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CHAPTER 1: REPORT - AGED CARE AMENDMENT BILL 1998
1. THE INQUIRY
1.1 The Aged Care Amendment Bill 1998 was introduced into the House of Representatives on 5 March 1998. On 11 March 1998, the Senate, on the recommendation of the Selection of Bills Committee (Report No. 2 of 1998), referred the provisions of the Bill to the Committee for report by 2 April 1998.
1.2 The Committee considered the Bill at a public hearing on 27 March 1998. Details of the public hearing are referred to in Appendix 2. The Committee received 26 submissions relating to the Bill and these are listed at Appendix 1.
2. THE BILL
2.1 The Aged Care Act 1997 implemented structural reforms to the aged care system. The Aged Care Amendment Bill provides for the introduction of a number of additional measures, announced by the Government in November 1997, to the structural reforms. The Bill also addresses some administrative and procedural issues.
2.2 The Bill provides for the introduction of an accommodation charge for people needing nursing home level care. The charge replaces the accommodation bond introduced by the Aged Care Act for those entering nursing homes. The accommodation charge `maintains the principle of people making a contribution to improving the quality of their accommodation where they can afford to do so'.  The charge is capped as a daily rate specified in the User Rights Principles. In November 1997 amendments to the Principles were gazetted to cap the rate at $12 per day for non-concessional residents or up to $6 per day for assisted residents. The accommodation charge applies for a maximum of five years.
2.3 The actual amount of the charge for each resident will be determined by an income based formula. Concessional residents or those facing financial hardship cannot be asked to pay the charge.
2.4 The Bill provides for flexibility in payment options. Nursing home residents may rent out their homes to produce an income stream to pay the charge. In such a case, the rent will be exempt from the pension income test and the value of the house from the pension assets test.
2.5 The Bill provides that operators must use the accommodation charge to meet capital works costs relating to residential care or to retire debt or improve the range and quality of aged care services.
2.6 Accommodation bonds will continue to be able to be charged by hostels.
Carers residing in the family home
2.7 Under the Aged Care Act, in order for a person to qualify as a concessional resident or assisted resident, the person must, among other things, not have owned a home for 2 years or the home must have been occupied by a carer or close relation for the past 5 years and that carer/relation is in receipt of a pension. The Bill provides that a carer need only have resided in the care recipient's home for 2 years. The 5 year rule still applies to close relations residing in the recipient's home.
Administrative and procedural amendments
2.8 The Bill provides for a number of administrative and procedural amendments including: the assessment of concessional and assisted resident status each time a person enters a residential care facility including when they move from one facility to another; clarification of pre-entry leave provisions; clarification of approved provider responsibilities; and, qualification of the 7 day rule relating to agreements for those residents who are mentally impaired.
Amendments to other Acts
2.9 The Bill introduces amendments to the Social Security Act 1991 and the Veterans' Entitlements Act 1986 to exempt income earned from renting the family home to the pension income test where the person is liable to pay an accommodation charge.
2.10 The Aged Care (Consequential Provisions) Act 1997 is to be amended to provide for sanctions for pre 1 October 1997 breaches of responsibilities by providers and to allow for the extension of approvals-in-principle (AIPs) for additional recurrent funding for new and rebuilt and upgraded nursing homes.
Uncertainty over application of accommodation bonds
3.1 Submissions indicated that there was still a level of concern among intending residents about the type of accommodation charge, the methods of payment and duration of payment.
3.2 Other issues raised in submissions related to accommodation bonds paid between 1 October and 1 November 1997,  the reintroduction of the terms hostel and nursing home care in the legislation  and concerns about the prudential requirements for the protection of residents' funds.  A further matter raised was assessments by an Aged Care Assessment Team (ACAT) indicating a high level of care but appraisal by a provider that a low level of care is required resulting in the low level care funding being received by the care provider. It was suggested that it may not be appropriate to transfer a person to another facility and the high level services may not be able to sustain a loss of funding by caring for the resident. 
3.3 In its submission, the Department of Health and Family Services (DHFS) noted that there were two processes for determining whether a person needs a `high' level of care, which has led to some confusion about the type of accommodation payment to apply. Assessment of a person by an ACAT is undertaken before the person enters care. A more detailed assessment of needs is undertaken by the aged care provider using the Resident Classification Scale (RCS) over a period of at least 21 days. DHFS stated that, while ACAT approval does not always provide a precise indication of the type and level of care needed, it is used as the basis for determining whether an accommodation charge or bond is to be paid `so that people have certainty as to what they may be asked to pay before they enter care'. 
3.4 DHFS indicated that some problems had arisen because of these arrangments including where a person has a high care approval but is classified into a low care category of the RSC. Further, the ACAT approval, while it indicates the level or intensity of care, does not always reflect the type of environment and therefore the most appropriate type of accommodation payment. DHFS noted that the Bill contains a new provision `under which the type of accommodation payment that residents be asked to pay will be determined by the type of care and accommodation they need that is, hostel or nursing home care, rather than the intensity or level'. 
3.5 The Bill also provides for a statement to accompany the ACAT approval to indicate that the person is considered suitable for either nursing home care or hostel care. This statement is reviewable only by the person entering care or their legal representative. The Department stated that to have this statement reviewable by a provider `would reduce the certainty that residents required at what can be a difficult time'. 
Concern over working of additional recurrent funding and future provision of capital for upgrades
3.6 A number of matters were raised in submissions concerning additional recurrent funding (ARF). First, it was argued that the changes to the ARF arrangements introduce retrospective conditions for the receipt of ARF for capital work already completed or in progress.  As such, providers with an existing ARF should be permitted to charge accommodation bonds and charges for new residents.  Secondly, it was stated that the change was discriminatory, as those who had received an upfront capital grant where not asked to repay the grant because they then chose to charge accommodation bonds.  Thirdly, where a facility receiving ARF is sold, the new owner is expected to pay out the former owners ARF, should the new owner accept certification. 
3.7 DHFS noted that accommodation payments and ARF are:
alternative income streams for the same purpose, assisting providers to invest capital in their services. This is why providers were asked to choose to retain their entitlement under the old ARF scheme, or to access resident accommodation charges. There has been no unilateral removal of ARF by Government and no change to the scheme for those who have chosen to retain it. 
DHFS also noted that the Minister had established a Technical Reference Group on Restructuring to advise him on the merits of proposals relating to ARF.
3.8 Some submissions made comment about the future capital needs of the industry and noted that the accommodation bond would have generated significantly more capital funding for high level care services than will be raised through accommodation charges.  Aged Care Australia stated that it may take twenty years for adequate capital funds to be generated by accommodation charges.  Some operators indicated that the accommodation charge would only provide sufficient funds for minor capital work.  ANHECA noted that calculations for the accommodation charge were based on the assumption that all residents will stay in high care for 5 years when the average length of stay in high care facilities is 20 months. 
3.9 It was also suggested that consumers who were willing to pay an accommodation bond should be given the option to do so. 
Concern over the future of uncertified homes and the residents of those homes
3.10 Concerns were expressed in submissions about facilities that do not obtain certification. Those facilities that do not reach certification level will not be able to levy accommodation charges or bonds and will not be eligible to receive concessional supplements. It was argued that such facilities will have to cut costs to establish a cash-flow acceptable for borrowing and, it was suggested, that as a result, residents may be provided with fewer facilities.
3.11 The high failure rate in certification of Victorian facilities was also noted and that many of these facilities operate in small leased premises. 
3.12 In response to concerns about the future of uncertified homes, DHFS noted:
- services that are not certified can still receive Government subsidies for providing care to residents whilst they work to upgrade facilities;
- there is no reason why these services cannot continue to provide care and start improving their buildings to reach the certification standard;
- the Minister for Family Services had recently announced a $20 million program to assist in the restructuring of nursing homes and hostels; and
- in the event that it becomes necessary for a facility to close `the Government will intervene to ensure that residents and their families are advised at an early stage and that arrangements are in place to enable transfer to other facilities with minimal disruption'. 
Concern over equality of access and treatment
3.13 It was suggested that there was a need to keep concessional quotas under review, `as there is concern the regional quotas do not reflect socio-economic profiles of regions within regions'. Further, one provider may attract a greater number of concessional residents thus disadvantaging other providers by leaving insufficient demand in the area in that category to meet their quotas. 
3.14 It was also suggested in other submissions that there was now a preference for concessional residents due to certainty and convenience and the supplement payable for each resident where the daily number of concessional residents exceeds 40 per cent of new residents. Further, the concessional subsidy does not involve the obligations under the basic rules about accommodation charges specified in the legislation.  It was also suggested that a preference for concessional residents may also occur in areas where there are long waiting lists for care.  As a result, a financially advantaged person may be penalised as facilities encourage entry of concessional residents.
3.15 A further matter raised was the quarterly acquittal of the ratio of concessional residents in a facility. It was stated that imposing financial sanctions on providers who do not maintain the required number of concessional residents in any one quarter, may result in access problems `because the provider may have to give preference to a concessional resident over a non-concessional resident in order to meet the required level for the quarterly acquittal'. 
3.16 Catholic Care for the Aged, Diocese of Maitland-Newcastle, also raised a number of issues concerning the Commonwealth's planning systems and suggested that there were long waiting lists in some areas while there are empty beds in others. 
3.17 DHFS noted that measures are in operation to ensure equity of access and treatment. These include: allocation of new places through the application of needs based planning principles; approval of entry by the ACATs in order to link people with the care options which best meet their needs and preferences; protection for those who cannot pay an accommodation bond or charge; equitable income testing arrangements; and application of quality care standards.
3.18 DHFS further stated that there were a range of indicators `to warrant confidence' that there was equitable access to facilities, including: increased occupancy rates; that the sector is over-performing in meeting its concessional resident targets; and the Complaints Resolution Service had not received a single complaint in relation to the level of accommodation bonds or charges, resident agreements or denial of access related to capacity to pay. 
The future viability of the sector
3.19 A number of submissions commented on the future viability of the sector. It was asserted in evidence that many nursing homes are experiencing a drop in income as a result of the application of the RCS. This, coupled with the problems of ensuring adequate access to capital to upgrade and expand facilities, was considered to place in doubt the sustainability of the industry. 
3.20 DHFS stated that the concerns raised about the viability of the sector `are not substantiated by the facts'.  The Department pointed to:
- higher occupancy levels in every State and Territory since 1 October 1997 with 444 more persons in nursing homes at the end of January 1998 than in September 1997;
- the review of the RCS which indicates that there is higher funding on average, for both hostel and nursing home residents, more funding for residents with demenita and behavioural care need and slightly less funding for the frail aged. It was also noted that funding outcomes depend on the resident profile;
- evidence of the strength and viability of the sector with a total of 5,238 places being advertised nationally on 13 December 1997, attracting some 1,236 applications from prospective providers;
- banker confidence in the sector as a secure area for investment with strong growth potential; and
- allocation of an additional $20 million to assist in restructuring residential services as well as the establishment of Alert Response Teams to support individual providers encountering financial pressures which are directly attributable to the reforms. 
4.1 The Committee reports to the Senate that it has considered the Aged Care Amendment Bill 1998 and recommends that the Bill proceed.
Senator Sue Knowles
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 Second Reading Speech, 5.3.98, p.448.
 Submission No. 12 (NSW College of Nursing) p.2.
 Submission No. 4 (Aged Care Australia) p.1; Submission No. 26 (UCSA) p.3.
 Submission No. 21 (Residential Care Rights) p.2.
 Submission No. 4 (Aged Care Australia) p.3.
 Submission No. 22 (DHFS) p.2.
 Submission No. 22 (DHFS) p.2.
 Submission No. 22 (DHFS) p.3.
 Submission No. 4 (Aged Care Australia) p.8.
 Submission No. 11 (ACHCA) p.8.
 Submission No. 1 (Tricare) p.5.
 Submission No. 5 (NANHPH) p.3; Submission No. 14 (ANHECA) p.6;
 Submission No. 22 (DHFS) p.4.
 See for example, Submission No. 11 (ACHCA) pp.8-9; Submission No. 12 (NSW College of Nursing) p.2.
 Submission No. 4 (Aged Care Australia) p.3.
 Submission No. 6 (Maroba Nursing Home Inc) p.2.
 Submission No. 14 (ANHECA) p.4.
 Submission No. 4 (Aged Care Australia) p.7; Submission No.10 (Directors of Nursing for the Mid North Coast) p.1.
 Submission No. 7 (ANF) p.4; Submission No. 21 (Residential Care Rights) p.2.
 Submission No. 22 (DHFS) pp5-6.
 Submission No. 25 (UCSA) p.5; Submission No. 4 (Aged Care Australia) p.11.
 Submission No. 7 (ANF) p.6.
 Submission No. 15 (Catholic Care of the Aged) p.6.
 Submission No. 14 (ANHECA) p.9.
 Submission No. 15 (Catholic Care of the Aged) p.5.
 Submission No. 22 (DHFS) p.11.
 See for example, Submission No. 6 (Maroba Nursing Home Inc) p.3; Submission No. 11 (ACHCA) p.11; Submission No 25 (UCSA) p.5.
 Submission No. 22 (DHFS) p.12.
 Submission No. 22 (DHFS) pp12-15.