 saves those delegations that have been made under
current subsection 96-2(5) of the Aged Care Act 1997 so as
they continue to remain in force.
Concluding comments
As noted above, the Bill has attracted little
attention; however, the National Seniors Association and the AMA
have provided their support for the proposed changes.
-
Division 11 of Part III B of the Veterans Entitlements Act
1986.
-
Division 1 of Part 3.12 of the Social Security Act
1997.
-
Explanatory Memorandum to the Aged Care Amendment
(Residential Care) Bill 2006, p. 6.
Greg McIntosh and Thomas John
3 April 2007
Bills Digest Service
Parliamentary Library
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ISSN 1328-8091
© Commonwealth of Australia 2007
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