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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