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Bills Digest No. 35 1999-2000
Aged Care Amendment (Omnibus) Bill 1999

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

Passage History

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.

Purpose

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).

Background

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)

Main Provisions

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.

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 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).

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.

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.

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.

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:

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.

Concluding Comments

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.

Endnotes

1. McIntosh, Greg: "The 'Boomer Bulge': Ageing Policies for the 21^st Century", Research Paper No 4, 1998-99, Department of the Parliamentary Library
2. 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
3. HESTA Report Into Strategic Capital Needs of the Residential Aged Care Industry 1997-2003, Tasman Asia Pacific in association with Economic Insights, June 1997
4. Australian National Audit Office: 'The Planning of Aged Care', Audit Report No 19, 1998
5. Explanatory Memorandum, pp 18 - 19.
6. This distinction is emphasised by an amendment to the definition of 'accommodation bond' effected by item 45.
7. 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.
8. 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.
9. The Secretary has the power to request further information from the applicant if necessary: new section 57A-9(5).
10. Item 39 of the Bill and Part 6.1 of the Act.
11. Item 39 of the Bill and Part 6.1 of the Act.
12. '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'.
13. Schedule 5 is not actually divided into parts.
14. Explanatory Memorandum, p 41.
15. ibid., p 47.

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ISSN 1328-8091
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