Michael Isaac - Embracia

20 December 2012

Ms Kerrie WestcottDirectorLegislation Section Transition Branch Ageing and Aged Care DivisionMDP 550GPO Box 9848Canberra ACT 2601

Living Longer, Living Better - Proposed Legislative Changes

About EmbraciaEmbracia is a family company providing quality care for the aged in our nursing homes and providing excellent lifestyle choices for retirement living in our retirement villages with aged care homes on We have nursing homes in both Melbourne and Sunshine Coast, Queensland. Our nursing homes traditional aged care. Our name Embracia is all about people,

Peter and Dawn MacKenzie founded Embracia over 20 years ago with the driving passion to difference to the lives of people in need of support family and staff, the business has fi become an active advocate for the best outcomes for our elderly in aged care homes and retirement villages.

From simple beginnings in small residential aged care the Group now operates care homes in Victoria and three residential aged care homes in Queensland beds across nine aged care homes, employs built adjacent to two of the nursing homes

BackgroundOn 21 November 2012 the Department of Health legislative amendments proposed to facilitate the implementation of the package of aged care reforms that were announced on December 2012, which date was also the due date for applications for the 2012 Approvals Round (advertised 10 Novemb Better Healthcare Connections Programs grants put out to tender about 12 November 2012.

We feel that we have a responsibility to point out that the average aged care provider is not structured at a size which can accommodate the Department of Health & Ageing creating such a volume of activity by distributing three separate invitations all due on the same day. With that date being the Friday before Christmas, we suggest, with respect, that the Depar any of these matters until after the Holiday Season breaks and that there was actually no reason why all three had to be submitted by the same date

Might we suggest that if this coincidence of deadli communication and cohesion within the Department in the future might prevent a similar situation arising. It does project an image that the Department might not really want to receive responses or applications from everybody who might actually be interested in all invitations.

General CommentaryThe basic structure and operation of the Aged Care Act 1997 has worked successfully for almost 15 years now. We find that the references in the legislative materials that gove Approved Providers of Residential Care on a day understand – particularly if compared to other legislation affecting businesses (tax law, company law, etc) or consumers (social security la follows a logical flow that helps to identify where the answers separate parts for Approvals (providers, places, care recipients), Subsidies (residenti etc), Responsibilities, Grants and Administration.

We concur with the concepts of the Act describing the broad framework and important safeguards and Principles and Determinations dealing with detail that changes from time to time. It remai though to take care not to have framework and safeguards in the Principles and areas requiring flexibility written into the Act.

Just to cite an example to emphasise the importance of this point, Embracia believes that the important safeguard of requiring Police Checks for new employees and volunteers is a legal and policy safeguard that more properly should be placed in the legislation (the Aged Care Act) rather than in the Accountability Principles. This is not an area requiring flexibility time to time. It is an important safeguard to protect residents and should not be amendable at a Ministerial whim. Equally though, when a significant change to this safeguard is proposed, as was the definition of the provider’s contractors as “staff”, this ought to have been a change to the Act, not to the Principles. It had a broad impact on issues such as who could be employed by contractors and, without any acknowledgement, created enormous administrative complexit providers had to track eligibility of employees of other organisations.

One request that we do make however is that the Government make its intentions clear within the Act, Principles or Determinations. In our view, a situation has be people in the industry – and, seemingly, most people in the Department Manual as the definitive statement of our legal framework, especially if the Act or Principles is not clear on a point. Such a situation attempts to change the law from the control of the Parliament or the Minister and into the hands of the bureaucracy.

Again citing the case of the requirement or otherwise for Police Checks, these are required for any “staff member” aged over 16 who is contracted by the provider and who has access to residents. 1

The Accountability Principles then exclude certain people from this definition:

“Examples of persons who are not staff members:

...

trades people who perform work otherwise than under the control of the approved provider (that is, as independent contractors)." 2

The Residential Care Manual in its turn chooses to define this in a somewhat different way “this covers people over the age of 16 who work or provide this analysis does not include the requirement that the person be reasonably likely to have access to residents – that is only mentioned in the paragraph before). The Manual then states

“This excludes:

...

trades people and independent contractors – for example, plumbers, electricians and delivery people - who provide service on an ad hoc basis"2

That adds to the confusion and worse. Some in the bureaucracy or in the Aged Care Standards and Accreditation Agency have chosen to make their own determinations that turn on the meaning of “ad hoc”, saying that frequently visiting contractors are not ad hoc, and turning the debate into the number of occasions rather than resident safety.

We are not so much interested in this debate itself, but wish to demonstrate how made to take authority away from the legislation itself. While in the end we all know the legislation would prevail in Court, in practice no bureaucrat wants rather than create a dispute.

In these reforms, please ensure that the matters are clearly spelt out. Embracia believes that this will be particularly important in the context of extra services and residents choosing to purchase additional amenities and services from the provider. Just as we need to be certain that no resident pays extra for something that were entitled to receive within their existing fee, we need to be equally certain that this reform process is not an opportunity to “re date taken as being above and beyond the part of those Specified Care and Services.

This becomes particularly important because, even more than the Police Checks, the Residential Care Manual contains substantially more detail about Specified Care and Services than does the Quality of Care Principles. The Manual in this case provides a third column which purports to pro of things for which a provider cannot charge extra and the mechanism by which some extra charges can be made.

An example is storage fees. While administration is included within the standard price as part of the general operation of a residential care service, the Manual states that an Agreement between a resident and provider can allow charges for

“storage fees, provided this is stated in resident agreement”5

On the other hand, none of this takes into account existing laws in all States and Territories which cover the situation of abandoned or uncollected goods and goods left behind by tenants. In most cases these are administered by the various States’ Fair Trading jurisdiction as they administer Tenancy legislation and the like. These all have existing principles which are applicable - including storage of goods, removal of goods from rooms, charging for storage, disposing of goods that remain uncollected and the time frames, etc. In respect of storage of goods, there is no need for special requirements in respect of residential aged care, and no need for any level of legislative requirement that is of a higher standard than that which exists for the rest of the population.

Removing the High Care vs Low Care Distinction at AdmissionThe first issue canvassed in the Department’s Overview paper in this respect relates to the removal of the distinction between high and low care to provide greater choice and ensure funding is based on assessed care needs. The Overview paper quite correctly identifies that the legislation needs to be amended by removing the distinction between care recipients approved for a high level of care and those approved for a low level of care. It also correctly identifies that people would residential care based on an assessment of their needs without the high/low level distinction.6

The Overview paper goes on to note that this will mean that care recipients can access the level of care that they need at their time of entry rather than being lim approvals for residential care will become non with existing approvals. 7

Whilst Embracia is entirely supportive of the initiative and the theory behind it, and we have considered for a long time that the distinction between low care and high care is artificial and a relic of past regimes, we do also believe that the changes to give effect to the goal need to be very carefully delivered to avoid adverse outcomes. In previous correspondence about the Living Longer, Living Better reforms and in particular, Specified Care and Services, Embracia has emphasised that the High Care/Low Care distinction in the aged care assessment process has essentially been an irrelevant distinction since 1997 and the process is not essential in any case.

In the course of an assessment, an Aged Care Assessment Team (ACAT) considers what assistance a person may need and, in the case of residential care, is therefore charged with determining whether a person has needs that would attract the subsidies paid to an aged care home. As well as being a support to the person in need as a referral source, the ACT is therefore also a "gatekeeper", the arbiter of who the Government should spend taxpayer subsidies on and who they should not.

It is a technicality, but one with some significance, that an ACAT does not so much decide if a person’s needs are low care or high care, but rather is able to place “limitations’ on the approval the ACAT gives. All an ACAT actually does in this context is approve a person to receive residential aged care, but the legislative base declares that the ACAT approval for residential aged care may be limited to low care only.

Under the Aged Care Act 1997, an approval of a person for residential care may be limited:

1. “A period specified under paragraph (1) (b) must not exceed the period (if any) specified in the Approval of Care Recipients Principles.

2. If an approval is for residential care, the Secretary may limit the approval to one or more levels of care corresponding to the *classification levels (see section 25-2). NB: Limitations of approvals to one or more levels of care are reviewable under Part 6.1.

3. The Secretary may, at any time, vary any limitation under this section of an approval, including any limitation varied under this subsection. NB: Variations of limitations are reviewable under Part 6.1.

4. Any limitation of an approval under this section, including any limitation as varied under subsection (4), must be consistent with the care needs of the person to whom the approval relates.”9

Embracia submits that the published Aged Care Assessment and Approval Guidelines are not sufficiently clear on when such limitations ought to apply. The Guidelines are replete with factors that the ACAT should use to determine whether a person ought to be approved for residential aged care not but, as far as we can tell, the only rule in those Guidelines about high care or low approval is this:

"An approval to receive high level residential care will only be made when the outcome of an assessment undertaken by an ACAT indicates that the care requirements are significant enough to warrant that type of care. (Note: ACAT members exercising the Secretary's power to approve people as residents will not classify people into individual care categorie on the RCS - rather they will approve a person as needing either high level or low level care)."10

In explaining the background to this issue, we cited the Department of Health & Ageing as saying of the low care/high care distinction that:

“This distinction is not in line with the Aged Care Funding Instrument, which funds all care recipients according to their needs."11

In the present context of the Department and the Government announcing that the distinction between low care and high care is “not in line with the Aged Care Funding Instrument”, it seems to Embracia to be ludicrous that the only reason it is not in line with the ACFI is because the Department tells the ACATs that they are not to assess based on the ACFI categories.

Does no-one else see that the problem exists because the Department’s Guidelines say that it should exist? What we believe has actually occurred in the Australian system is that the residential aged care funding system modernised from its pre-1997 model and the residential aged care homes themselves modernised from their pre-1997 model but the Aged Care Assessment process to determine eligibility for the system has been frozen in its pre-1997 distinctions between low care and high care. The important thing to note here is that the Act says that an approval “may” be limited, not “must” be limited..

Strictly speaking then, because limiting the level of care approved is optional, this means that under the legislation as currently drafted, every aged care assessment could be completed without any limitation on the level of care approved – if the Department and the ACAT teams wanted it to be that way. In effect, what is actually being considered now is the amendment of the legislation so that the Department cannot require, and an ACAT cannot choose, to limit the approval to a certain level of care.

Removing the High Care vs Low Care Distinction in on-going careThe Aged Care Act 1997 originally defined high care and low care in terms of the person’s needs as assessed under the Residential Classification Scale (RCS). The definitions come from the Classification Principles 1997 and were described in the Department’s Aged Care Assessment

Guidelines for ACATs as:

“Service providers of residential care classify residents according to the categories on the Resident Classification Scale (RCS) as set out in the Classification Principles 1997. People assessed as categories 8 - 5 on the RCS are low level care, with 8 being the lowest care level.” 12

and

“On the RCS, high level care encompasses the range of categories 1 highest care category.

This was not strictly true. The legislation actually defined high care as categories 1 - 4 and low care as not high care, but it doesn’t substantially alter the outcome. Since the introduction of the Aged Care Funding Instrument (ACFI) the classifications that actually constitute high care or low care have changed, since the ACFI does not work on a simple 1 to 8 scale but as a combination of four scores (high, medium, low or none) across three separate domains – giving 64 different possible outcomes.

The definitions of high and low care had to change once again in 2010 after a review of the ACFI because:

“An unintended consequence of the introduction of the ACFI is that some residents that would have previously been appraised by providers as Low Care are now being appraised as High Care.

While subsidies have increased for many of these residents, in some cases it has resulted in aged care homes having to provide specified care and services that they are not equipped to provide and that their residents do not need. This anomaly has also increased the level of misalignment between assessments undertaken by Aged Care Assessment Teams and ACFI appraisals undertaken by aged care providers.14

At the time of writing, the present definition of high care is described by the Department as:

“to be appraised as High Care, the resident

a score of High in the ADL Domain; or a score of High in the CHC Domain; or a score of High in the Behaviour Domain together with a score above NIL

in a least one of the ADL or CHC domains; or a score of Medium or High in at least two of the three domains.15

Either way, by legal definition high care and low care are concepts totally dependent on the assessment of the resident under the instruments used to determine funding levels as prepared by the aged care homes themselves. The concepts are no longer independent of funding – rather they are all about the funding. And no doubt this is why even the Department admitted that “in some cases it has resulted in aged care homes having to provide specified care and services that they are not equipped to provide and that their residents do not need.

Removing the High Care vs Low Care Distinction - Respite CareEmbracia sees potential for problems in the implementation of the policy to remove the High Care/Low Care distinction in respect of approvals for Respite Care. The effect of the distinction in the case of respite care is very significant indeed, with:

Low Care respite subsidy being $38.33 per day plus Supplement of $34.44 = $72.77 per day; and

High Care respite subsidy being $107.47 per day plus Supplement of $82.17 = $187.64 perday.

Clearly, whether a person requires a High level of care or a Low level of care has a significant impact on both what care and services it takes to meet their needs and what subsidies the provider receives with which to meet those needs. An extra $115 per day is both a significant subsidy and a reflection of significantly higher care needs.

In 2008 the Government changed the system, amongst other things, so that ACAT approvals for residential respite care did not lapse after 12 months:

“Changes to the legislation, outlined below, remove unnecessary and administrative reassessments and provide the ACAT with the ability to focus their attention on the

clients most in need of their services. However, an older person can still be reassessed at any time, if their care needs change.

An approval for residential respite care will not lapse, but will expire if time limited. However reassessment should occur at any stage if there has been a change in the care recipient’s care needs.” 16

Unfortunately, this seems to have developed into one of the most cynical cost-saving moves we have seen by the Department of Health & Ageing, one sold to an unsuspecting public as being an improvement for them, but in effect now (in 2012) seeing aged care homes trying to meet the needs of respite residents whose needs are now High Care but who only attract a Low level of respite subsidy. All because the respite approval from an ACAT team, which could be up to 4 years old and which never expires, was Low Care at the time.

Where else can some hope to receive $187 worth of care and services for only $72 per day? That is a saving to Government for each person with a low care respite approval whose needs have changed since their first low care ACAT assessment. And another aged care home struggling to do the right thing with inadequate income.

The Government would no doubt say that the person could get a re-assessment from their ACAT. And so they could, except for the fact the ACAT will tell them when they ask that their existing low care respite approval does not lapse and therefore never needs to be re-assessed. Already we are finding people seeking low care respite with assessments done in, say, 2008 who, when they enter respite care, are quite obviously very high need and the local ACAT says that a re-assessment is unnecessary and in any case they could not do the assessment before the person’s booked respite ends (we often do very short respite stays less than a week as we do not require minimum stays as some do).

The situation needs to be addressed urgently now but most certainly will not be helped by removal of the High Care/Low Care distinction. We suggest that a decision be made that the respite subsidy for all respite admissions is to be the former High Care respite subsidy. Technically, that is what would currently happen if all ACATs chose not to limit the level of care approved to a Low level of care.

If not, the distinction between High Care and Low Care is still required for Respite approvals.

Amending the LegislationEmbracia suggests that before any amendments to legislation to remove the High Care vs Low care definition are drafted, the Government must make it perfectly clear exactly what is intended by removing the distinction. There are two possibilities here:

1. If the Government is intending to remove the distinction only so that the level of care is irrelevant in the admission process, e.g., for determining whether Accommodation payments are lump sums or daily amounts, determining the maximum funding level payable unless a new ACAT assessment is done, etc), then the Legislation only needs to be amended in the areas governing aged care assessment and the limitation of approvals.

2. On the other hand, if the Government is intending to remove the distinction in all situations, including the on-going care situation, then the amendments will need to go much further, including the removal of the definitions of high care and low care in the Aged Care Act, as well as changes to the Specified Care and Services in the Quality of Care Principles.

The question is really one of the Government’s intent. The Specified Care and Services do not really have to change at all. Embracia sees no reason why the high care vs low care distinction could not be

removed from the aged care assessment process that leads to approval at admission while still leaving the definition to apply in respect of on-going care – and therefore still defining Specified Care and Services.

On the other hand, Embracia strongly sympathise with the argument that the Specified Care and Services ought to be updated. Residential aged care is all about providing residents with the care and services that they are assessed as needing. The change from the RCS to the ACFI to determine on- going care needs from 2008, saw the introduction of an assessment tool that determined funding amounts which was no longer operating under the same assumptions as the Specified Care and Services. High care became a question of high needs in one of the 3 domains of Activities of Daily Living, Behaviour or Complex Health Care, or medium in needs to two or more domains.

Meanwhile, the Specified Care and Services define things that have to be provided within the legislated daily fee and subsidy for people depending on whether they are classed as high care or low care by these ACFI domains. But the two things are not the same. Is it correct that a person who qualifies as high care because of behaviour issues should receive toothpaste within their standard fee but another person who has less behaviour issues should not? How is the behaviour even relevant to the toothpaste?

Amending the Specified Care and ServicesEmbracia agrees that the Specified Care and Services in the Quality of Care Principles need to be updated. Applying some things only to people with a highcare assessment under the ACFI is not always appropriate, as demonstrated above. However, any changes to the Specified Care and Services that may flow from the removal of the high care vs low care distinction need to be carefully managed to ensure that the cost of anything extra that needs to be done is covered for the providers.

Over the years, we have experienced a fair litany of changes to the aged care system which added costs for providers by increasing what they have to do for no extra money, or by making them do the same things with less money.

When the 1996 aged care reforms were introduced they included a new concept of an “Income Tested Reduction”. Where an aged care resident’s income exceeded the income test-free income limit for the aged pension, a proportion of that excess ($0.25 in the dollar) was taken off the subsidy and the service provider could add it to the resident’s daily fee. Prior to this, hostels could income test their residents and add a proportion to the daily fee with no loss of subsidy. Hostels lost access to a source of additional income.

Government nomenclature for its “reforms” over the years has often come into question. Look at the headlines such as "Living Longer, but not always better"17. There was another well-named reform package from then Minister Santoro in 2007 called "Securing the Future". That gem reduced the daily care fee that would be paid by some residents with no compensation for providers.

In 2009, a Budget initiative called “Secure and Sustainable Pensions” saw a regime of 4 daily care fees introduced into residential aged care - standard, protected, phased and non-standard – with some resident’s fees (protected) being reduced without compensation

to theproviders and the compensation that was paid for other people being reduced over time.

And now, from July 2012 the Government has arbitrarily decided that for the 2012/2013 fiscal year, the residential aged care sector will get no indexation of its ACFI domain subsidies and the rules have been changed to reduce the growth in funding - at a guess, bureaucracy-speak for “we guessed wrong and now the Department of Finance is cranky”. This one is a serious insult to the industry and will reduce income available to the residential aged care sector by $1.6 billion over 5 years.18

So, by all means remove the distinction between high care and low care. By all means change the Specified Care and Services to reflect that people should receive what they need to receive. But do not use this as yet another money-saving venture whereby aged care providers are required to more with the same input or required to do the same with less inputs.

Our concern in this regard has been sparked by statements in the Living Longer, Living Better documentation and in particular the following statements:

“Older Australians receiving low level care are currently required to purchase their own continence aids and walking frames, whereas this is the responsibility of the aged care

provider for older Australians receiving high level care. Older Australians receiving low level care have also had less access to subsidised nursing and therapy services. This distinction is not in line with the Aged Care Funding Instrument, which funds all care their needs.” 19

It would not be appropriate, after decades of the Specified Care and Services (and before them the Prescribed Services) saying otherwise, for the Living Longer, Living Better reforms to suddenly assert that Low Care residents should receive things that have to be supplied to High Care residents. The concept is fine, but if the Aged Care Funding Instrument (ACFI) was as good as this suggests, and actually funded what was required, then presumably the ACFI would assess this person as High Care and there would be no debate. The problem, of course, is that the ACFI does not adequately achieve this.

The Government will need to accept that it will receive that for which it is prepared to pay and the community can assess its Government by what it observes in the standard of care that Government will fund.

Other Consequential Changes - Allocation of PlacesWhen aged care places are allocated to an approved provider, usually through an Aged Care Approvals Round, the Aged Care Act section 14-5 allows the Secretary to impose conditions on that particular approval and in particular allows the Secretary to impose a condition:

“(iv) people needing a particular level of care;"20

This is used in almost every allocation - and it certainly it has been in every allocation of places that Embracia has received over the year. An example of how this manifests itself is:

“1(c) Any aged care provided in respect of the 30 high care places must be for people who, at the time of entry to the aged care service, have been approved as care recipients of high level residential care.

1(d) Any aged care provided in respect of the at the 45 low care places must be for people who, time of entry to the aged care service, have been approved as care recipients of low level residential care.”20

We will need to ensure that approvals for both operating and provisionally allocated residential aged care places do not continue to have conditions requiring them to meet criteria which are no longer relevant or even in existence. Similar conditions apply to Extra Service approvals – many of these are defined as a certain number of high care or low care places and that definition will be irrelevant as well.

Changes in Amenities and ServicesEmbracia fully supports the proposals relating to extra service places, the change to one or more rooms in a service and the abolition of the 25% additional charge (known as the claw-back) imposed by Government. However, we believe that the proposal could benefit from some refinement as it does not seem to fulfill the undertakings given during the announcement of these reforms.

In the Overview paper, the Department says that“if an extra service place was granted before 1 July 2014, it will have extra service status after 1 July 2014. The amount of subsidy payable in respect of the place and the amount o resident fees that can be charged will depend on the status of the care recipient who occupies the place from time to time”20

The paper then goes on to suggest that residents in care (presumably at any aged care home, not just the one with the extra service approval) prior to 1 July 2014 will always pay the “claw-back” and those who enter care for the first time from 1 July 2014 will never pay the “claw-back”. This was a little unexpected as we had read the Living Longer, Living Better announcements as saying that there would be opportunities for people to decide what they wished to do. Specifically, the paperwork published in April 2012 at the time of announcements said:

“Existing extra service homes will have the opportunity to gradually move to the new arrangements, subject to approval by the new Aged Care Financing Authority”

and that

“Fees for current residents will be grand-parented at current rates, but with the opportunity to move across to the new system (and potentially have their fee reduced) if the home gains approval.” 24

We believe that the only effect of this decision would be to increase the fees payable by a person who is already in residential care and chooses to move to an extra service place when compared to person who enters an extra service place for the first time. where two people who enter extra service places on the same day after 1 July 2014 pay different fees – with the higher fees being paid only because that person was in a non-extra service place beforehand. That is also quite contrary to what was promised in the information released on the day of the announcements.

The proposals in the Overview paper do not give effect to the undertakings by Government on the day of the announcements of Living Longer, Living Better reforms and will need to be revised so that:

a. Existing extra service homes can opt in to the new arrangements; and

b. Current residents can choose to move to the new system and potentially have their fees reduced.

Optional Additional Amenities

The Overview paper points out, quite correctly, that“Fees for optional additional amenities will not be set by the Aged Care Pricing Commissioner and will continue to be agreed by the care recipient and provider consistent with current arrangements, which require that a price be agreed beforehand and that the care recipient be given an itemised account.”

Embracia is very supportive of the concept of residents being able to purchase additional amenities, luxuries if you like, if they so desire. The Overview paper indicates that this can be done without amendments to legislation. But this does not sit comfortably with us – not, we suggest, with whoever said

“There is currently little scope for care recipients or their families to purchase additional amenities or supplementary care services from their residential care provider."26

or

“Following a review of the Schedule of Specified Care and Services, the Government proposes to allow two levels of additional charges for amenities and hotel type services over and above basic specified care and services. Under this arrangement, residents in all aged care homes would be able to purchase optional extra services, such as enhanced entertainment or lifestyle choices, for an additional fee."27

One wonders why the Government announced that it would in future “allow" something which couldalready happen. We think the answer to that lies more in the administration than in the legislation. The problem has been that many of the luxuries (additional amenities) that people would like to purchase can also be interpreted to fit into the definitions contained in the Specified Care and Services. We need to establish a very clear mutual understanding between providers, consumers and bureaucrats as to what is required within the fee and subsidy and what is considered an “additional amenity” beyond the Specified Care and Services.

If this is not clearly articulated in the legislation (presumably the Principles), then the area is primed for on-going disputes from:

Providers who misunderstand what is expected of them and what goes beyond that expectation;

Consumers who misunderstand their entitlement within the fee; and Accreditation auditors, Departmental Officers or Complaints Commission staff who

might be over-zealous in determining some things as within the Specified Care and Services when extra charges have been levied.

Fairer Means Testing for care feesEssentially this part of the Overview paper is giving effect to policy announcements and Embcia does not wish to challenge the mechanics of converting those policie to a formula.

However, from a process rather than a policy perspective, the existing system does have its inherent problems. The basic principle of income testing in residential aged care is that the income testeded reduction does not exceed the maximum amount of subsidies payable.

“Step 4 If the care recipient’s *total assessable income exceeds the care recipient’s *total assessable income free area, the smallest of the following amounts (rounded down to the nearest cent) is the *daily income tested reduction:

a. the amount equal to 5/12 of that excess (worked out on a per day basis);b. the amount equal to 135% of the *basic age pension amount for that day (worked out on

a per day basis); the amount worked out in respect of the *payment period using steps 1, 2 and 3 of the residential care subsidy calculator in section 44-2, less the amount of any charge exempt

c. resident supplement under section 44-8A (worked out on a per day basis)."28

That is quite logical. If the income tested reduction exceeded the subsidy payable, then one person’s income would, in effect, reduce the subsidy payable to another person. Unfortunately, in the current system the opportunity does exist for that situation to arise. This occurs because the Department of Health & Ageing, via the Medicare system which pays the subsidies, applies the income test based on a person’s income levels from Day 1 of their being subsidised for care (either the day they enter care, or the day pre-entry leave subsidies commence, depending on the case).

The effect of this is that income tested reductions are applied to cases prior to the Department or Medicare system knowing what level of subsidy is payable in respect of that person. Here is a de-identified example from one of Embracia’s Payment Explanations:

Adjusted

Subsidy: DNA

Default 1 29 0.00 0.00

Income Tested

Red

27/10/2012 30 -1.98 -59.40

Total -59.40

Certainly the income test in this case is only relatively small, but at the time this has been deducted from the claim for this home, the Department and Medicare have no idea what level of care via the ACFI might be going to be claimed for this person. If responses to the 12 ACFI questions result in no subsidy being payable on either the Activities of Daily Living, Behaviour or Complex Health Care domains, then the subsidy could be zero and the reduction would exceed the subsidy.

Where no subsidy is payable (or a low subsidy only is payable before the ACFI is received), even if it might be payable at a later date, there should be no income tested reduction in excess of the subsidy payable. This can be adjusted in a later claim if necessary. In the example above, this home has effectively had $59 taken off the subsidies for other residents for the month in question.

Proposed Changes relating to Accommodation PaymentsIt is exceedingly difficult to comment on the Overview paper’s assessment of the legislative impact of the new rules on Accommodation Payments when these new rules have not yest been decided or announced. However, we can make the following observations as they are in essence issues that already exist.

Asset AssessmentsSome time ago, it was decided to allow Centrelink or the Department of Veterans Affairs to issue the decision as to what might be the value of a person’s assets. This fundamentally changed the premise of the asset test from being a decision about a person’s assets on the day they entered care, to a decision about the person’s assets on the day they chose to have the relevant agency (Centrelink or DVA) make the assessment. The effect has been a godsend to quite a number of financial advisors and their wealthier clients with substantial assets, particularly if those assets are tied up in the family home.

Here’s how they do it. If both members of a couple need care, the advisor submits the application for an asset assessment to the relevant agency before any one of the couple needs to actually enter care. For both members of the couple then, the officers at Centrelink or DVA will make a decision about each person’s assets based on the assumption that the other partner is still living in the home. Then both partners enter care together.

Thus a couple with a house in a capital city worth $700,000 and $40,000 in the bank will each obtain a letter confirming that they are each qualified to be a Supported Resident and pay no Accommodation Payment. In fact the Government will subsidise their care with an Accommodation Supplement of, say, $24.44 per day each – while the couple now has $740,000 ($370,000 each) in their bank account.

And all that because the asset assessment was moved to a time when the parties are not in care rather than the relevant date of when the parties enter care.

Another favourite which crops up from time to time is when a person who is in care at one facility where he or she has paid an Accommodation Bond wishes to move to another facility. It is not a necessary thing to do, but if the person applies for a new asset assessment, Centrelink or DVA has done the assessment – and called the Accommodation Bond an exempt asset as assessed the person as Supported. The person then seeks admissiadmission to the new home and a Supported Resident while failing to mention to the new home that they are transferring from another facility. And all the while they are seeking to obtain the refund of the Bond from the losing home.

The assessment of assets needs to be either taken away from Centrelink and DVA and returned to providers or someone else, but in any case the effective date of the assessment needs to be returned to the date of admission to residential care, not some date months beforehand.

Moving Between ServicesUnder the new regime, it appears that the key to the amount of Accommodation Payments will be the amount approved for a particular facility. Thus, if a person enters one aged care facility and pays an Accommodation Payment of $700,000, finds they are not satisfied with the care and transfers to

another facility where the maximum Bond is $500,000, that person will only pay $500,000 at the new facility.

Frankly, we believe that the decision about payment of an Accommodation Payment ought to placed in the hands of the resident, rather than adopt a “nanny state” approach to this matter. In the case of a person seeking to relocate from an aged care home which is not satisfying their needs, the fact that the person may bring with them an Accommodation Payment in excess of the maximum that the gaining home could normally charge is actually a powerful incentive to gaining homes to take the transfer – thereby empowering the resident.

And in this situation, the resident would not be in need of “protection" by the State. The situation is a person who is dissatisfied and wants some bargaining power to improve their lot in life – either by transferring to another home more easily or alternatively by using the threat of transfer to improve their situation at the first home. We see this as empowering residents to control their affairs and we believe the decision should be the resident’s decision, not the losing home’s, not the gaining home’s and not the State’s.

Michael IsaacGeneral ManagerEmbracia

1. Accountability Principles, Principle 1.182. Ibid3. The Residential Care Manual, Department of Health & Ageing, page 2324. Ibid5. Ibid, page 2136. Overview of proposed changes to the Aged Care Act Health & Ageing, November 2012,

page 117. Ibid8. Comments on Specified Care and Services (sent to Secretariat ACFA) , Embracia,

October 20129. Aged Care Act 1997, section 2210. “Aged Care Assessment and Approval Guidelines" Dept of Health & Ageing, 1996, page

3711. “Living Longer. Living Better.”, Commonwealth of Australia, 2012, page 1112. “Aged Care Assessment and Approval Guidelines”, Dept of Health & Ageing, 1996,

page 1313. Ibid14. Aged Care Funding Instrument Fact Sheet 11, Dept of Health & Ageing, page 115. Ibid16. “Guide to Changes to the Regulatory Framework for Aged Care", Dept of Health &

Ageing, December 2008, page 2217. Brendan Earle, Australian Financial Review opinion, 27 June 201218. Living Longer Living Better Aged Care Reform Package”, Distributed on 20 April 2012,

page 8819. “Living Longer. Living Better.”, Commonwealth of Australia, 2012, pages 10/1120 Aged

Care Act, section 14-5(4)(a)(iv)21. Extract from Conditions of Allocation fo23. Living Longer Living Better Aged Care Reform Package”, Distributed on 20 April 2012,

page 4424. Ibid

22. Overview of proposed changes to the Aged Care Act 1997 and related legislation, Department of Health & Ageing, November 2012, page 13

25. Overview of proposed changes to the Aged Care Act 1997 and related legislation, Department of Health & Ageing, November 2012, page 13

26. Ibid page 1127. Ibid28. Aged Care Act 1997, Section 44