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Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 2) Bill 2020

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2019-2020

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

SENATE

 

 

 

 

 

 

 

 

AGED CARE LEGISLATION AMENDMENT (IMPROVED HOME CARE PAYMENT ADMINISTRATION NO. 2) BILL 2020

 

 

 

 

 

 

REVISED EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Aged Care and Senior Australians, Senator the Hon Richard Colbeck)

 

 

 

 

 

THIS MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY THE HOUSE OF REPRESENTATIVES TO THE BILL AS INTRODUCED

 

 

 

This revised explanatory memorandum responds to concerns raised by the Senate Standing Committee for the Scrutiny of Bills in Scrutiny Digest No. 15 dated 11 November 2020 and in Scrutiny Digest No. 17 dated 2 December 2020



AGED CARE LEGISLATION AMENDMENT (IMPROVED HOME CARE PAYMENT ADMINISTRATION NO. 2) BILL 2020

 

OUTLINE

The Bill amends the Aged Care Act 1997 (the Aged Care Act) and the Aged Care (Transitional Provisions) Act 1997 (the TP Act).

 

The purpose of the Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 2) Bill 2020 (the Bill) is to improve the administration arrangements of paying home care subsidy to approved providers.

 

The Bill introduces more contemporary business practices into home care subsidy payment arrangements and brings these arrangements into alignment with other Government programs.

 

Approved providers are currently required to provide a monthly statement to their home care recipients that shows the care recipient’s available funds, how the funds are being spent (i.e. care and services delivered) and the amount of unspent funds.

 

The measures in the Bill improve financial accountability and allow for better transparency over the actual use of funds for home care service delivery by requiring approved providers to also report to the Commonwealth the cost of care and services delivered to the home care recipient each month in order for the subsidies to be paid to the approved provider.

 

Currently, approved providers hold and manage any accumulated unspent funds (both Commonwealth subsidy and consumer contributions) that may arise over time on behalf of the home care recipient if the cost of the care and services they access is less than the sum of their home care fees and subsidies paid by the Commonwealth.

 

Once the measures in the Bill commence, the Commonwealth will retain, on behalf of care recipients, the Commonwealth subsidy that may be in excess of the services provided, to be drawn down in future.

 

These reforms will simplify home care subsidy payment arrangements and provide better transparency over the use of funds for home care

 

The Bill will introduce a mechanism whereby providers can elect to return unspent funds to the Commonwealth.

 

The Commonwealth portion of the provider held unspent funds will be taken into account for the purposes of the home care subsidy calculator if the provider elects to return unspent funds to the Commonwealth. 

 

Providers who elect to return unspent funds will do this through a 100 per cent subsidy reduction from the cost of the care and services provided until the unspent funds are exhausted.

 

 

This Bill does not change how consumer contributions will be treated under home care packages. The income tested care fee will automatically be deducted prior to any subsidy being paid as per current practice.

 

The Bill will not affect the eligibility of consumers to home care subsidy or the amount of home care subsidy payable for eligible home care recipients.

 

The Bill makes a consequential amendment to the A New Tax System (Goods and Services Tax) Act 1999 to ensure that the supply of home care remains GST-free.

 

The Bill gives effect to the second stage of reforms to improve payment administration arrangements for home care packages announced by the Government in the 2019-20 Budget. The first stage of the reforms to change home care subsidy from being paid in advance to being paid in arrears was introduced by the Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 1) Bill 2020.

 

Financial Impact Statement

The amendments in Schedule 1 of the Bill are required to implement the second stage of the home care payment administration reforms announced by the Government in the 2019-20 Budget. Government allocated $7.1 million to implement this measure.

 

Regulation Impact Statement

Consistent with the Government’s Regulation Impact Statement (RIS) requirements, the Department certified that the attached excerpts from the Aged Care Financing Authority’s review Consideration of the Financial Impact on Home Care Providers as a Result of Changes in Payment Arrangements represent a similar process and analysis to that required for a RIS.

 



 

Relevant excerpts from

The Aged Care Financing Authority (ACFA) review: Consideration of the financial impact on home care providers as a result of changes in payment arrangements

 

Introduction

The Aged Care Financing Authority (ACFA) is a statutory committee whose role is to provide independent, transparent advice to the Australian Government on financing and funding issues in the aged care industry.

 

The project and terms of reference

On 2 October 2019, the Minister for Aged Care and Senior Australians, Senator the Hon Richard Colbeck, asked ACFA to examine the potential financial impact on home care providers of the Australian Government’s 2019-20 Budget measure to improve the way home care providers are paid Government subsidy on behalf of home care recipients, and to bring these arrangements in line with contemporary business practice.

 

Home care providers are currently paid a consumer’s full entitlement to Government subsidy for each month, less any income-tested care fee, regardless of the services actually provided to the consumer. The subsidy is paid in advance at the start of the month. Any amount that is not spent providing care and services to a consumer in a month is held by the provider as unspent funds to be drawn upon by the consumer in the future.

 

The Budget measure involves a change in timing of the Government subsidy from payment in advance to payment in arrears for services actually provided. The difference between the full Government subsidy for the claim period and the cost to the consumer for the services actually provided (i.e. the unspent funds) will be held by the Government to be drawn upon by the consumer in future, through the provider. This change does not impact the amount that is available overall to the consumer.

 

When announcing the measure in the 2019-20 Budget, the Government said the change in payment arrangements would address stakeholder concerns regarding unspent funds and align home care payment arrangements with other Government programs - most notably the National Disability Insurance Scheme (NDIS).

 

The Minister for Aged Care and Senior Australians sought ACFA’s advice on how the new payment arrangements would impact on providers’ finances and whether the transition to the new arrangements is likely to present any significant challenges to providers in providing services to consumers and their ongoing financial arrangements. ACFA was also asked to advise on possible measures the Government could take to limit potential impacts and risk.

 

The review process

ACFA considered the potential financial impact on home care providers and implications for consumers through a public request for written submissions, face-to-face consultations with stakeholders, discussions with the Department of Health (Health) and the then Department of Human Services (DHS) now Services Australia, software vendors and data analysis. ACFA engaged StewartBrown to analyse the financial accounts of home care providers and provide an assessment of their current capacity to absorb the change in payment arrangements.

 

ACFA received 43 submissions from home care providers, aged care peak bodies, carers, carer advocacy groups, concerned individuals and payment management companies.

 

Face-to-face consultations were held with 79 home care providers attending forums in Brisbane, Adelaide, Perth, Melbourne and Sydney. This included a cross section of providers including small home care only providers, medium and large providers, providers that also engage in other aged care and non-aged care business, remote providers, providers servicing culturally and linguistically diverse (CALD) communities, for profit, not-for-profit and faith-based providers.

 

Health provided ACFA with a broad outline of the implementation arrangements the Government was considering, and this was the basis of ACFA’s consultations. The arrangements were included in the Consultation Paper ACFA released when inviting submissions.

 

During the course of the consultations, providers raised a number of questions regarding how the new funding arrangements would operate that were not covered in the implementation outline ACFA received from Health. Some of the details providers were seeking to clarify could have a bearing on the financial impact of the change in payment arrangements, as well as implications for the provision of services to consumers. During the course of ACFA’s consultations, Health was conducting a separate consultation process on the implementation arrangements for the Budget measure. ACFA has advised Health about the points of detail around the operation of the new arrangements that providers are seeking to clarify.

 

In ACFA’s consultations, providers also raised comments on the merits of the Budget measure and the broader operation of the home care program. ACFA noted that it had not been asked to advise on the merits of the change in payment arrangements or broader reforms to home care.

 

The home care sector

Home care services were provided to 116,843 consumers in 2017-18, compared with 97,516 in 2016-17. The total Government expenditure on home care in 2017-18 was $2 billion dollars, an increase of $400 million from 2016-17. Consumer contributions in home care in 2017-18 were $122 million.

 

As at 30 July 2018, there were 873 home care providers. Over half of all providers were not-for-profit. The balance of providers was for-profit (35 per cent) and Government (12 per cent). Home care providers mainly serviced metropolitan locations (55 per cent), with 36 per cent operating regionally and 9 per cent operating in both metropolitan and regional locations.

 

Sixty-two per cent of home care providers also provide residential care and/or services under the Commonwealth Home Support Program (CHSP). Many home care providers also provide other services including retirement living, wellbeing and disability services, outreach community health and housing support services.

 

The home care sector has experienced significant growth in recent times, both in terms of Government expenditure, the number of consumers serviced and an increase in the number of providers servicing the sector.

 

Home care providers are still in the process of adjusting to the introduction of packages following consumers (portability of the package) rather than being allocated to providers. This reform allows consumers to direct their care package to the provider of their choice as well as to change providers. The changes have resulted in a large increase in the number of approved providers and, in turn, greater competition which has resulted in a decline in profit margins for individual providers. As noted in ACFA’s 2019 Annual Report, in 2017-18 the Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for home care providers fell by over 60 per cent. The preliminary results from the StewartBrown survey for 2018-19 suggests a further small decline in the financial performance of home care providers. The large falls in the previous two years appear to have been arrested.

 

Current payment arrangements in home care

Home consumers are allocated a level 1, 2, 3 or 4 home care package depending on their assessed needs, with level 1 having the lowest dollar value and level 4 the highest. Once a package becomes available, consumers enter an agreement with a home care provider to receive care and services under their package.

 

Government subsidy levels (current to 19 March 2020) are:

Subsidy rate per day by package level

Level

Per day

1

$24.07

2

$42.35

3

$92.16

4

$139.70

 

Providers may also receive supplementary funding in respect of certain services and consumers, for example, a viability supplement for more remote services and dementia and cognition supplements.

 

Home care providers are currently paid a consumer’s full entitlement to Government subsidy for each month (i.e. their package level for each day in care less the subsidy reduction which is known as an income-tested care fee), regardless of the services actually provided to the consumer. This is paid in two stages. Using the month of June as an example, the provider receives an advance payment at the start of June equivalent to the amount received for the month two months earlier, being April. Then, at the start of the subsequent month, July, the provider lodges a claim specifying the actual subsidy due for June, at which time a reconciliation takes place.

 

Providers also collect an income-tested care fee from consumers who have sufficient assessable income and, by agreement with the consumer, can also charge a basic daily fee, currently up to approximately $11 per day. These amounts are added to the consumer’s subsidy to form their package budget and can be drawn upon to pay for care and services. The Government subsidy on average represents 96% of home care providers’ income.

 

Any amount that is not spent providing care and services to a consumer in a month is held by the provider as available funds to be drawn upon by the consumer in future. Available funds are commonly referred to as unspent funds, noting these only become unspent funds when a person exits care.

 

Unspent funds

Based on the most recent data, the current pool of unspent funds is around $750 million. This is an increase of approximately $200 million in the last 12 months. The average unspent funds per client is approximately $7,000. [1]

 

Unspent package funds are currently held by providers but should not be recognised as income by the provider until the funds have been spent or committed for the consumer’s care. Some providers treat unspent funds as part of their working capital (which reduces the need to access other sources of working capital such as through borrowing), but these funds should then be recognised in the providers’ accounts as a liability. It appears some providers quarantine unspent funds in an account separate from the operating account and use the funds only to pay for care and services to consumers, although they may use the interest earned on those funds for various purposes. Some providers have this money held by a third party, effectively holding it in trust for the consumers.

 

The average subsidy utilisation rate is 90 per cent, meaning that on average 10 per cent of Government subsidy payments are accruing as unspent funds. While the growth of an individual’s unspent funds balance will largely be related to how long they are in care, providers reported that their unspent funds were concentrated on a small number of consumers with very large balances.

 

A range of factors are behind the growth in unspent funds, as discussed in ACFA’s 2019 annual report. [2] The change in payment arrangements, which was the basis of the consultations, will not address the underlying issues causing unspent funds to accumulate, but will address who holds the funds- provider or Government.

 

During ACFA’s consultations, a number of providers said that the focus should be on addressing the reasons for the build-up in unspent funds rather than changing who holds such funds. A number of suggestions were offered on how to reduce the growth in unspent funds, predominantly involving changes to the assessment process to avoid over assessment and to enable downgrading of package levels if a consumer’s needs reduce.

 

Issues raised in consultations

Current arrangements

Providers are currently paid the Government subsidy in advance based on a consumer’s days in care and their package level. Providers retain unspent funds for future drawdown by the consumer.

 

Receiving the Government subsidy in advance has reduced the need for many providers to access other means to obtain working capital. Providers noted that they still need to finance the services provided to new consumers pending receipt of their Government subsidy.

 

Providers also advised that there can be significant reconciliation issues when they do not receive what they consider to be the correct subsidy payments for consumers. Providers said the current payment system is slow to respond to requests for payment adjustments and the reconciliation process can involve significant administrative effort and cost to providers. It was observed that gaps in the information flow between providers and DHS can be caused by such factors as providers not receiving package upgrade notifications, the absence of a mechanism to confirm the subsidy package that consumers are receiving when they transfer between providers, and no mechanism for providers to access how many days of leave remain before a package recipients subsidy is reduced. One provider reported that 40 of their consumers had ‘dropped off’ the DHS system, resulting in unpaid subsidies of $120,000.

 

It was claimed that payment adjustments can take up to six weeks to reach providers’ bank accounts. Providers noted they faced the challenge of continuing to fund care and services whilst payment issues are being worked through; essentially they had to continue to deliver services for some consumers without receiving the Government subsidy payment. It was observed that under current arrangements, the impact of such financing pressures is somewhat cushioned by the subsidy payments being made in advance and providers holding the consumers’ unspent package funds.

 

It appears that providers are concerned that the reconciliation issues and resulting administrative costs currently being experienced could be exacerbated by introducing further complexity to the payment system. Moreover, problems with the existing system contributed to providers’ scepticism as to whether a change in payment arrangements would be smoothly implemented.

 

Phase 2 - payment for services provided

Phase 2 (as from April 2021) involves subsidy payments based on services actually provided to individual consumers. DHS will retain each consumer’s unspent funds to be drawn down by providers on behalf of consumers when needed.

 

The main concern raised by providers did not involve the impact of Phase 2 on their cash flow. Their Phase 2 concerns focussed on the system changes that would be required, both to their systems and DHS payment systems, to accommodate the move to payment for goods and services actually provided to each of their consumers. Providers were concerned about having sufficient time for system changes to be developed, tested and implemented, as well as the costs that they would incur for such changes and for staff training, which may be passed on to the consumer.

Providers were particularly concerned about the ability of DHS to introduce a new system to support the change in payment arrangements. Their concern was based on previous negative experiences with significant system upgrades, such as those that occurred with the introduction of funding following the consumer for home care packages. They observed that if the required changes in payment systems by providers and DHS are not compatible, and there are discrepancies in the flow of information regarding each consumer, there will be reconciliation issues. These issues will pose significant additional administrative effort and costs for providers. If there continued to be sizeable delays in sorting out data discrepancies with the current payment system, it could cause significant financial problems for providers.

 

Providers would be particularly concerned if Phase 2 required them to manually input the data on the goods and services actually used by consumers each month. This would significantly increase their costs.

 

Providers said clarification was required around many aspects of the implementation of Phase 2. Some of the issues raised included:

·          Who will be responsible for monitoring client balances and advising the consumer of their unspent fund balance (provider or DHS or jointly)?

·          How will resolution occur if there is a discrepancy between providers’ records and DHS?

·          What level of detail is required when claiming for goods and services actually provided?

·          Will there be a time limit on invoicing?

·          Who should be collecting the income tested care fee (provider or DHS)?

·          How would the basic daily fee be treated (would it be deducted from the subsidy payment in the same way as the income tested care fee)?

·          Will consumers be allowed to get into negative balance? Currently providers allow consumers to temporarily go into negative balance in times of particular need, such as following a health related event or when capital items are immediately needed. Under current arrangements, providers recoup an over spend in a few months from subsequent monthly payments. Providers noted that they bear the risk if the consumer departs care before the overspent funds are recouped.

 

As noted previously, these questions have been referred to Health who is consulting on the detail of the implementation of the change in payment arrangements. This detail can impact on the cost to providers of the new arrangements.

Most providers said the Government’s timeframe for the implementation of Phase 2 was too short. There was a strong desire for this phase to be pushed back to allow more time for development, testing and a trial period to ensure that past issues with the payments system do not occur again.

 

Due to the time and cost associated with significant system change, a number of providers suggested that these changes should not be introduced ahead of the final report being delivered by the Royal Commission into Aged Care Quality and Safety.

 

DHS has advised ACFA that they are committed to delivering systems that are modern, adaptable and meet the requirements of their stakeholders. DHS further advised that they will continue to work with Health and engage with service providers to seek input and feedback on how payment systems are designed and operate.

 

Possible impact on viability of some providers

Some of the submissions suggested that the new payment arrangements would be a risk to the viability of some providers. One submission noted that a loss of liquidity for providers may result in insolvency or pose difficulties for providers to fund significant drawdowns from available funds. Some submissions suggested that smaller providers may no longer be able to operate due to an inability to pay staff or suppliers before the funds are reimbursed.

 

One submission provided details about the anticipated impacts on a group of providers operating in thin markets. This submission advised that Moving to a post-paid individualised finance model will impact cash flows for remote and very remote service providers in the short and long term and this could be worsened by providers who may be relying on the availability of unspent funds to provide services that otherwise are not financially viable.

 

Many submissions referenced small providers and those operating in rural and remote locations, suggesting that the risks to the ongoing viability of these providers would be heightened as a result of the change in payment arrangements. Submissions from smaller providers asked that they be given special consideration and receive support to ameliorate the costs to them of the change in payment arrangements.

 

In addition to the individual impacts, providers noted that the cumulative effect of this change needs careful consideration in the context of previous and ongoing reforms to home care.

 

Possible impact on consumers

A number of concerns were raised regarding the possible impact of the new payment arrangements on the delivery of goods and services to consumers. It was noted that should the new arrangements result in some providers leaving the industry, this would reduce consumer choice. The extent to which the new arrangements adversely impact on the viability of providers operating in very thin markets in rural and remote locations may have a significant impact on consumers if there are no other providers operating in those markets.

 

Some providers said that as a result of the cash flow pressures arising from the changes, they may be reluctant to take on new consumers during the transition period. Others observed that if this was the case, they saw an opportunity to increase market share. A related concern raised by a number of smaller providers was that larger providers would have greater capacity to absorb the costs associated with the changes, and this would distort the competitive market.

 

Many providers suggested that with unspent package funds being held by DHS, there would be significant delays before consumers could access these funds to finance the provision of large capital items. It was noted that larger providers may have the capacity to finance such purchasers before getting reimbursement from DHS, but smaller providers would not have the same capacity to finance such outlays. This was seen as another consequence impeding the competitiveness of smaller providers.

It was also noted in the consultations that, to the extent that the new payment arrangements increase administrative costs for providers, these costs would be passed on to consumers which in turn would reduce the level of goods and services available to a consumer under a package.

 

It was also highlighted that consumers would be adversely impacted if the arrangements involving DHS paying the subsidy for actual services delivered in the past month reduced the flexibility under current arrangements whereby a provider could overspend on a consumer in one month, and recoup from subsidy payments in subsequent months.

 

Data analysis

The accounting firm StewartBrown was engaged to provide an assessment of the likely financial impact of the proposed changes based on an examination of the financial accounts of home care providers. In undertaking this analysis, StewartBrown used the information available from the 2018-19 Aged Care Financial Reports (ACFR) submitted by providers, data from the most recent StewartBrown Aged Care Financial Performance Survey, and other relevant financial data.

 

StewartBrown’s report is attached. The key findings from the report are:

 

Financial impact on providers

The overall financial performance of approved providers, other than the potential additional interest expense and possible foregone interest revenue on unspent funds, will not be materially impacted by the cash flow impact of the proposed changes to funding arrangements.

 

On average, and across the cohort of approved providers examined by StewartBrown, there are sufficient liquid assets held by at least 89 per cent (477 in number) of approved providers. They have sufficient cash flows to meet normal operating expenses for one month while the arrangements transition from payment in advance to payment in arrears.

 

The potential financial impacts to approved providers are likely to be amplified for smaller providers who do not have other major sources of revenue other than that generated from the delivery of home care packages.

 

Significant risk

StewartBrown noted that if the Government, through DHS, required approved providers to submit each claim at the individual consumer level, this would result in additional administrative effort for providers, not only in making claims but also in reconciling the reimbursed funding receipt to the claim on a consumer by consumer basis.

 

 

 

 

 

Assessment of issues raised

Phase 2

The main concern with Phase 2 raised in the consultation meetings and in written submissions was the capacity for DHS to implement the required changes to their systems to deal with the new payment arrangements, along with the costs to providers of having to change their payment systems. Providers were particularly concerned that if the new arrangements are not introduced smoothly, there will be significant reconciliation issues in dealing with discrepancies in data and this will have a significant financial impact on providers.

 

In order to gain an insight into the system adjustments that providers may need to introduce to accommodate the change in payment arrangements, ACFA consulted with software providers to assess their views on the feasibility of the changes within the proposed timeframes.

 

Software providers noted that the most important pre-condition to managing a smooth transition process is getting the systems development phase in place and agreed to by key stakeholders as early as possible. It was further noted that the ability for software developers to implement timely and accurate changes for their clients (home care providers) was conditional on DHS being able to manage system requirements effectively from their end.

 

Software providers observed that a fully integrated system (business to Government) would not be achievable within the timeframe.

 

ACFA notes that it is important that the new arrangements whereby Government subsidies are paid for actual services provided maintains the flexibility of the current system which enables a consumer’s package to go into negative balance if needed and to be recouped from subsequent monthly subsidy payments.

 

Conclusions and Recommendations

With some exceptions, there is general acceptance and support amongst providers and peak bodies that there is merit in the Government’s decision to pay home care subsidies in arrears and for DHS to retain unspent funds.

 

Notwithstanding this general acceptance and support, ACFA’s consultation raised a range of concerns around the implications of the new funding arrangements. A few providers advocated for the maintenance of current funding arrangements. While some providers supported the intent of the changes in payment arrangements, they argued that no changes should be made until the Royal Commission into Aged Care Quality and Safety has delivered its final report.

 

Acknowledging the range of themes raised during the consultation, ACFA makes the following conclusions and recommendations. The recommendations are framed within the three proposed implementation phases.

 

Phase 2

Phase 2 presents a potential risk for providers and the Government. This is primarily due to the extent of new system requirements to deal with the changes in payment arrangements and how smoothly these systems operate. Providers’ concerns relate to a number of factors that can be broadly categorised into the following groups:

 

1.       System costs and increased staffing costs associated with increased administration (particularly if manual data entry is required).

2.       Significant increase in reconciliation requirements which will add to administrative expenses and impact on providers’ financial position if there is a sizeable delay in resolving discrepancies and receiving payments.

3.       Previous negative experiences with significant systems changes and concerns that short lead times will not allow time to trial the changes.

4.       A high degree of uncertainty as to how Phase 2 will operate given numerous substantive matters are not yet resolved.

 

Risks are heightened for providers operating in thin markets and delivering niche services.

 

ACFA notes the complexity of the changes required to the DHS payment system. For this Phase to be implemented with minimal disruption to providers and consumers, system implementation requirements need to be well considered and articulated to the sector as soon as possible. The focus should also be on minimising the administrative costs for providers under Phase 2. In this regard, consideration should be given to the suggestion raised in StewartBrown’s report that rather than requiring providers to submit a claim for services actually provided at the individual level, providers submit an aggregate amount of the services provided.

 

It is also important that the details of the operation of the payment arrangements under Phase 2 do not have an adverse impact on consumers. In particular, the new system should retain the flexibility of the current system whereby providers allow a consumer’s balance to go into arrears if needed and recoup the amount from subsidy payments in subsequent months. Flexibility may also be needed to allow providers early access to a consumer’s unspent balances held by DHS in order to finance large capital items. ACFA recognises the significant costs providers may incur in changing their systems and the smoothness of moving to the payment arrangements under Phase 2 is very dependent on how effectively DHS can manage their systems changes.

 

The prudent course to minimise the risks associated with Phase 2 is for Health to finalise the details of how this phase will operate in consultation with providers and to discuss with DHS and software providers what realistic time frame is required to trial and implement system changes.

 

Phase 2 recommendations

Recommendation 4: All aspects of how the new payment arrangements will operate need to be settled as quickly as possible to determine the system changes required by both DHS and providers. In settling this detail, the focus should be on minimising the costs to providers and avoiding any reduction in the flexibility of the current system in providing goods and services to consumers as they need them.

 

Recommendation 5: Once the details of the new arrangements are settled, there need to be consultations between DHS, providers and software developers to determine an appropriate time frame to ensure a smooth change to the new funding scheme, and also what can be done to minimise the administrative burden on providers. There should be a reasonable trial period of the new systems before full implementation. The current time frame for the introduction of Phase 2 (April 2021) should be reviewed following these consultations between DHS, providers and software developers.

 

Recommendation 6: Consideration should be given to providing financial support to providers operating in thin and difficult markets who may find it particularly challenging to adjust their systems to deal with the requirements of the new payment arrangements.



 

Statement of Compatibility with Human Rights

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

AGED CARE LEGISLATION AMENDMENT (IMPROVED HOME CARE PAYMENT ADMINISTRATION NO. 2) BILL 2020

 

The Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 2) Bill 2020 (the Bill) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

 

Overview of the Bill

The Bill amends both the Aged Care Act 1997 and the Aged Care (Transitional Provisions) Act 1997 . The Bill makes a consequential amendment to the A New Tax System (Goods and Services Tax) Act 1999 to ensure that the supply of home care remains GST-free.

 

The Schedules in the Bill make amendments to improve financial accountability and allow for better transparency over the actual use of funds for home care service delivery by requiring approved providers to report the cost of the services provided to home care recipients to the Commonwealth in order to be paid subsidy. The Bill specifies that the Commonwealth will retain, on behalf of home care recipients, the Commonwealth subsidy that may be in excess of the services provided, to be drawn down in future. Providers maintain the responsibility for managing consumer contributions towards their home care package.

 

Approved providers are currently required to provide a monthly statement to their home care recipients that shows the care recipient’s available funds, how the funds are being spent (i.e. care and services delivered) and the amount of unspent funds.

 

The measures in the Bill improve financial accountability and allow for better transparency over the actual use of funds for home care service delivery by requiring approved providers to also report to the Commonwealth the cost of care and services delivered to the home care recipient each month in order for the subsidies to be paid to the approved provider.

 

In the 2019-20 Budget, the Government announced reforms to improve payment administration for home care packages to address concerns regarding unspent funds and align home care arrangements with other Government programs.

 

Currently, approved providers hold and manage any accumulated unspent funds that may arise over time on behalf of the home care recipient if the cost of the care and services they access is less than the sum of their home care fees and subsidies paid by the Commonwealth.

 

 

 

The Bill gives effect to the second stage of reforms to improve payment administration arrangements for home care packages announced by the Government in the 2019-20 Budget. The first stage of the reforms to change home care subsidy from being paid in advance to being paid in arrears was introduced by the Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 1) Bill 2020.

 

In the first stage, the home care subsidy paid to an approved provider changes from being a payment made in advance of the home care services being delivered to a consumer, to a payment made in arrears after the services have been delivered to a home care consumer. The home care subsidy continues to be paid at the full rate.

 

In the second stage of the reforms introduced by this Bill, the Government intends to continue to pay home care subsidy in arrears, however the payments will be based on actual care and services delivered. This will allow unspent home care subsidy to accumulate with the Commonwealth on behalf of the home care recipient instead of with an approved provider and will provide better transparency over the actual use of funds for home care service delivery.   

 

The Bill introduces a mechanism whereby the Commonwealth portion of the provider held unspent funds is taken into account for the purposes of the home care subsidy calculator if the provider elects to return unspent funds to the Commonwealth. 

 

Providers who elect to return unspent funds will do this through a 100 per cent subsidy reduction from the cost of the care and services provided until the unspent funds are exhausted.

 

Human rights implications

The Bill engages the following human rights as contained in Articles 11 and 12 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) and Articles 3, 5, 25 and 28 of Convention of the Rights of Persons with Disabilities (CRPD) :

·          the right to an adequate standard of living;

  • the right to the enjoyment of the highest attainable standard of physical and mental health;
  • the rights of equality and non-discrimination; and
  • the right to choice for persons with disabilities.

 

The Government recognises that older people want to remain living in their own home for as long as possible and may need to receive care to do so. As such, the Government subsidises home care packages to provide comprehensive home-based care that can improve older Australians quality of life and help them remain active and connected to their communities.

 

This involves the payment of subsidy to approved providers for the provision of care and services to people with a condition of frailty or disability who require assistance to achieve and maintain the highest attainable standard of physical and mental health.

 

The home care package program ensures access to care that is affordable by, and appropriate to, the needs of people who require it.

 

The measures in the Bill improve financial accountability and allow for better transparency over the actual use of funds for home care service delivery by requiring approved providers to report to the Commonwealth cost of care and services delivered to the home care recipient each month in order for the subsidies to be paid to the approved provider. The Bill will also allow the Commonwealth to retain the Commonwealth subsidy that may be in excess of the services provided, to be drawn down in future.   

In doing so, the Bill positively engages the rights set out in Articles 11 and 12 of the ICESCR and Articles 25 and 28 of the CRPD by promoting the right to an adequate standard of living and the right to the enjoyment of the highest attainable standard of physical and mental health.

 

The Bill promotes the rights of equality and non-discrimination, as set out in Article 5 of the CRPD, by improving the financial accountability of, and allowing for better transparency over the actual use of the subsidies paid to provide care and services to those who need them, regardless of race, culture, language, gender, economic circumstances or geographic location.

 

The home care package program positively engages the rights for persons with disabilities set out in Articles 25 and 28 of the CRPD, including the right to enjoyment of the highest attainable standard of health and the right to an adequate standard of living without discrimination on the basis of disability, by providing genuine consumer direction of care. Improving the home care payment administration arrangements by introducing more transparency over the actual use of home care subsidy further engages these rights.

 

The Bill is the second stage of reforms to improve payment administration arrangements for home care packages and strengthens the integrity of the home care package program. As facilitated by this Bill, strengthening the home care package program leads to an improvement in the lives of older Australians, including those with disabilities.

 

The Bill will not affect the eligibility of home care recipients for home care subsidy or the amount of home care subsidy payable for eligible home care recipients and ensures that the supply of home care remains GST-free.

 

Conclusion

The Bill promotes human rights to the highest attainable standard of physical and mental health and is compatible with the human rights and freedoms recognized and declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

 

 

Senator the Hon Richard Colbeck, Minister for Aged Care and Senior Australians

 



AGED CARE LEGISLATION AMENDMENT (IMPROVED HOME CARE PAYMENT ADMINISTRATION NO. 2) BILL 2020

 

NOTES ON CLAUSES

 

Clause 1 - Short Title

This clause provides that the Bill, once enacted, may be cited as the Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 2) Act 2020 .

 

Clause 2 - Commencement

This clause sets out when the Bill commences. Item 1 to the table provides that sections 1 to 3 of the Act commence the day the Act receives the Royal Assent.

 

Item 2 to the table provides that Parts 1 and 2 of Schedule 1 commence on a day to be fixed by Proclamation. However, if the commencement of the provisions is not fixed by a Proclamation registered on the Federal Register of Legislation within 6 months after the Royal Assent, the provisions in Parts 1 and 2 of Schedule 1 are repealed on the day after the end of that period.

 

Item 3 to the table provides that Part 3 of Schedule 1, commences immediately after the commencement of Parts 1 and 2 of Schedule 1 to the Bill. However, if the provisions in Parts 1 and 2 of Schedule 1 do not commence, the provisions in Part 3 of Schedule 1 are repealed at the same time as the provisions in Parts 1 and 2 of Schedule 1 are repealed.

 

Clause 3 - Schedule(s)

This clause provides that each Act that is specified in a Schedule to this Bill is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item has effect according to its terms. This is a technical provision which gives operational effect to the amendments contained in the Schedules.

 

Schedule 1 amends the Aged Care Act 1997 (the Aged Care Act) and the Aged Care (Transitional Provisions) Act 1997 (the TP Act) in relation to the payment of home care subsidy. Schedule 1 also makes a consequential amendment to the A New Tax System (Goods and Services Tax) Act 1999 to ensure that the supply of home care remains GST-free.

 

SCHEDULE 1 — AMENDMENTS

 

Aged Care Act 1997

 

Item 1 - Before section 48-1

This item inserts the heading of Subdivision A - Amount of home care subsidy immediately before section 48-1

 

Item 2 - Subsection 48-1(2)

This item repeals subsection 48-1(2) and substitutes in its place new subsections 48-1(2) and 48-1(3). New subsection 48-1(2) sets out the home care subsidy calculator and the steps to be followed when calculating the amount of home care subsidy for a care recipient.

 

New subsection 48-1(3) identifies circumstances when the home care account balance is not added to the Commonwealth contribution amount for the purposes of Step 4 of the calculator. Step 4 of the calculator recognises that in some situations an approved provider may need time to receive and process outstanding invoices for the home care account balance to be finalised, such as when a home care recipient has ceased to be provided with home care from a particular approved provider and then commences to receive home care from a new approved provider. The Subsidy Principles will be amended to provide the relevant period for new subsection 48-1(3).

 

Item 3 - After section 48-1

This item inserts a new heading, Subdivision B - Commonwealth contribution amount, and new section 48-1A which sets out the Commonwealth contribution amount calculator.

 

Items 4, 5 and 6 - Subsection 48-3(1), section 48-4 and sub-section 48-9(1)

Items 4, 5 and 6 omit the words “home care subsidy” and substitute the words “Commonwealth contribution amount” in their place in subsection 48-3(1), section 48-4 and subsection 48-9(1) respectively.

 

Item 7 - At the end of Part 3.2

This item inserts new Subdivision C - Shortfall amount and new Subdivision D - Home care accounts.

 

New section 48-13 in Subdivision C sets out how to calculate the shortfall amount for a payment period. New subsection 48-13(1) sets out the shortfall amount calculator.

 

The shortfall amount calculator operates so that where a provider elects to return the Commonwealth portion of a care recipient’s unspent home care funds to the Commonwealth, the price of the care and services provided in the payment period will be reduced by the amount of the Commonwealth portion of unspent funds that were available at the end of the previous payment period, up to 100% of the price. The User Rights Principles will be amended to set out any requirements for an approved provider to elect to return the Commonwealth portion of a care recipient’s unspent home care funds.  

 

New subsection 48-13(2) sets out that the Subsidy Principles must specify the way to work out the price for the home care that has been provided during a payment period for the purposes of step 1 of the shortfall amount calculator.

 

New subsection 48-13(3) sets out that the Subsidy Principles may require the price for the home care that has been provided to include or to exclude amounts in specified circumstances. 

 

New subsection 48-13(4) sets out that the Subsidy Principles may specify the care recipient contribution amount, or how to work out the care recipient contribution amount for the purposes of the shortfall amount calculator.

 

New section 48-14 in Subdivision D sets out that on or after the implementation day (the meaning of implementation day is inserted by Item 10) there will be a home care account for each prioritised home care recipient.

 

If a person is a prioritised home care recipient on the implementation day, they will start to have a home care account on the implementation day. If a person is not a prioritised home care recipient on the implementation day, they will start to have a home care account on the day the Secretary first makes (after the implementation day) a determination under section 23B-1 of the Aged Care Act that the person is a prioritised home care recipient.

 

The creation of a home care account is necessary to facilitate the management of any unspent subsidy that the Commonwealth may commence to hold on behalf of home care recipients.

 

Debits from, and credits to, a home care account will take place when unspent subsidy is added to, or drawn from, a home care account.

 

New section 48-15 in Subdivision D sets out the circumstances in which a home care credit arises in a home care account.

 

New section 48-16 in Subdivision D sets out the circumstances in which a home care debit arises in a home care account.

 

New section 48-17 in Subdivision D sets out the meaning of home care account balance for the purposes of the Act. The home care account balance in a care recipient’s home care account at a particular time equals the sum of the home care credits in that account, less the sum of the home care debits in that account at the time.

 

New section 48-18 in Subdivision D sets out that a home care account ceases when the care recipient dies.

 

Item 8 - Subparagraphs 56-2(b)(i) and (c)(i)

This item inserts the words “the care recipient” after the word “charge” in subparagraphs 56-2(b)(i) and (c)(i) to make clear that the limit on charging in those subparagraphs is a limit on charging the care recipient.  

 

Item 9 - Section 96-1 (table item 23)

This item omits the words “Part 4.2” from table item 23 in section 96-1 and substitutes the words “Parts 3.2 and 4.2” in their place. This amendment will enable the User Rights Principles to be amended to provide for any matters required or permitted, or necessary or convenient, under Part 3.2 of the Act relating to the Home Care Subsidy.

 

Item 10 - Clause 1 of Schedule 1

Item 10 amends Clause 1 of Schedule 1 - Dictionary to the Act to insert the meanings of the terms “home care account” and “home care credit” and “home care debit” and “implementation day”.

 

Home care account means an account that arises under new section 48-14.

 

Home care credit has the meaning given by new section 48-15.

 

Home care debit has the meaning given by new section 48-16.

 

Implementation day means the day that Part 1 of Schedule 1 to the Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 2) Act 2020 commences.

 

Item 11 - Clause 1 of Schedule 1 (definition of payment period)

Item 11 amends Clause 1 of Schedule 1 - Dictionary to the Act by repealing the definition of “payment period” and substituting in its place a new definition. The new definition of “payment period” provides that this term is defined in section 43-2 in relation to residential care, and section 47-2 in relation to home care.

 

Aged Care (Transitional Provisions) Act 1997

 

Item 12 - Subsections 48-1(2) to (4)

Item 12 repeals subsections 48-1(2) to (4) of the TP Act and substitutes new subsections 48-1(2) and 48-1(3) in their place.

 

Subsections 48-1(2) to (4) of the TP Act deal with the amount of home care subsidy that is payable to an approved provider in respect of a care recipient as determined by the Minister and worked out in accordance with a method determined by the Minister by legislative instrument.

 

New subsection 48-1(2) provides that the amount of home care subsidy payable to an approved provider in respect of a care recipient in respect of the relevant payment period is the amount specified in the Aged Care (Transitional Provisions) Principles or the amount worked out in accordance with a method specified in the Aged Care (Transitional Provisions) Principles.

 

The intention of new subsection 48-1(3) is to allow new rules in the Aged Care (Transitional Provisions) Principles to maintain consistency with the current structure for working out the amount of home care subsidy payable to an approved provider. 

 

Item 13 - Clause 1 of Schedule 1 (definition of payment period)

Item 13 amends Clause 1 of Schedule 1 - Dictionary to the TP Act by repealing the definition of “payment period” and substituting in its place a new definition. The new definition of “payment period” provides that this term is defined in section 43-2 in relation to residential care, and section 47-2 in relation to home care.

 

A New Tax System (Goods and Services Tax) Act 1999

Item 14 - Subsection 38-30(1)

Item 14 repeals subsection 38-30(1) of the A New Tax System (Goods and Services Tax) Act 1999 and substitutes it with a new subsection 38-30(1) to ensure that the supply of home care remains GST-free.

 

Item 15 - Application of amendments

Item 15 specifies that the amendments to the Aged Care Act 1997 and the TP Act made by this Part apply in relation to payment periods beginning on or after the day this item commences.

 

Item 16 - Rules

Item 16 of the Bill enables the creation of rules by the Minister, in the form of a legislative instrument, that pertain to transitional matters. The proposed changes introduced by this Bill and the complexity of the home care payment administration system require such a rule making power to permit legislative amendments to be made to address any unanticipated consequences as a result of the transition to the new payment administration arrangements.

 

Rules made under this item are not intended to adversely affect any individuals because they would only be made in circumstances where it was necessary to address detrimental consequences of the Bill. As a result, any rules (if made) would not operate to disadvantage any person.

 

Sub-item 16(1) sets out that the Minister may, by legislative instrument, make rules prescribing matters of a transitional nature (including any saving or application provisions) relating to the amendments or repeals made by this Act.

 

Sub-item 16(2) sets out that the rules may not create an offence or civil penalty; may not provide powers of arrest, detention, entry, search, or seizure; may not impose a tax; or directly amend the text of an Act.

 

Sub-item 16(3) states that the rules may provide that, during or in relation to the first 12 months after the commencement of the item, the Act or any other Act or instrument has effect with any modifications prescribed by the rules.

 

Sub-item 16(3) is intended to allow the making of subordinate legislation to deal expeditiously with matters which may have unintentionally unfairly affected home care recipients or approved providers. It is considered that the most practical and appropriate way to quickly address emerging circumstances regarding the administration of home care subsidy payment arrangements is to include a provision that subordinate legislation may, during the first 12 months after the commencement of the item, modify the provisions as appropriately required.

 

Sub-item 16(4) sets out that subsection 12(2) of the Legislation Act 2003 does not apply to rules made under this item. This is to allow the rules, which under this item must be made within 12 months after the commencement of this item, to apply from the commencement of this item in order to expeditiously address emerging issues relevant to the administration of home care subsidy payments resulting from the commencement of this Bill.

The purpose of sub-item 16(4) is to ensure that all approved providers that provide home care, that may be affected by the provisions of the Bill and any subsequent rules made under sub-item 16(3), will be subject to the same legislative requirements with effect from a date specified by the rules, if necessary. In addition, it is intended that the rules made under item 16 should operate beneficially, so as to not affect the eligibility of home care recipients to home care subsidy or the amount of home care subsidy payable for eligible home care recipients.

 

Part 2 - Variation of claims for home care subsidy



Aged Care Act 1997

 

Item 17 - Paragraph 47-4A(1)(a)

Item 17 repeals paragraph 47-4A(1)(a) of the Act in relation to the time after a payment period in which an approved provider may vary a claim for payment. Item 17 substitutes a new paragraph 47-4A(1)(a) that sets out that an approved provider may make a variation to a claim made in respect of a payment period within the period specified in the Subsidy Principles, or if no such period is specified, within 2 years after the end of that payment period (which is the existing period in which an approved provider may vary a claim in respect of a payment period).

 

The intention of item 17 regarding periods in which approved providers can make a variation to a claim for payment is to facilitate the management of any unspent subsidy the Commonwealth may commence to hold on behalf of home care recipients and the calculation of the balance of a care recipient’s home care account.

 

It is noted that there is no change to paragraph 47-4A(1)(b) of the Aged Care Act which allows the Secretary to determine a longer period in which an approved provider may vary a claim in respect of a payment period.

 

Item 18 - After subsection 47-4A(1)

Item 18 inserts new subsection 47-4A(1A) after subsection 47-4A(1) of the Aged Care Act. New subsection 47-4A(1A) sets out that the Subsidy Principles may specify different periods in respect of different classes of claim variations.

 

Item 18 facilitates the management of any unspent subsidy that the Commonwealth may commence to hold on behalf of home care recipients as a result of this Act and the calculation of the balance of a care recipient’s home care account.

 

Aged Care (Transitional Provisions) Act 1997

 

Item 19 - Paragraph 47-4A(1)(a)

Item 19 repeals paragraph 47-4A(1)(a) in relation to the time after a payment period in which an approved provider may vary a claim for payment. Item 19 substitutes a new paragraph 47-4A(1)(a) that sets out that an approved provider may make a variation to a claim made in respect of a payment period within the period specified in the Aged Care (Transitional Provisions) Principles, or if no such period is specified, within 2 years after the end of that payment period (which is the existing period in which an approved provider may vary a claim in respect of a payment period).

 

The intention of item 19 regarding periods in which approved providers can make a variation to a claim for payment is to facilitate the management of any unspent subsidy the Commonwealth may commence to hold on behalf of home care recipients and the calculation of the balance of a care recipient’s home care account.

 

It is noted that there is no change to paragraph 47-4A(1)(b) of the TP Act, which allows the Secretary to determine a longer period in which an approved provider may vary a claim in respect of a payment period.

 

Item 20 - After subsection 47-4A(1)

Item 20 inserts new subsection 47-4A(1A) after subsection 47-4A(1) of the TP Act. New subsection 47-4A(1A) sets out that the Aged Care (Transitional Provisions) Principles may specify different periods in respect of different classes of claim variations. Item 20 facilitates the management of any unspent subsidy that the Commonwealth may commence to hold on behalf of home care recipients as a result of this Act and the calculation of the balance of a care recipient’s home care account.

 

Item 21 - Application of amendments

Item 21 specifies that the amendments of subsection 47-4A(1) of the Aged Care Act  and subsection 47-4A(1) of the TP Act made by this Part apply in relation to any claim for payment made in respect of a payment period beginning on or after the day this item commences.

 

Item 21 also sets out that on and from the day that is 12 months after the day this item commences, the amendments of subsection 47-4A(1) of the Aged Care Act and subsection 47-4A(1) of the TP Act made by this Part also apply in relation to any claim for payment made in respect of a payment period beginning before the day this item commences.

 

Part 3 - Previous claims

 

Aged Care Act 1997

 

Item 22 - Paragraph 47-1(1A)(b)  

Item 22 repeals paragraph 47-1(1A)(b), which will be inserted into the Aged Care Act 1997 by item 1 of Schedule 1 to the Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 1) Act 2020, and substitutes in its place a new paragraph 47-1(1A)(b) setting out that subsidy is only payable if the approved provider has made a claim in respect of the payment period to the Secretary and the approved provider has made claims in respect of each preceding payment period from when the approved provider was eligible for home care subsidy.

 

Item 22 will facilitate the management of any unspent subsidy the Commonwealth may commence to hold on behalf of home care recipients as a result of this Act. This is because an approved provider will need to have made claims for payment for all preceding payment periods for the Commonwealth to correctly calculate a care recipient’s home care account balance.

 

Aged Care (Transitional Provisions) Act 1997

 

Item 23 - Paragraph 47-1(1A)(b)

Item 23 repeals paragraph 47-1(1A)(b), which will be inserted into the TP Act by item 5 of Schedule 1 to the Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 1) Act 2020, and substitutes in its place a new paragraph 47-1(1A)(b) setting out that subsidy is only payable if the approved provider has made a claim in respect of the payment period to the Secretary and the approved provider has made claims in respect of each preceding payment period from when the approved provider was eligible for home care subsidy.

 

Item 23 will facilitate the management of any unspent subsidy the Commonwealth may commence to hold on behalf of home care recipients as a result of this Act. This is because an approved provider will need to have made claims for payment for all preceding payment periods for the Commonwealth to correctly calculate a care recipient’s home care account balance.

 

Item 24 - Application of amendments

Item 24 specifies that the amendments of the Aged Care Act and the TP Act made by this Part apply in relation to payment of home care subsidy in respect of payment periods beginning on or after the day this item commences.

 




[1] StewartBrown, Home care Funding Analysis (November 2019), p.9.

[2] ACFA’s 2019 Annual Report noted that unspent funds accumulate for a variety of reasons including that consumers wish to save a proportion of their budget for future events, misconceptions that money not spent under the package belongs to the consumer, or because the consumer does not require all the funds allocated to them.