Aged care

Budget Review 2016–17 Index

Alex Grove and Anna Dunkley

The 2016–17 Budget tightens funding for residential aged care providers, but provides some extra funding for regional aged care and the My Aged Care contact centre. The combined effect of aged care measures in the Budget is a reduction in expenditure of $902.7 million over five years.[1]

Changes to aged care provider funding

The Budget includes savings of $1.2 billion over four years through changes to the Aged Care Funding Instrument (ACFI) used by residential aged care providers to determine the base funding for each resident.[2] This is in addition to the $472.4 million savings over four years through changes to the ACFI scoring matrix that were announced in the Mid-Year Economic and Fiscal Outlook 2015–16 (MYEFO).[3]

The ACFI is a tool used to assess the care needs of permanent residents through a series of questions that determine funding across three domains: Activities of Daily Living (ADL), Behaviour and Complex Health Care (CHC). The greater the assessed need in each domain, the higher the basic subsidy for the resident. This basic subsidy (determined by the ACFI) accounted for the majority of the funding ($9.7 billion out of $10.6 billion) the Australian Government paid for residential care subsidies and supplements in 2014–15.[4]

The Australian Government controls the number of subsidised aged care places.[5] Despite this, residential aged care funding can still exceed forecasts because ACFI assessments completed by individual providers affect the level of subsidy that each place attracts. The Government is concerned by higher than expected growth in ACFI expenditure, particularly in the CHC domain, which it believes cannot be explained by an increase in the frailty of residents (as the other two domains have not grown at the same rate).[6]

The savings will be achieved by changing the scoring matrix that determines a resident’s classification for each of the three ACFI domains, as well as reducing the indexation of the CHC component of the basic subsidy by 50 per cent in 2016–17.[7] The Government will establish a $53.3 million transitional assistance fund to support providers and consult the sector on future options for determining aged care funding, including the possibility of having ACFI assessments done by an independent party rather than providers.[8]

This is not the first time ACFI has been revised due to concerns about excessive growth. For example, the Gillard Labor Government tightened ACFI assessment criteria in 2012 in order to redirect funding to its Living Longer. Living Better aged care reform package.[9] This led to a debate between the Government and providers on whether ACFI funding reflected the actual costs of providing care.[10]A similar debate ensued when the current Government announced changes to ACFI in the 2015–16 MYEFO.[11]

The 2016–17 Budget also has $102.3 million in increased funding over four years for regional aged care providers through changes to the viability supplement. The supplement is paid to eligible rural and remote aged care services to assist with the extra cost of delivering services in those areas.[12] The Government will update the geographical classification model used to determine eligibility for the supplement, and increase the supplement rate for some residential aged care services.[13] These changes are expected to benefit around 250 residential services, many in or near outer regional towns, as well as a number of multi-purpose and Indigenous services and around 7,000 home care package recipients. Grandfathering arrangements will apply to ensure that no service or care recipient is worse off as a result of the change in model.[14]

This measure is in keeping with the finding from a recent Aged Care Financing Authority (ACFA) report that although ‘the Viability Supplement is assisting providers and generally appears well targeted with payments predominantly to the rural and remote group … its classification system is dated and may not best target funding in all cases.’[15]

More funds for aged care contact centre

The My Aged Care call centre and website provide aged care information and serve as the primary contact point for people seeking subsidised aged care. Contact centre staff screen and assess clients over the phone, and can then refer them to a face-to-face assessor to determine their eligibility for services such as home support, home care or residential care.[16]The Budget includes an additional $136.6 million over four years to support the operation of the contact centre. The contact centre received around 1,280,000 calls in 2015–16, but this is expected to increase by 41 per cent in 2016–17.[17]


The 2016 Budget has been described by key stakeholder, Catholic Health Australia (CHA), as a ‘mixed bag’ for aged care.[18] Provider peak bodies have criticised the cuts to ACFI funding. CHA believes they will have a negative impact on budgeting for nursing and personal care, as well as on investment in the industry.[19] Leading Age Services Australia (LASA) believes the Government ‘is in denial about the true cost of providing complex care’.[20] Health peak bodies are similarly concerned. Alzheimer’s Australia (AA) acknowledges that the Government ‘may have had little choice but to cut ACFI due to projections of unsustainable expenditure’, but argues that ACFI is a flawed funding tool.[21] Palliative Care Australia is concerned that cuts will lead to aged care residents missing out on high quality care at the end of life.[22]

Extra funding for rural and remote services has been welcomed by provider peak bodies Aged and Community Services Australia (ACSA), CHA and LASA, although LASA has questioned if it will lift the financial viability of many providers in the face of other cuts.[23] Increased funding for the My Aged Care call centre has been widely welcomed by consumer and provider groups including ACSA, CHA, AA and COTA Australia (formerly Council on the Ageing).[24] Both COTA Australia and CHA remarked on one omission from the Budget: a clear signal on the Government’s plans for future reform of the aged care system.[25]These plans may be revealed in the forthcoming election campaign.

[1].          Department of Health (DoH), Health 2016–17 Budget at a glance, DoH website.

[2].          The budget figures in this brief have been taken from the following document unless otherwise sourced: Australian Government, Budget measures: budget paper no. 2: 2016–17, pp. 101–102, 109.

[3].          S Morrison (Treasurer) and M Cormann (Minister for Finance), Mid-Year Economic and Fiscal Outlook 2015-16, p. 172

[4].          DoH, 2014–15 Report on the operation of the Aged Care Act 1997, DoH, Canberra, 2015, pp. 53–55.

[5].          Department of Social Services (DSS), ‘5.3.2 How does the Commonwealth plan its allocation of places?’, Guide to aged care law, version 1.09, released 4 January 2016, DSS website, last reviewed 19 September 2014.

[6].          DoH, Aged care provider funding – further revision of the Aged Care Funding Instrument, Health Budget 2016–17 fact sheet, 3 May 2016.

[7].          Budget measures: budget paper no. 2: 2016–17 , op. cit., p. 101. The ACFI scoring matrix is set out in the Classification Principles 2014. The dollar value of basic subsidy attached to each ACFI domain category is set out in the Aged Care (Subsidy, Fees and Payments) Determination 2014.

[9].          Australian Government, Budget measures: Budget Paper No. 2: 2012-13, p. 184.

[10].       J Gillard (Prime Minister) and M Butler (Minister for Health and Ageing), More choice, easier access and better care for older Australians, media release, 20 April 2012; K Curtis, ‘Enough ACFI anger’, Australian Ageing Agenda website, 10 July 2012.

[11].       D O’Keeffe, ‘Government clamps down on ACFI claims’, Australian Ageing Agenda website, 17 December 2015.

[15].       Aged Care Financing Authority (ACFA), Issues affecting the financial performance of rural and remote providers, both residential and home care providers, Department of Health, February 2016, p. vi.

[17].       DoH, My Aged Care – consumer access, Health Budget 2016–17 fact sheet, 3 May 2016.

[18].       Catholic Health Australia (CHA), Aged Care Budget is a ‘mixed bag’, media release, 3 May 2016.

[19].       Ibid.

[20].       Leading Age Services Australia (LASA), Devastating cuts to direct aged care services continue, media release, 4 May 2016.

[21].       Alzheimer’s Australia (AA), Budget shortfall for dementia, media release, 3 May 2016.

[22].       Palliative Care Australia (PCA), Health budget needs close monitoring, media release, 3 May 2016.

[23].       N Egan, ‘Budget: windfall for remote providers’, Australian Ageing Agenda website, 4 May 2016.

[24].       N Egan, ‘Budget: boost for My Aged Care’, Australian Ageing Agenda website, 4 May 2016.


All online articles accessed May 2016. 

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