Residential aged care funding: recent developments

There have been a number of developments in residential (nursing home) aged care funding since the 2016–17 Budget. This FlagPost briefly outlines key changes to the Aged Care Funding Instrument (ACFI), a tool used by aged care providers to determine the base funding they receive to care for each resident.

Australian Government funding

The Australian Government is the primary funder of residential aged care. The largest single cost to the Government is the basic subsidy for permanent residents, which accounted for $10.5 billion out of the $11.4 billion (Table 23) the Government paid for residential care subsidies and supplements in 2015–16.

The basic (or ACFI) subsidy for an individual resident depends on their care needs. Aged care providers assess each resident using a series of questions in the ACFI Answer Appraisal Pack, with reference to the requirements set out in the ACFI User Guide. The resident’s care needs are evaluated across three ACFI domains: Activities of Daily Living (such as eating, walking or toileting), Behaviour (such as wandering, inappropriate behaviour, cognitive ability and depression) and Complex Health Care (CHC) (medication administration and health care procedures). The higher the score in each domain, the higher the daily ACFI subsidy for the provider.

Recent changes

ACFI subsidy expenditure has been growing more quickly than expected. The Australian Government believes the unexpected growth in claims cannot be explained by an increase in the frailty of residents, although many in the industry disagree. In order to rein in expenditure, around $1.7 billion in savings over four years were included in the Mid-Year Economic and Fiscal Outlook 2015–16 (MYEFO) and the 2016–17 Budget, to be achieved through changes to ACFI scoring and subsidy indexation. Despite these savings, residential aged care expenditure was still forecast to grow at around 5.1 per cent per annum.

Modelling by Ansell Strategic (commissioned by aged care provider UnitingCare Australia) estimated the cost of the ACFI changes to providers at over $2.5 billion over four years, or nearly $840 million more than the Government’s figure.

The ACFI savings measures were criticised by aged care provider and health peak bodies, who lobbied for their reversal during the 2016 Federal Election campaign. Providers and unions expressed concerns about the impact of the savings on the quality of care, staffing levels and service viability. However, a few commentators supported the Government’s view that some providers might be using ‘sharp practices’ in ACFI claiming to maximise their funding. One article reported on the relatively high proportion of audited ACFI claims that are downgraded , while another researcher claimed that staffing levels and services may not increase when a resident is reclassified to a higher level.

The first tranche of ACFI changes commenced on 1 July 2016. The indexation of the Complex Health Care (CHC) part of the subsidy was halved, and the Classification Amendment (CHC Domain Scores) Principles 2016 reduced some scores (and therefore funding) in the CHC domain. The Australian Greens moved to disallow the Principles in November 2016, but the motion was negatived. Labor did not support the disallowance motion, preferring their own Private Members Bill to make the existing Aged Care Legislated Review specifically examine the suitability of the ACFI funding model.

Following its re-election, the Government indicated that it was willing to work with the aged care sector to find alternatives to the next tranche of ACFI changes due to commence on 1 January 2017, but that the same overall savings needed to be achieved.

While this negotiation was in progress, the Parliament passed the Government’s measures to increase provider compliance in ACFI assessments (first announced in MYEFO) as part of the Budget Savings (Omnibus) Bill 2016. This included the introduction of fines of up to $10,800 for providers that repeatedly make false, misleading or inaccurate ACFI claims.

The results of the Government’s negotiations with the sector over the ACFI savings were announced in December 2016. The modified set of 1 January 2017 ACFI changes retained lower scores for some CHC items (medication administration, blood pressure management and bandaging for arthritic joints), but did not proceed with lower scores for others (complex pain management). New timing requirements for complex pain management delivered by allied health professionals were revised downwards. The forgone savings are to be recouped by pausing indexation on all ACFI subsidies in 2017–18, and halving indexation of the CHC domain in 2018–19. This will have the effect of spreading ‘the impact across all services (except rural and remote services who will be compensated [through an increase to the viability supplement]) and lessen[ing] the impact on services who have been claiming additional revenue for pain management and physiotherapy.’

The modified ACFI changes have been met with a more positive reaction from provider and consumer peak bodies, as well as Labor and the Greens, than the original Budget measures. However, there seems to be broad agreement that the ACFI may need a more fundamental overhaul to ensure long term stability in funding for residential aged care.

Looking forward

The Government has commissioned the University of Wollongong to investigate alternatives to the ACFI funding tool. The Government is also investigating the possibility of removing responsibility for ACFI assessments from providers (who have a financial interest in the outcome) and appointing external third parties to assess residents’ needs (as already occurs in schemes such as the National Disability Insurance Scheme).

Early indications for 2016–17 are that providers may have already adjusted their claiming behaviour in light of the 1 July 2016 ACFI changes, and that the budgeted tightening of ACFI growth may not be sustained. If ACFI subsidies continue to exceed their budget, and with the ACFI tool subject to much current scrutiny, it seems likely that the Government will seek to make further changes to residential aged care funding.

Tags: aged care


Flagpost is a blog on current issues of interest to members of the Australian Parliament

Logo - Parliamentary Library Department of Parliamentary Services

Filter by



Tag cloud