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STANDING COMMITTEE ON COMMUNITY AFFAIRS
01/05/2007
Aged Care Amendment (Residential Care) Bill 2007

CHAIR —Welcome. Do you have any comments to make on the capacity in which you appear?

Mr Broadhead —The officers responsible for the process of development of this particular aged care funding instrument are within my branch.

Mr Tracey-Patte —I am one of the two directors of the funding model implementation team which is tasked with managing the overall implementation of the aged care funding instrument.

CHAIR —Thank you. Information on parliamentary privilege and the protection of witnesses has been provided to you. I think some of you, at least, have appeared before these committees before. You will not be asked, as departmental officers, to give opinions on matters of policy, although this does not preclude questions asking for explanations of policy or factual questions about when and how policies were adopted. We have a submission from the department—thank you for that. Before we ask you questions, would you like to make an opening statement about the matters before the committee?

Mr Broadhead —The purpose of the bill is to introduce a new classification as the basis for paying care subsidies in aged-care facilities. The current instrument is called the resident classification scale—the RCS is how it generally gets referred to. The RCS is based upon care plans. The original intention of this was that it would be a by-product of processes that already took place in the organisation and delivery of care and therefore it would not be a burden. But in practice that is not the way things have turned out. It has become a driver of documentation—largely, I would say, due to fears on the part of homes about their fate when validation takes place; that is, when their classifications are reviewed to see whether or not they match the needs of the resident or the care plan provided to the resident. So there has been a lot of defensive documentation going on. This has given rise to an overburden of documentation within the industry which is distracting from the provision of care.

The answer to this seemed to be a review of the RCS in 2002, which the then minister commissioned. That recommended a new funding model and a reduced question set for the classification. There was also a recommendation in 2004 when Professor Hogan did his review of pricing arrangements in aged care, which suggested a collapsing of the number of categories in the funding instrument from eight to three. He also recommended the introduction of three new supplements. In the government’s response they accepted that there should be two new supplements: one for people exhibiting complex or challenging behaviour, which can be a predictor of the need for intensity of care, and the other for people needing complex health care support, particularly people who are in need of palliative care.

A reference group was set up in August 2004. I think you have heard today from a number of the members of that reference group. A national trial was established to look at how we might change the way in which the classification was done. Dr Richard Rosewarne from Applied Aged Care Solutions essentially led that study. In 2005, 23 per cent of aged-care facilities participated in a national trial, and 5½ thousand residents were classified using a new instrument, the aged-care funding instrument. The outcome of that was a report from them to the government, the result of which is the instrument we now propose to use.

I suspect that the major difference between the resident classification scale and the ACFI, or the aged-care funding instrument, is that the ACFI attempts to assess care needs. It is not based on care planned. It has a fairly strictly defined documentation set to try to limit the tendency for more and more documentation to be brought to the business. It has a reduced number of questions: 12, plus two diagnostic fields. So less information needs to be gathered in order to produce a classification of a resident. Almost 2,000 validations were performed as well, and there was 95 per cent agreement between the results of validation and the assessments done within the homes. That is comforting. At the moment we can have disagreements between validators and time assessments. In some instances, it is almost approaching half, so 95 per cent is a very encouraging result.

The promise of the ACFI is that it will better identify the care needs of residents. It will allow payment that is more aligned with the care needs of residents. I think you heard Greg Mundy suggest that the current one has some fairly lumpy bits in it and that small changes in care needs can lead to large changes in payment. The ACFI does not suffer from that; it is essentially linear. It will have a reduced requirement for documentation strictly defined. We have an ACFI documentation pack, which people will complete when doing assessments. It is essentially the documentation that is required. We expect to have much less disagreement and therefore less incentive towards defensive documentation as a result.

As part of the introduction the government has also introduced some additional funding. So there will be higher levels of payment at the top of the ACFI, phased in over time, as you would be aware. In total, if everybody were to be on the ACFI instantaneously, the government would be spending approximately $50 million more per year on care than it would under the RCS—as best we can predict. Because it is being phased in over time, the additional resources are $96 million over the first four years as people move from the RCS to the ACFI.

The bill covers a range of other issues which are related to this change in the classification, including, as you have heard, things to do with classification expiry. In particular, currently the RCS classification expires after 12 months. This means that everybody has to be reappraised every year, and about 60,000 of those reappraisals result in no change—roughly one-third of those. So, as part of the changes, it is proposed that the classification be indefinite—that it goes on until there is seen to be a need to reclassify somebody. This should eliminate the number of assessments done that result in no change.

On transfer from one place to another, one currently has to again reassess somebody. That is to be removed so that a home may accept the existing classification. It is their option. If they believe that the person’s classification does not reflect their care needs then they can assess the person, as they do now; but, if they believe it does, there is no compulsion to reassess. This should again significantly reduce the burden of classification on the sector and result in less paperwork for the sake of paperwork.

On training, we have a contract with the Western Institute of TAFE—technical and further education—in New South Wales. They won through open tender a contract for the provision of training nationally. We have since revised that contract, given the additional time now available to the introduction. The value of the contract is approximately $4 million. It will provide training in two rounds essentially. The plan is that the first round will be to managers in October-November this year so that the people managing facilities will have the opportunity to acquaint themselves with the features of the new system. The training of people who will be involved in assessment will happen closer to the time of the introduction, largely because what you learn does not stick forever unless you get to practise it. Training close to the time that people will begin practising is seen as a good thing and also because there are levels of staff turnover. It would be a pity to train someone who then moves on and then find that untrained people are attempting the assessments.

Overall, we expect 3,000 people in the management phase to access training and then 7,000 assessors to access the training. This is in the context of about 3,000 facilities that provide care. There is essentially one management person per facility in the first round of training. In the second round, facilities with fewer than 80 places will have the opportunity for two people to be trained; facilities with between 80 and 120 places will be able to have three people trained; and facilities with more than 120 places will be able to have four people trained. It will be conducted nationally. Also, the materials generated out of that will be made available for people to use in continuing training.

I think that is probably all I wish to say in my introductory statement. I am happy to take questions of course.

CHAIR —We might deal with some of the issues thematically rather than by senator, if that is all right. Senator McLucas, do you want to kick off with your first area of concern?

Senator McLUCAS —Thank you, Chair. Let us go first to the question of implementation. You may have heard Mr Gray’s evidence—I know that Ms McNeill did—in which he said that he could not find a reason why 20 March next year would be useful. Mr Mundy, in response to my question on this issue, said that there would be no disbenefit in extending the implementation date to 1 July. The point made by the Catholic Health Australia submission and by Mr Mundy in his evidence was that the linking of the changed pension arrangements with the implementation of the ACFI date was somewhat meaningless and that it would be better to put it to a financial year basis as a first preference and, as a second preference, to at least the first of a month for ease of implementation. Do you have a view on why that could not be moved?

Mr Broadhead —It is feasible to move implementation date. I suppose the question is why one would. It was earlier planned that the ACFI be introduced from 1 July this year. It was consequent upon submissions from the sector, including the peaks and from a number of providers, that it was moved back, and that was largely to do with the capacity of their software suppliers to develop systems that incorporated the ACFI. We believe that the revised date of 20 March 2008 will enable those developers to make the necessary changes. So we believe that the impediment to doing it earlier will no longer be there by 20 March.

It is correct that 20 March relates to the date on which pensions are indexed—and that might seem to be an odd date. It is because the rescheduling occurred as part of a larger package, which includes a number of changes to funding arrangements. It was thought sensible to bring those in on the same day that some of the parameters that affect payments were going to change anyway. It provides a period of six months stability in the funding arrangements post that indexation point.

With the question of the timing, I think it would be best if the ACFI were done sooner rather than later. I think that is the general view. I suspect that even those who talked earlier today would hold that view to some degree, which is that the ACFI is a better instrument. It will resolve documentation problems to a significant degree for the sector. For people with higher care needs, it will result in higher levels of payment than are currently available. In order to get the benefits as early as possible, there is a variety of reasons why you would not want to delay it. I think the implementation date is really a balancing act between being prepared to do it in a smooth and orderly fashion and doing it as soon as possible to bring the benefits of it to the sector and to the people receiving care. Apparently, in the government’s view, 20 March is the balancing point.

Senator McLUCAS —Do you understand the point made by submittees though that the first day of a month is a simpler way of introducing such an instrument that affects budgeting and financial management in the way that it does?

Mr Stuart —I would make a couple of points in relation to that. One is that, for both the department and aged-care providers, lining up with the other changes means one set of system changes and one implementation date, which is of some benefit. Another point I would make is that, with this measure, not a lot happens on implementation day.

Senator McLUCAS —I think that is the point they are making.

Mr Stuart —It is the date after which new residents arriving will be assessed by a new instrument, but it is not some kind of a sea change; it does not impact existing residents until their previous RCS classification expires. Really, it is only a quite small trickle of incoming new residents that will be assessed under the aged-care funding instrument. So I am not sure that I completely understand the benefit of a change to the first of a month versus the 20th of a month.

CHAIR —The providers who have to deliver these changes seem to be united in the view that that would give them an appropriate lead time to prepare. They would normally be the ones seeking additional resourcing and benefits to flow more quickly, but they say that they would prefer a later date. That would be a compelling reason, would it not, to defer the matter until that later date?

Mr Stuart —The date chosen was more than a year after the announcement date of 8 February and itself was a further delay to implementation. We are very confident that we will get through the finalisation, the training and the work with the industry by that date. It is not a date that makes the department think we have a significant challenge in meeting the time line.

Senator McLUCAS —I think it is more of a financial management question rather than a question of ‘Will we be able to get the training done in time?’ I do not think the submittees are making any sort of comment about not being ready by then; I think it is about being able to do your books more effectively.

Mr Broadhead —As my colleague Mr Stuart mentions, if you have a 60-bed home, essentially fewer than 10 new residents, on average, will be classified under the ACFI in the first three months. The average length of stay is roughly three years, so roughly a third of people would turn over in a year; in a quarter of a year, you would have a quarter of a third of people, so it is not as though there is an intensive burst of activity. In addition, the outcomes will not affect the revenue of a home except at the margin. By far, the bulk of residents in any home will still be on the RCS by the end of that financial year. So, in a sense, it gives homes a taste of the changes and it gives the capacity to start working with them but in a time frame that means for that financial year it will have, at most, a marginal impact on their overall revenues. I think that is a good balance.

Senator McLUCAS —We have heard from witnesses this morning about the element which talks about the secretary deeming at the low level of care, section 22-2(3) and 22-6(2)(c). Could you explain that for the committee please?

Mr Broadhead —My understanding and I may yet refer to my colleague Keith Tracey-Patte is that at the moment if you have an ACAT assessment only for low care then you cannot be classified as high care subsequent to entry to a facility. That is the case as we speak. In order to be classified as high care you would need to be visited by an ACAT and assessed as to whether your needs included high care or should be extended to high care. That is the existing arrangement, as I understand it. This is not something where the secretary herself intervenes in a classification; it is a delegated power to decide what level of care somebody is eligible for. If they come with only eligibility for low care then it raises a question if they are classified for high care and there is a need to revisit their eligibility before they can be classified for high care.

Senator McLUCAS —How many people is that expected to affect?

Mr Tracey-Patte —As at 31 December 2006 there were 17,643 residents who had been classified by the ACAT as a low-care resident whose subsequent RCS appraisal was for a high level of care.

Mr Broadhead —Is that for the first six months of the financial year?

Mr Tracey-Patte —That is within the existing population as at 31 December. That is how many residents at that time had an initial ACAT approval of low but who were subsequently classified as high. So that decision could have been made at any time prior to that.

Senator McLUCAS —So essentially what is happening in this legislation is that we are duplicating the current situation?

Mr Tracey-Patte —That is correct.

Senator McLUCAS —Catholic Health Australia is suggesting that is not required. Is the reason for those 17½ thousand people essentially changing their classification on entry because of a time delay between the ACAT assessment and entry into residential care? Is that why that happens?

Mr Tracey-Patte —That is certainly one of the reasons that it can happen. It may simply be that the ACAT makes a decision using a slightly different set of criteria to those the home will use to make their decision about the RCS classification. The ACAT looks at the person’s care needs at the time they are assessing them during that particular interview and they may talk to other people who have been caring for the person. That is a very different process to when a home has had somebody in their care for a week. They start to go through and then they go through the 20 questions. There may be an element of the time delay but it is also a different decision.

Senator McLUCAS —Because of the instrument being different from ACAT to RCS now ACFI.

Mr Tracey-Patte —Yes.

Mr Broadhead —There is also Keith’s point that a home has usually had somebody in for some days and so their opportunity to observe and understand a person’s care needs is different from an ACAT which may do it in hospital or on a visiting basis in a person’s home.

Senator McLUCAS —I am trying to understand the policy intent of that section.

Mr Broadhead —The policy intent is to provide a brake on the classification of people who, in the view of ACATs, were eligible for low care only being classified for high care. It is essentially a control. It is assumed that although there is some discrepancy between ACAT assessments and assessments by facilities that where an ACAT did not assess a person as eligible for high care there ought to be a re-examination rather than simply accepting the home’s appraisal. In other words, there ought to be an occasion for a review, if you like, if there is a discrepancy between the two. It is a brake on the possible overclassification of people on entry.

Senator McLUCAS —I might have this wrong, but let me put it this way and you can tell me if I am wrong. The ACAT has assessed the person as a low-care recipient and they have been admitted to the facility on the basis—that is, they can be charged a bond. Subsequent to that, the facility believes that they actually need a higher level of care and therefore a bond cannot be applied. So the secretary is making a determination that they are low care so that the financial arrangement that the facility has engaged in can be respected.

Mr Tracey-Patte —No. The initial approval by the ACAT at a low level of care means that a bond can be asked of the resident even if they are subsequently classified at a high level of care according to the RCS. That does not change or negate the accommodation bond issue.

Senator McLUCAS —That is fine.

CHAIR —Under the present arrangements, is it the secretary who exercises the discretion at the moment?

Mr Tracey-Patte —The secretary in this particular situation has delegated her authority to the ACAT to make the decision about whether or not the person is approved as high or low level of care.

CHAIR —Sure. I appreciate that it is not done personally by the secretary. How often these days is the secretary’s discretion being exercised in respect of residents in this form?

Mr Tracey-Patte —I am not sure that I understand your question. We have 17,643 current residents who were approved at a lower level and who were subsequently classified as being at a high level. Once the resident reaches the aged-care home, the aged-care home has an option to ask the ACAT to come back and reconsider the approval. That would be a subset of that 17,000, but I do not have an exact number for how frequently that occurs.

CHAIR —This request has been made by the provider?

Mr Tracey-Patte —That is correct.

CHAIR —You talked before about the secretary’s discretion. You said that the provisions in this bill are a replication of what is in the existing legislation. Is that correct?

Ms McNeill —It is not a discretion of the secretary. If you are talking about the classification of a person who comes in with a limitation to low, the secretary must classify that person within a low classification. So the person is in effect always classified as RCS 5, which is the highest of the low classifications.

CHAIR —So it is a default position more than anything else in the absence of an ACAT assessment that gives them a higher—

Ms McNeill —In the absence of an ACAT reassessment the service may ask for ACAT to come and reassess the resident. When the ACAT does that and reassesses the person as requiring high care then they can access high classifications.

CHAIR —Both the ANF and Catholic Health Australia have said that that capacity to limit the level of care to a lower level is not necessary and that the formula—the ACFI—should determine their level of care. I think I have described what they are saying in their submissions. Are you saying that we should retain a default position when a resident initially comes into the system but that that should be capable of being dislodged by a later assessment by an ACAT?

Mr Broadhead —That is in effect the way it is at the moment. To step back a little bit, aged care assessment teams are essentially the gatekeepers of entry to aged care and they assess people as to whether or not they need aged care or are eligible for it in strict terms. As part of that they assess whether they are eligible for low care, high care or community care. Whatever their judgement may be, that is the person’s assessment. When that person turns up—if they do, and they may not turn up immediately for a variety of reasons—to access care there will be a proportion—not a large proportion, in my view—of cases where the ticket they have, as it were, from the ACAT does not agree with the provider’s assessment of their care needs.

The recourse is to go back to the ACAT and ask: have you got this right? They will reassess the person, and if they say, ‘Yes, it’s true that this person actually does have high-care needs’ then they can be classified for high care in the facility. In the absence of that eligibility, they cannot be. It is a basic control on the system about who is eligible for care and what level of care they are eligible for. It is imperfect. There are times when there are disagreements between the various assessments. There are opportunities to rectify that. It is not always the case that somebody who the provider thinks is eligible for high care—where the ACAT has given only a low-care assessment—ends up being eligible for high care, but I suspect that in most instances it would end up with the person being assessed for high care. I do not have those figures at hand though. If you would like, we could provide you with a breakdown.

CHAIR —When section 22 refers to the secretary limiting the level of care of a resident to a particular level—

Mr Broadhead —That is the ACAT eligibility assessment.

CHAIR —So what you are saying is that the decision by the secretary or her delegate is really being made by the ACAT?

Mr Broadhead —Yes. It is about the level of care the person is eligible for, which may be restricted to low care, for example.

CHAIR —That is reasonable because it is a decision by an ACAT.

Senator McLUCAS —That leads to the recommendation from the ANF about external assessment. The recommendation was to have the ACAT do the ACFI. No-one in the world would know what we are talking about: the ACAT do the ACFI! It sounds ridiculous.

Mr Broadhead —The aged-care assessment team do the aged-care funding instrument assessment.

Senator McLUCAS —Their recommendation is that the ACAT do the ACFI. Was that contemplated so that you basically have one assessment and it is done according to what everybody thinks are the ways that we assess care needs, and then off we go? Mr Tracey-Patte, there is some delay between the ACAT assessment and entry, for a whole range of reasons, so we cannot just say, ‘You’ll get your ACFI assessment today and you’ll go into residential care tomorrow.’ That does not happen. Did you contemplate having the ACAT doing the ACFI? Why was that discounted, as not appropriate?

Mr Broadhead —We did. In fact, the national trial had ACATs involved in doing assessments. The problem that we had with the results of the national trial was that, although a number of people were assessed in the community, only 27 actually went into care during the period of the trial. So we had insufficient data, quite literally, to understand the extent to which the external assessments tallied with people’s assessments on entry. Of course, the critical factor here in designing prior external assessments is how good it is—how well does it correspond to the assessments one would make on entry, or shortly after entry, as we currently do? If one could design a system that to a high degree came up with an assessment that was similar to the assessment or the same as the assessment made under the current arrangements then you would say that at least technically it is feasible, and possibly for other reasons desirable, to move to external assessment. But the national trial did not yield enough instances where people had been previously assessed and subsequently entered care for us to form any judgements about that.

That said, we—that is, the officials involved in this—are still interested in trying to develop an understanding of how well external assessment would work and whether it is indeed an option that should be put to government in advice. We have taken the view, however, that in the circumstances, with the number of changes going on, that this is something that should be on our list of things to do but is not something that should be done right now. With the changes that are happening, the view would be taken that there needs to be a period of adjustment for the industry to absorb the new arrangements—to bed down the use of the ACFI and various other things that are going on. In the meantime, we need to do some work on the conceptual side of how it might work, and that might lead to some further work in cooperation with the industry around the possibilities for external assessment.

ACATs are an obvious choice. There were other assessors involved in the national trial as well—for example, we had the Royal District Nursing Service involved in assessments in Victoria. So ACATs are not the only option. There are some issues around whether or not ACATs want to be involved. We had some resistance in New South Wales, for example, to ACATs having any role in the national trial, so it is not necessarily readily accepted in some quarters that this is a role that ACATs should be performing or could perform. There is a range of issues to be explored here. But, yes, we do think that external assessment is worth a good, hard look. Yes, we think it is worth some developmental assessments, but we think there is a timing issue about when we pursue it.

Mr Stuart —Just to embellish that, ACATs come with a perspective that they are there to direct care. While the ACFI is much more about care than its predecessor, I think we still have a bit of a way to go to persuade ACATs that the new funding instrument is about care rather than about money, which is not an immediately appealing task for ACATs. So there is a policy issue there. There is also an issue of the kind of journey of clients through ACAT assessment, which can happen several times for an individual client, and with year to year delays as people try to delay their entry into residential care. So there is a question of how many times an ACAT would do an ACFI assessment for an individual. I think there is also some merit in the industry gaining some trust in the objectivity of this measure by implementing it, and then, if there is a clear understanding that this is an objective instrument, that may open possibilities in the future. So I think it is something to think about and to learn from.

Senator McLUCAS —The other element is that ACATs do not only do assessments for residential care; they do assessments for community care as well. And whether or not you can extrapolate this care need assessment tool to community care—I do not know the answer to that.

Mr Broadhead —You’ve been listening to our discussions! That is exactly the kind of discussion we have been having. For example, the ACFI uses ‘activities of daily living’ as a key component. In community care, instrumental activities of daily living—in other words, not things that require care within a given setting but things like shopping and so on—can be key predictors of people’s capacity to remain in the community. There is not that component in the ACFI as it stands, but of course, as you say, ACATs do assessments for community care. So, yes, there is a bunch of issues in there that we have to better tease out and explore that are of exactly the kind that you have raised.

Senator McLUCAS —I am happy with that.

CHAIR —On this question of classification, you may have seen the recommendation that is made by ACSA on page 5 of their submission about the validity of the classification decisions within six months of a resident’s entry. Have you seen that recommendation and do you have a view about it?

Mr Broadhead —Yes. In general, the idea of having a six-month assessment period in relation to some residents is for residents whose care needs are thought to be likely to change. The key example of this would be where a resident has entered from hospital and may still have some care needs that relate to whatever they went into hospital for. If you do an assessment shortly after they arrive from hospital there will be a range of care needs that are correctly identified for a period of time, but some time down the track—in two or three or four months—their care needs may well have changed because the aftermath of the hospital episode is behind them, and therefore there ought to be a trigger to reassess. That is the basis of having it at six months. It is a protection against the possibility that people will be assessed at a point where their care needs are not typical of what their care needs will be into the future.

CHAIR —So you do not see any merit in the suggestion that ACSA has made?

Mr Broadhead —No. I have to say we are in constant dialogue with the industry around a range of these sorts of issues, about their merits or otherwise. I expect that if it were apparent that people who were assessed after hospitalisation and then reassessed six months later and there was no change in the classification for the majority of them then we would be entirely open to a discussion about what that meant and whether or not it would be sensible, therefore, to revise the arrangements. But we already have requirements for reassessment, and in our view the reason why we have advised government and government has accepted the need to continue this is that people’s needs do change. Again, it is a balance between trying to reduce the assessment burden, through things like not having the classification expire and not requiring it on transfer, and ensuring that the classification really does reflect the person’s needs. At this point we think this is required to ensure that latter requirement.

CHAIR —I take it that leads to the intention to monitor how these arrangements work out under the new regime and, if there is some evidence that the burden on providers is still significant or there is some capacity to get better outcomes for residents, there would be some reconsideration of these arrangements.

Mr Stuart —That is certainly going to be possible to monitor. The ACFI is a far more objective instrument and will say more meaningful things about the care needs of clients. Certainly, it will be possible for the department to monitor whether the six-month review point is turning up reductions in resident classification. As Peter has been outlining, we have gone through really quite a substantial reduction in reclassification requirements in this package. Basically, from looking at existing experience with the RCS, where a lot of reclassifications were resulting in a return of either the same or a higher subsidy amount, we think that if there is likely to be a higher subsidy amount then providers will be motived to reclassify, and they can do so. But we do not see any need to impose a reclassification requirement every year anymore when in the past we have seen a lot of classifications remain at the same level.

Senator McLUCAS —How regularly can a provider reapply for reclassification?

Mr Broadhead —In theory they can do it serially.

Senator McLUCAS —Every day if they want to?

Mr Stuart —It is not quite as simple as that. Correct me if I am wrong, Keith, but at the point when an existing classification expires the provider can choose to reclassify—

Senator McLUCAS —At the end of the 12-month period?

Mr Stuart —They do not have to but they may choose to do so. But at other times reclassification can be sought on the basis that there is a significant jump in the resident care need.

Senator McLUCAS —Yes, but that is motivated by the care provider? They make the decision. Something has happened, a person has had a fall or—

Mr Broadhead —The current system essentially says that, within the 12-month period that the classification is current, you may still reclassify a resident if you believe there is a significant change. In the current system the significant change is a change that will result in a shift of two categories.

Senator McLUCAS —Thirty dollars?

Mr Broadhead —This is the two category shift. After the 12 months has expired, in fact on expiry, you must reassess the person. At that time they can shift a category. Obviously their care needs may have changed in a minor way, but if it does not result in a category shift then they are still funded under the same category as they were previously. In principle, you could reassess somebody on 12 months and then six months later, due to some decline in their circumstances, you could reassess them and bump them two categories, and I am sure that actually happens in practice.

The new system essentially says there is no compulsory reassessment after 12 months, but again if you wished to reclassify somebody within 12 months of their last classification or reclassification then it would need to be a significant change. So there is a brake, if you like, on classifying everybody periodically just to see if you can get a bit of a change out of it. It requires a significant change again. Because we now have a basic category and two new supplements, the rules around what is a significant change are somewhat different and the legislation deals with that, but again the principle is that it would need to be a significant change within the 12 months. After the 12 months, a single-category shift either in the basic category or in either of the supplements is possible. Have I made that as clear as mud?

Senator McLUCAS —No, I understand what you are saying. As to the issue you were discussing with Senator Humphries—I am loath to use the word ‘validation’, but I think it sort of is a validation—they are simply people who have entered resi care from hospitals, and you could likely predict that their care needs may decline as they improve? 

Mr Broadhead —Yes. Essentially, the requirement for reappraisal within six months applies to people whose care needs are thought highly likely not to be stable. The classic example is somebody coming out of hospital: they may often have a period of recovery and they may well be assessed prior to completion of their recovery, for good reason. The question is then: do you go back and reassess them or do you require them to be reassessed? The answer at the moment is, yes, you do require them to be reassessed. Six months is a long enough period to be certain that their care requirements have stabilised, at least due to whatever episode it was that occasioned their hospitalisation, and so it gives you a bit of a check and a balance on whether or not the classification that is being paid for is indeed the right classification for that person.

Senator McLUCAS —I understand that; thanks. I think the ACSA submission raised the question of the phasing in of supplements. Mr Mundy said that the phasing in of supplements will delay funding coming on stream as people take time to pick up the amount of money that they should be receiving according to their assessment. What is the quantum that will be saved—I think ‘saved’ is probably the right word—by phasing in the supplements rather than bringing in the supplement payment on the first day? 

Mr Stuart —Can I put a bit of context around that.

Senator McLUCAS —Thank you, Mr Stuart.

Mr Stuart —We are neither phasing in the supplements nor phasing in the aged care funding instrument. Both will apply from the first day, but only for new residents and then for residents that are due reclassification. If the suggestion is being made that we should start paying the supplements for existing residents immediately, then that could be quite a different kind of a system. We would then have a system in which you needed to subject every existing resident to the aged care funding instrument on or before the implementation date and we would have a frenzy of classification going on in aged-care homes around the implementation date. So we are not setting out to save any money. What we are doing is setting out to grandparent existing residents and phase in sensibly the new arrangements.

Mr Broadhead —However, you may be referring to the fact that the maximum payment available is being phased up. At the moment, for example, the maximum care subsidy is $122.77, I think, for an RCS1, which is the top classification. That does not include enteral feeding or oxygen supplements, but that is essentially the top payment. The top payment under the ACFI will be $10 more than it would have been under the RCS in the first year of the ACFI and then will be raised to $20 more. For many people this will make no difference to the outcome, because it is only a ceiling, if you like, on the top-level payment. So if you are in the mid range then it will make no difference to the level of payment made. The government chose to phase in the top level payment I think because of the level of resourcing required to introduce the ACFI overall, and this provides a mechanism to make sure that, even from day one, people who are assessed as requiring it will get a higher level of payment, but over time that higher level will rise even further. The ultimate amount will be over $160 per day for somebody who is classified at the highest level using the ACFI, but it will take four years for the top level payment to reach that amount.

Senator McLUCAS —I would call that phasing in.

Mr Stuart —Yes, I agree that that is a phasing in. It is not the supplements; it is the maximum payments.

Senator McLUCAS —If it is not on the supplement, I understand the error I made. Because the number of people using ACFI and being funded by ACFI will grow from zero at the implementation date to a number over four years—and nobody knows what that will be exactly but you would imagine by the end of four years it will be everybody.

Mr Broadhead —No, it will not be everybody.

Senator McLUCAS —No, it will not be everybody, but let us say it would be a good two-thirds.

Mr Broadhead —A majority.

Mr Stuart —It will be more than two-thirds; it will be the greater majority. But there is always a small tail. We still have residents in care from before the 1997 reforms. It is a small number, but there are some.

Senator McLUCAS —You should know the names of those people, who are obviously doing very well.

Mr Stuart —They are still on grandparented arrangements.

Senator McLUCAS —If you were to not phase in the incremental $10 a year payment but, rather, paid the full payment according to the funding instrument from day one, what would be the difference in the total amount of money for those two ways of implementation?

Mr Broadhead —As I understand it, what you are essentially asking is that, given all the other arrangements about how it is to be introduced, if there were not a ceiling on the maximum payment what do we anticipate would be the order of expenditure as compared with the order of expenditure under the arrangements as they currently stand? The answer is that it will be a cost of $393 million over four years. From memory, and with your permission I will confirm this with an answer on notice, it is of the order of $680 million without that ceiling. So it will have a substantial impact on the four-year cost.

Senator McLUCAS —So it is about $300 million over four years?

Mr Broadhead —Yes. As I said, I would like to go back and make sure I have the right figure and I will confirm it to you.

Senator McLUCAS —In the first year it would not be very much, but in the fourth year it would be quite a bit of that $350-odd million.

Mr Broadhead —It is a complex interaction because you have very few people because of the time it takes for new residents to arrive and for old residents to be reclassified. In the first year it will not have a huge impact in terms of outlays. As the volume of people builds it will have a larger impact, but then the ceiling is rising. So the curve of the difference is not a simple line.

Senator McLUCAS —But at the end of the fourth year everybody who is eligible will get the appropriate level. So if you come in during year 3 you will come in at the third incremental rise; is that right?

Mr Broadhead —Let’s say, for argument sake, that in the third year it will be $153. So if you are a person who has been assessed at the very top level you might otherwise have received $160 per day but, due to the ceiling, you will receive $153 per day to support your care. The following year you would receive $160-odd, or whatever the figure turns out to be, a day for your care. So, as the ceiling rises, people classified under that will also have their care payments increased—if they are up against that ceiling.

Senator McLUCAS —And is this only for the top-level care? Is it phased through everyone else as well?

Mr Broadhead —No. It is only a ceiling, and that is why I am using that term. It does not affect people below. People whose outcome would put them on a payment level that is even 20c less than the ceiling will be unaffected. It is only where you would end up above it. As I say, from day one, people who are assessed with top-level care needs will receive more payment per day but it will take time to phase up.

Senator McLUCAS —Mr Broadhead, if you would provide that difference between the two implementation models we have just talked about I would appreciate it.

CHAIR —Senator McLucas, while you think of your next question I wish to clarify the situation. Does that mean that under this new system every resident with the highest care needs will be receiving more for their care needs than was the case before?

Mr Broadhead —Yes. At the moment the maximum that you can receive—as I said, excluding oxygen and enteral feeding, which only applies to some people—is $122.77. Under the new system the top-level payment will ultimately be above $160 but in the short run it will be phased up, so it will be $10 more than was possible under the RCS in the first year, it will be $20 more than was possible under the RCS in the second year and so on. As soon as people reach that level of classification in the system there will be people paid at a higher level than is feasible under the current arrangements.

CHAIR —As estimated, that is an increase in real terms in the spending on their care?

Mr Broadhead —Yes, that is an increase in real terms. It is over and above indexation. Indeed, the ceiling is pegged, as I recall, to the indexed level of the RCS payment. Say it was $122.77 today. If it were indexed to, shall we say, $124 or $125, then the ceiling would be $125 plus $10 in the first year, which equals $135, plus $20 and so on. It is not only rising due to the amount of the limit going from $10 to $20 to $30; it is also rising because the underlying thing to which it is hooked—that is, the maximum RCS payment—will still be indexed.

Mr Stuart —The overall policy construction here is that moving from one funding system to another funding system is always complex and there is always a complex pattern of potential gainers and losers. The government has chosen to grandparent all existing residents so that the income that providers are earning in respect of existing residents cannot go down, so providers are enabled to gain but not enabled to lose. Consequently, there is a significant cost to government during the first four years of the introduction of the new funding instrument. This is simply a device that says we will not allow providers to make a loss on any resident and therefore we are going to limit the gains for a period in an offsetting fashion.

CHAIR —ACSA made the point though that residents entering the system after that four-year transition who had the same level of need as that of certain residents before may be on a lower level of payment than was the case before; some people may move downwards in effect in equivalent positions or equivalent levels of need. Is that (a) possible and (b) likely to be the case very often?

Mr Broadhead —If I have understood it, and I am not sure that I have, if I am classified in a year at the top level of payment—therefore I am being paid the amount that the ceiling determined in that year—and then subsequently the amount goes up, because the ceiling has now risen in the following year by $10, my care payment also goes up. Nobody will be left on what the ceiling payment was because that was what applied when they arrived, so they will not be left on that level while the level of payment has now risen to a higher level. Have I understood the question properly?

CHAIR —I am not sure that is quite the point that ACSA were making. I think they were saying that there is to be a new classification system, so that it is possible that some individuals with a certain level of care need—let us say below the top level of care need—may actually end up being on lower payments as a result of this new classification system because they fall into a different classification.

Mr Broadhead —That is the issue dealt with by grandparenting.

CHAIR —But that only applies to those who are in the system now. Those who are entering the system after this arrangement are not affected by the grandparenting arrangements.

Mr Broadhead —Correct.

CHAIR —So a certain resident with a level of need who is in the system now would have their arrangements grandparented but a resident coming in at the same level of need after this arrangement has been put in place might be on a lower level of payment?

Mr Broadhead —That is correct. That is an outcome. Taking the lumpiness, as Greg mentioned, out of the RCS and moving to a more linear scale does mean that, for some types of people or for some people with levels of care need, they would receive less subsidy for their care under the ACFI than they would under the RCS. That is why grandparenting is there: to ensure that existing residents do not receive less than they do now. But it is true that, as a new resident, I might receive less funding under the ACFI than I would have had I entered under the RCS a week earlier if I happened to be at the cut point. If you introduce a new system of classification you get different results. If you only got the same results why would you introduce it?

CHAIR —With more money going in, presumably there are more winners than losers under this arrangement. Is that a fair comment?

Mr Broadhead —Yes.

Senator McLUCAS —It is within the same pool?

Mr Broadhead —It is not within the same pool. That was originally a design requirement. Let me expand further on that. When it was first contemplated after Professor Hogan’s review that it would collapse a number of categories and introduce two new supplements, at that time the government also introduced the conditional adjustment payment. The view at the time was, ‘Yes, we’re introducing a new basis for distributing the subsidy, but we’re introducing it at the same time that we are also increasing the level of available resources for care by the introduction of the conditional adjustment payment,’ which is an additional payment that originally was 1.75 per cent of basic subsidy, then 3.5 per cent. This year it is 5.25 per cent of basic subsidy and next year it will be seven per cent. At the time, the view of the government was, ‘We’re increasing the level of care subsidy by that means at the same time as we agree to the introduction of a new method of distributing the care subsidy between residents.’ So the design parameter was then shortened. The short description of it was to do it within existing resources. That included the additional $877 million that was going to be provided over four years through the conditional adjustment payment.

Since that decision, the government has subsequently decided to increase the level of resources over and above the increase it has provided through the conditional adjustment payment. That was the $50 million I referred to earlier. If everybody was on the ACFI rather than the RCS then, overall, the government would be spending an additional $50 million a year in care subsidies over and above what it would otherwise spend. That is exclusive of the effects of the conditional adjustment payment. The government has decided to put in additional resources for the introduction of this instrument. As a result, there are more winners than losers under the ACFI, but it still remains the case that there will be people who, had they been classified under the RCS, would have received a higher level of subsidy than they will under the ACFI. There will not actually be anybody in that situation because of the grandparenting. But, theoretically, somebody who, had they entered here would have received this; now they have entered there, they will get that. Most subsidies will go up, but some will go down.

Mr Stuart —It is important to say that the goal of any funding instrument is to ensure that providers receive an income stream which does not discriminate on the basis of care need. We want all types of resident care to be attractive to aged-care providers. Having said that, though, in the end, the instrument delivers an income stream to an aged-care provider. We do not expect them to hypothecate on an individual by individual resident basis the care that they give to the resident. It is logically possible for someone entering after the reforms to receive a little less in care funding than those who entered just before the reforms. While others are being rewarded substantially more, we do not think that in any sense goes towards damaging the prospects of their receiving appropriate care.

Mr Broadhead —Overall, the level of resourcing will increase substantially. The $393.1 million over four years is real money over and above what would have been spent on care subsidies in that four-year period. However it is arrived at, partly by grandparenting, partly by increased resources et cetera, it is real, additional money over and above what would otherwise have been spent. You can say that just shy of $400 million more, over the next four years, will be spent in care subsidies than would have been spent. Dare I suggest that that is a reasonable lift.

Senator ADAMS —Just on the allocation of high- and low-care places, can you explain how that will work as far as your advertising is concerned. I will come back to rural issues, because I can foresee that we have a few problems arising there. Starting with your advertisement, how many places are available? Can you just describe how we differentiate between them?

Mr Stuart —We are continuing to differentiate between high- and low-care places at the point of allocation, and on much the same basis as before—although there was an announcement as part of this particular package that there would be more high-care places released in future, to rebalance the ratio to some extent towards high care; towards 44 low and 44 high. I think I will stop there and let you elucidate. I think there is more that you want to know, but I am not sure I am getting at it.

Senator ADAMS —Yes, there is. It is a question I asked earlier on, regarding where I come from. In my home town we had some high-care places, but because of the problems of attracting the staff to look after those people we are now going back to a low-care situation. But we have got a terrific lot of concessional residents there, and everyone is getting a little bit worried because I think the shire run the 22-bed facility, and with their depreciation they are running at a $400,000 loss. So we as a community are having real problems. This is a community service, and unfortunately it has not been making a profit. It is far too small for any private organisation to come in and take it over. It looks as if it may close its doors, and the community is going to be left high and dry. So there is a lot of confusion around this new classification, as to how they can survive. Will it improve? There are very few people now paying accommodation bonds. That was what I was going to ask: where that cuts off. We start with the low care, but if they then move into that medium range, where does the situation go, practically?

Mr Stuart —Okay, I think I understand. So it is more about the income levels that attach to low care and high care that you are asking about?

Senator ADAMS —Well, it is to a point. It is just the fact that high care has to be abandoned because of the skill set of the staff. They were all doing very well with low care, but to actually employ those extra staff with the problem of the budget they have made a decision to drop that out completely. The other thing is: how do we keep the doors open? It is just really difficult.

Mr Stuart —That is probably a problem specific to certain aged-care facilities.

Senator ADAMS —That is right. There are a number of others going to end up the same way, I think. So is this going to help or isn’t it? I cannot see how we are going to advance under this classification.

Mr Stuart —Obviously we cannot speak exactly for the circumstances of an individual aged-care home without having done some research on that. There are two or three things I would just point to, however. One is that in this package the government has taken concerted steps to increase the return to aged-care homes for high-care residents, with quite a considerable increase in resourcing into high care. The second is that, as part of this package and as part of enabling aged-care providers to consider how they fare under it, the government is also making available a pool of financial advisers who will be able to work with individual providers to help them to better understand the incentives that are available under this package. Thirdly, as part of this package there is a redefinition of the concessional resident and an increase in funding for the government for concessional residents, which a number of providers have not fully grasped yet. We will be going about from state to state later this month and early in June to explain these changes in detail, and at that time we will also put out a very detailed fact sheet for aged-care providers, which should help them to understand the incentives under the new arrangements in greater detail.

Senator ADAMS —That might help a little.

Mr Stuart —I hope so, and I am certainly willing also to have a look at the circumstances of an individual provider if you would like to organise that.

Senator ADAMS —That would be great.

Senator McLUCAS —That leads us to the question that was raised earlier about modelling. There had been a modelling exercise for the ACFI that was subsequently undertaken by Access Economics. It was put to us that that modelling has not been redone subsequent to the bringing in of the securing the future changes. I think that is the case, if I understand that correctly. Has it?

Mr Broadhead —Yes.

Senator McLUCAS —Can we have a copy of it, please?

Mr Broadhead —I do not know what the status of the report is. But I believe we plan to release it. It has only recently been completed in a form that would be intelligible to anybody except possibly Keith, who is on my left here. Yes, there was modelling done and indeed Access Economics presented their findings to, for example, the board of ACAA. The initial assessment did not take account of some of the aspects that were subsequently decided as part of the securing the future package, in particular the additional funding. It has since been rerun to incorporate that and we propose to make the report available, so we would be happy to provide it when we do. I would expect that to be in the next week or two.

Senator McLUCAS —Would that then assist the facilities that Senator Adams is referring to? The concern that I am receiving from the sector is this: whilst you can talk in telephone numbers, and these numbers sound extraordinarily large, what does it mean for my 40-bed facility in a rural area when most of us are low care? That is what we need to know.

Mr Broadhead —It will and it won’t. In the end, how this will affect a particular home will depend on the mix of residents that they have, the mix of new residents that they have coming in and so on under the ACFI and how they are classified. The Access Economics model looks at the overall situation but it does not have the capacity to predict the outcome for an individual home because at that level there is not enough stability in the numbers to do it. So you cannot say with any degree of certainty that it will have exactly this effect on a particular home. That will depend on who comes through the door; indeed, that is the case now. You cannot predict precisely whether your next resident will be an RCS3 or an RCS2 or whatever until you do the assessment. So it is not a feature of the ACFI; rather, it is just a feature of the system that it depends who you take in as residents and who your existing residents are. I believe it will provide some information that will enable people to form views about the overall effects and the likely impacts but it will not tell you exactly what will happen to your home because that is not feasible.

That said, as my colleague has raised, where—in the course of moving to the ACFI and classifying new people and indeed under the other arrangements that are coming in as part of the securing the future package—homes find that they are struggling with this there will be independent advice available, funded by the government, to support them to work through those issues to make sure that this is not simply a misunderstanding of how it applies or some other issue that could be managed by the home if they better understood what was going on.

Senator McLUCAS —As for when the department was modelling the securing the future changes, I understand that it has to be done at a very high level. But how it impacts on the various types of aged-care facilities in Australia must have been modelled, I hope.

Mr Broadhead —We did attempt to look to see if there were any patterns. Without trying to predict the outcome for a particular home, one can look at the analysis and say: ‘Overall, does there appear to be a differential impact on rural homes versus urban homes? Does there appear to be a differential impact on this versus that?’ The answer is that although we went looking for it we could not find it. So, in other words, we have not been able to identify that there is a systematic advantage or disadvantage to homes because they are small or large, because they are rural or urban and so on.

Senator McLUCAS —Because they are high care or low care?

Mr Broadhead —No. There is a bit of a common understanding out there that the ACFI results in a transfer of resources from low to high. In practice, that could not be the case to any great degree because 50 per cent of residents under the RCS are in the top two categories—1 and 2. Those are also the categories that draw the highest per diem payment. From memory, I think about 80 per cent of the resources are in the top two categories. So there is not enough money, as it were, in the bottom categories in terms of the volume of people and the payments made, to shift large amounts out of the bottom to the top. So the redistributive effect of the ACFI is more complicated than that, and it is to some degree a shift within high care. For example, one of the bumps that Greg Mundy referred to would be category 3 residents. You can go from a category 5 or 4 to a category 3 with a relatively small shift in care needs but a relatively large shift in payment.

So, if you try to compare them side by side, some of the ways in which the ACFI is different from the RCS are actually in the middle categories rather the bottom categories. I am trying to speak in general terms to illustrate that it is not a simple shift from here to there and the impact really does depend on the profile of residents that a home has and how they would fall under the ACFI. There is a long time for the transition. It is not like homes. We do not have that frenzy of classification in the lead-up, where everybody goes from RCS to ACFI. Even after four years, there will still be people being paid under the RCS. So there is a long transition period that allows homes time to adjust to the new regime, to understand how it operates in respect of both the cost of their operations and their resident mix. It is not an instant impact.

Senator McLUCAS —Mr Gray talked this morning about an 85-bed facility in Victoria where people are classified as low that serves, essentially, homeless alcoholic men. I think you could assume that, given those people’s classification is low—by and large nearly all of them are low—that home will do worse under ACFI than it would under RCS. Is that correct?

Mr Broadhead —I would be very wary of making that assumption. I will make a couple of points. For example, the ACFI is a multidimensional instrument. It not only looks at the activity of daily living, it looks at healthcare needs and it looks at behavioural challenge, for example. It is quite possible that somebody who at the moment is classified as low might score more than people might expect, particularly under behavioural challenge.

Senator McLUCAS —Challenging behaviours.

Mr Broadhead —So it is not simple. They are not two linear scales side by side and you just map people from here to there. On average, people in category 8 in the RCS, who receive no payment under the RCS, will receive a few dollars under the ACFI. So there are people who currently get paid nothing in care subsidy who will receive some care subsidy under the ACFI. So it is not a simple translation. It is not a simple, ‘If you’re low under the RCS you’ll get less, and if you’re high under the RCS you’ll get more.’ It is a more complicated translation than that. That is why I think the fact that it is coming in over time and there will be a process of moving from the old to the new over some years is actually a good thing, because I think it is easy for people to assume that it is a simple case of: ‘If you’re low you’ll go down, and if you’re high you’ll go up.’ That is not necessarily the case.

Senator McLUCAS —So when will the department advise providers of the dollar amounts that will be attached to each stream?

Mr Broadhead —Again, we plan to release indicative prices. They will be indicative only. This is subject to the agreement of the government, but I imagine it will be forthcoming. I say that they will only be indicative because, as was mentioned earlier—by Greg Mundy, I think—we do not know exactly what they will be. They will be determined by ministerial determination prior to the introduction. But, for the sake of allowing people to better understand, we will be releasing indicative prices. We will put out this kind of information as part of the information that we put out to support what we are calling the roadshow—that is the series of workshops around the country to assist people to better understand elements of the securing the future package.

Senator McLUCAS —Will that be soon?

Mr Broadhead —Yes, our flights are booked.

Senator McLUCAS —When? Let us have the date.

Mr Broadhead —I could not tell you off the top of my head.

Mr Stuart —We are just finalising a draft schedule for a period during the second half of May and into the early part of June. We expect to be in upward of a dozen centres around Australia, but the exact number escapes me.

Mr Broadhead —I cannot tell you when I am going to be in Traralgon, Ballarat, Coffs Harbour or—

Mr Stuart —Capital cities and large regional centres.

Mr Broadhead —Bundaberg. We are going to get around a bit.

Senator McLUCAS —Make sure that you come to Cairns. Item 27, which refers to section 42-1(4), talks about people who have to move from—in the old language—a hostel to a high-care facility for a temporary period. Concern has been expressed on two fronts: firstly, that person might lose their place if they then want to return to their original facility; and, secondly, you cannot double fund a person for higher need, short-term temporary—it has to be high-care—aged care. We have been told that it does not affect many people; therefore, why are you doing it? How many people are we talking about; and what is the cost of continuing it?

Mr Stuart —We have read with interest the comments that have been made in the submissions. We thought we had got through this issue; we had discussed it broadly and come to an agreed view on it, which is reflected in the draft legislation. You can argue the low numbers in one of two ways. Firstly, it is only a low number of people, so why change it; and, secondly, quite honestly, if it were affecting a large number of people, you would be arguing the opposite. However, the number is so low that we really question the benefits of retaining the existing administrative arrangements, both for the department and for the industry. I will ask Peter to speak to that.

Mr Broadhead —I would say two things. We did a review of this in 2006—not a capital ‘R’ review—where we looked at the incidence of this in the 2004-05 financial year. We found that in facilities in six out of the eight states and territories it was not used at all in that year. In one of the two states where it was used, it was used once.

Senator McLUCAS —Are we talking about Queensland and Western Australia?

Mr Broadhead —No. It was used in New South Wales and, as it happened, once in South Australia. Fewer than 20 residents were involved.

Senator McLUCAS —So it was used for 19 in New South Wales and for one in South Australia.

Mr Broadhead —I think it was for 17 in one, so it would be 18 in total. When we looked at the individual cases, we discovered that in a number of instances it probably was not applicable. So it was used very rarely and possibly when it should not have applied, even in instances where it was technically applicable. For example, a single provider had two facilities, which were co-located, for which they had separate IDs. They were transferring somebody within their own arrangement. Technically, they were eligible—

Senator McLUCAS —That would be called double dipping, I think.

Mr Broadhead —to be paid for both places while they had the person in the high-care facility and not the low-care facility. I would also strengthen what Andrew said earlier. We had a working group of the industry reference group in 2004. A number of people who sat before this committee earlier today participated in that group and they reported back to the main reference group supporting the abolition of this. However, time passes and things change.

Senator McLUCAS —They may have changed their mind in the intervening period.

Mr Broadhead —We are a little dismayed to discover the same people putting forward a different view now. That is probably all I should say on the subject.

Senator McLUCAS —I think your points are fairly well made. We are talking about fewer than 20 people in Australia, unless it has changed significantly in the intervening years.

Mr Broadhead —Prior to coming to this, we had another look. In the first six months of the current financial year, the number was four. We have not gone to see whether in fact those were instances that really should be there or not.

Mr Stuart —I think it is important to note that it is not only an issue of double payment from government; it is also an issue of double charging of users as well.

Mr Broadhead —They can be charged fees for both places.

Senator McLUCAS —Does that happen?

CHAIR —Will they be? Is it automatic or is it a discretion on the provider’s part?

Mr Broadhead —Fees are discretionary on the provider’s part in general so, yes, it is discretionary. We have not examined the instances to find out whether in fact that is taking place.

Mr Stuart —I am not sure that that data would be available to us.

CHAIR —Are there instances, though, where such a provision for double payment is appropriate and fair in all of the circumstances?

Mr Broadhead —I would not want to rule out the possibility that there would be instances where it could be useful—in other words, hypothetically, that there would be somebody whose situation was such that the thing might be useful. I suppose the question is whether there is no other means of meeting that person’s care needs—I am not clear that that is the case—and whether one keeps alive provisions in legislation that cater to very rare circumstances where there might be another recourse.

Mr Stuart —For example, ageing in place has grown across the sector to such an extent now that most aged-care homes that are classified as low care contain a number of high-care classified residents and they need to be able to accommodate their care. I think that goes partly towards explaining why the numbers utilising this particular function are so low.

Mr Broadhead —The other thing that has changed in recent times is the provision of transition care. Going back to the discussion we had about six-month review of classification, people returning from hospital may require a period of more intensive care post hospitalisation. The government has introduced in recent times the Transition Care Program, which now makes an expected average of about eight weeks of care available for up to 13,000 people. It is fully functioning in 2,000 places around the country. So there are new forms of care available even outside of aged-care facilities which are targeting the kinds of people to whom this provision might have been more applicable in the past.

Senator McLUCAS —I cannot imagine, though, that a person would transition from residential care to transition care. It would go the other way.

Mr Broadhead —No, this is where somebody is coming from hospital and might require a period of higher care than usual, which is what this provision originally was about. It was about somebody who needed to be moved to somewhere else in order to receive a higher level of care for a temporary period. An example where that might be the case is where somebody had higher care needs on exiting from hospital. There are now forms of care available—like transition care, which provides a higher form of care for a considerable period of time in some instances prior to them returning to their usual facility—which were not previously available. There are a range of changes happening which are undercutting the use of and need for this provision. I suspect that is why very few people use it.

Senator McLUCAS —If a facility—and I am thinking of a very small rural facility of 25 places—felt that they required some consideration of a circumstance, could they go somewhere or ring up the department and say, ‘We are pretty special here—can you have a look at our situation?’ Is there a discretion that the secretary can apply?

Mr Broadhead —Not to my knowledge. My guess, again, is that amongst the options available there is an issue about the extent to which somebody’s care needs have been resolved prior to exiting the hospital. There might be an issue about whether somebody is returned to a low-care facility as soon as they otherwise would be. Particularly in rural facilities, often in smaller rural towns, what we are looking at is not actually a stand-alone facility but a multipurpose service. So it is really about shifting people between categories, if you like, within the same facility. The other option is that you can bring in care on a temporary basis to the low-care facility, whether it is in the form of an agency nurse or somebody of that nature. That is a feasible outcome or option as well. I feel I am discussing hypothetical examples here because there are so few instances of it in practice. One could sit here and think about ways in which it might happen, but in practice it does not happen so much.

Senator McLUCAS —That satisfied me; thank you.

CHAIR —We are running a bit over time. Are there any other issues that you want to cover?

Senator McLUCAS —That is all I had on my list, Chair.

CHAIR —Senator Moore, do you have any other issues?

Senator MOORE —No.

CHAIR —Senator Adams?

Senator ADAMS —Just this last one: the penalty for late submissions of applications was considered to be not really required?

Mr Broadhead —Most applications are not late. The issue here is that—and I will get my colleague to speak in more detail if required—the classification is retroactive. In other words, if a classification is late, it can apply to the period prior to when the classification comes in. So there is the risk here in the classification that—because, on average, people’s needs increase rather than decrease—by delaying a classification you might achieve a higher level of classification than you otherwise would. So this is again one of those checks and balances where there is seen to be merit in having an incentive for people to not delay classification.

The penalty that is proposed under the new arrangements is in fact on average lower than the penalty that applies currently. The old penalty was a flat rate penalty, from recollection, which resulted in some instances, where people were on a lower care subsidy, in no care subsidy whatsoever being payable for the late application; whereas this one is proportional. So we think that this is a better approach but that it still achieves that issue of making sure that people are not taking advantage, I suppose, of late submissions to gain higher classifications—there is a countervailing incentive operating. Does that answer the question, or would you prefer—

CHAIR —No, I think—

Mr Tracey-Patte —The existing penalties are $20 per day in low care and $35 per day in high care. The proposed late penalty under the aged-care funding instrument will be $25 for all classifications.

Mr Broadhead —The period after which it applies?

Mr Tracey-Patte —The three months—at the moment, when a classification expires, a reappraisal is to be submitted in the period one month before and one month after the date that the classification expires. A late application can be received at any time after the end of that month after the expiry date. In the situation where the application is late, we pay the rate that would be payable to the classification, less the penalty rate, back to the date of the expiry. As Mr Broadhead indicated, the risk that we are endeavouring to manage there is that, if a person continues to deteriorate in condition, there may be an incentive to submit a very late application and receive a much higher rate of subsidy backdated to the period of the expiry.

CHAIR —Okay. I am happy with that.

Senator McLUCAS —On the question of a review, it has been put to us that ACFI should be reviewed after 12 months. What is the department proposing? I am clearly getting the indication that you are going to review it all the time, but, in terms of the formal review, what is the department proposing? My other question is: is 12 months long enough to make a proper assessment about how it is rolling out?

Mr Broadhead —I would suggest that, no, 12 months is not, because of the time taken for new people to arrive and old people to be reclassified. You would be only reclassifying the last of your existing residents at the end of 12 months, and perhaps a third of your people would be new residents who had come in. So I would have thought that a longer period of time would be required to be sure that the thing had settled.

That said, of course, we will be monitoring how this thing happens in practice from day one and keeping an eye, as it were, on whether it is tracking according to expectations. We will be in discussions with industry groups, I am sure, about that through that period. So, in a sense, we will be monitoring and looking at how it is travelling in the first 12 months, not waiting until some period after. I will probably get a kick under the table for this, but I would be very surprised if, for example, the ANAO did not take an interest in our implementation of this some time after.

Senator McLUCAS —That is a wonderful recommendation.

Mr Broadhead —Do not give them a copy of the Hansard! But I would be very surprised if they did not. At the moment we have got a range of proposed audits in front of us for the coming year. They routinely trawl through our programs and look at what happened and what was intended. Even were we not as attentive to what is going on as we will be, we are still going to be subject, I think, to review.

Mr Stuart —There are a number of natural pieces of data that will come in front of us on a very regular basis. We monitor our expenditure very closely. If our expenditure is not in line with expectations, we ask searching questions about why that might be so. In fact, we are required to answer regular questions from central agencies’ finance sections that govern that in relation to our estimates. As well as that, we have already highlighted that there will be a panel of advisers that will be able to assist individual aged-care homes. I managed such a panel in relation to the previous lot of reforms in 1997 and it was an instructive and useful process. While we will not of course be obtaining information about individual aged-care homes, that panel will be able to give us feedback about what it is that they are finding in the general, and I think we will be very interested in that as well. I do agree with Peter that a year is too short for formal review, but after a year there will be very considerable indications in public data and we will also be working closely with the provider peaks.

Senator McLUCAS —Mr Stuart, I recognise what you are saying and I do not dispute that it is valuable, but a formal review does give you an opportunity to take a step back from that day-to-day monitoring and say, ‘What is happening?’ I recognise that you are going to look at expenditure, and that is important, but I think we also have to look at the care that is being delivered, making sure that the ACFI as a care analysis instrument is actually turning into the quality of care outcomes that we all share as a goal. My concern was that 12 months was probably a little short as well, but is 18 months realistic in terms of the number of people who will have gone through the system, the number of people who have been trained to do the work et cetera? I am trying to find a realistic time that our committee might want to recommend as a formal review.

Mr Stuart —I do not think we should—

Senator McLUCAS —You do not want to comment—that is fine.

—As there are no further questions, I thank the department very much for the evidence it has provided today and for the submission it has lodged with the committee. That concludes our hearing on the Aged Care Amendment (Residential Care) Bill. We are due to report on this bill in about a fortnight’s time, but we may be able to get a draft together fairly quickly and circulate that to senators.

Senator McLUCAS —And additional comments and dissenting reports—the response to this will be a very thick document.

CHAIR —Machines are whirring away preparing that already, I am sure. Thank you very much to all concerned with today’s hearing.

Committee adjourned at 12.29 pm