Senator the Hon. Mitch Fifield

Assistant Minister for Social Services

PARLIAMENT HOUSE

CANBERRA ACT 2600

Dear Minister

I am pleased to attach the Aged Care Financing Authority’s (ACFA’s) report on the impacts of the 1 July 2014 financing reforms for the month of September 2014.

This report includes analysis of the second round of data concerning accommodation payments, collected through ACFA’s survey of aged care providers and new analysis on admissions and occupancy data. It also takes into account additional feedback provided to ACFA including from sector representatives, providers and the Department of Social Services.

Future reports will continue to build on trend analysis for accommodation payments and further examine impacts in access to care, with a focus on examining whether impacts and issues are transitionary,as may be the case with some means testing process issues that have arisen to date, or systemic and likely to continue.

I am available, along with the other members of ACFA, if you would like to discuss the Report further.

Yours sincerely

(Authorised for electronic transmission)

Lynda O’Grady

Chairman

October 2014

Report on the impact of the 1 July 2014 financial reforms on the aged care sector

September 2014 Report

Introduction

This is the Aged Care Financing Authority’s (ACFA’s) report on the impacts of the 1 July 2014 financing reforms for the month of September.

This report includes analysis of the second round of data concerning accommodation payments (covering the month ending 31 August), collected through ACFA’s survey of aged care providers and also includes new analysis on occupancy and admissions data collected by the Department. To complement the data collection, ACFA has also continued to engage with sector representatives, providers and the Department of Social Services to obtain information and feedback on the impact of the reforms.

This report is split into three parts:

Part 1 – Accommodation Payments
Part 2 – Access to Care
Part 3 – Supportfor the sector and consumers in transition

Key Findings

Accommodation Payments – Key Findings

Lump Sum Refundable Accommodation Deposits/Contributions (RADs) remain the preferred choice of making accommodation payments, growing from 40.8% in July to 43.0% in August.
Periodic Daily Accommodation Payments/Contributions (DAPs)remain the second preferred option of making accommodation payment, declining from a 36.2% share in July to 31.3% in August.
Combination Paymentsgrew from 23.0% in July to 25.8% in August.

Between July and August there was a 1.2% increase in the overall pool of lump sum accommodation payments. This growth was driven by RADs whose amount more than doubled (see figure 2) and more than offset the accommodation bonds paid out for departing residents.

*Including bonds receivable at 30 June 2014of $3.2 billion.

2. Access to Care

It will take some time to build a suitably robust data set in this area, which will rely on collation of data concerning trends on entering care analysed against income and wealth information. This report includes some initial high level data on admissions and occupancy levels in residential care sourced from preliminary departmental data. ACFA will continue to build on this analysis in future reports as more detailed data and analysis becomes available.

There was a spike in overall admissions to residential care pre 30 June 2014 followed by lower than usual admissions in July and August. An increase in respite admissions at the expense of permanent admissions was also evident in July and August.

It is likely these changes in overall admissions are primarily transitionary, driven by a combination of factors, including:

a desire of some to enter care before the 1 July means testing changes took effect;
providers and residents waiting for means test assessments before finalising entry arrangements;
delays in DHS issuing means testing assessments; and
all stakeholders taking time to adapt to the new system.

ACFA will continue to monitor these impacts in coming months to determine the extent to which issues are transitionary or more ongoing. ACFA notes that DHS has advised the sector that additional resources have been directed towards reducing administrative delays going forward.

There has been a small decrease in occupancy rates in residential care.

Trends in admission to residential care

3. Support for the sector

The Transitional Business Advisory Service continues to provide support for providers with the transition to the new accommodation payments arrangements. Relevant departments have also been updating and distributing additional information materials to clarify reform implementation issues. The Department of Human Services has made available a dedicated phone line for persons concerned over delays in means test assessments and allocated additional resources to reduce delays in issuing assessments.

Part 1.Accommodation Payments

Survey of residential care providers

This report presents data collected from residential aged care providers through a voluntary survey. Residential aged care providers were invited to participate in a voluntary survey which collected information on the choice of accommodation payment method and the changes in the lump sum accommodation payments held and receivable. Forms were sent to all providers, with responses submitted to a third party who deidentified the results before providing them to ACFA.

The survey specifically collected data on:

the numbers of accommodation bonds held and their value at 30 June 2014;
the numbers of bonds/RADs held and their value at the end of the months of July and August 2014;
the numbers of RAD, DAP and Combination Paymentoptions chosen by residents in the months of July and August 2014.

Survey forms covering August were received from 1511 services (102,000 places). While the results cover a significant proportion of the sector (56% of services; 54% of places), ACFA notes that care should be taken when interpreting the survey results as the providers who responded to the survey may not necessarily be fully representative of the structure of the aged care sector. Results from the survey have been extrapolated in the following analysis to provide the estimated overall sector impacts.

Choice of accommodation payment and changes to the lump sum pool

Key findings are summarised below in aggregate and by various sector segments. Further detail is provided at Attachment A.

Aggregate results for total sector

The results from the survey indicate that in August:

Choice regarding accommodation payments continued to favour RADs (43%) over DAPs (31.3%) and Combination Payments (25.8%).
There was an increase in the total lump sums (bonds and RADs) held or receivable of about 1.2% or approximately $225million from end July to end August.
RAD amount more than doubled, growing from about $403 million in July to about $937 million in August

Geographical analysis

RADs are more favoured in major cities than other geographic areas.

Choice of payment / Change to the lump sum pool
Service location / Compared to the other areas, there was a greater preference toward RADs in major cities. In July, DAP payments were preferred in areas outside of major cities. However, in August, RADs were preferred in inner regional areas as well. / The increase in lump sum payments held between July and August was a result of the increase recorded in major cities. The other locations recorded a slight decline.

Table A: by service location, August 2014, per cent

Service ownership analysis

RAD remains the preferred method of payment across all provider types except the Government sector, where DAP is the preferred method of accommodation payment (see figure 4).

Choice of payment / Change to the lump sum pool
Service ownership / Consumers in the For Profit sector are showing the highest preference for RADs. / For-Profit providers recorded an increase in lump sum payments held between July and August. The other sectors recorded a slight decrease, with the largest (3.3% decrease) being in the Government sector.

Table B: by service ownership type, August 2014, per cent

Care type[1] analysis

The impact of accommodation payment choices is likely to vary between providers by the type of care traditionally offered, noting that former low care places would have been characterised by payment of lump sum bonds prior to 1 July 2014 and (non extra service) high care facilities by daily accommodation charges. In August,RAD was the preferred method of making accommodation payments across all former care types (see figure 5).

Choice of payment / Change to the lump sum pool
Care type / RAD remains the preferred payment method and increased significantly in low care in August. / Between July and August all levels of care recorded growth in their lump sum pool. However, between June and August, low care recorded a slight decline in its lump sum pool.

Table C: by care type*, August 2014, per cent

Facility size analysis

Large and small services recorded increase in RADs and Combination Payments share, with an equivalent decline in DAPs (see figure 6) between July and August.

Choice of payment / Change to the lump sum pool
Number of places / Preferred payment method for consumers in services with less than 50 residents changed from DAP in July to RAD in August. / There were small increases in the lump sum pool in smaller and middle sized facilities and a small decrease for larger facilities. Aggregate growth was mainly driven by middle sized facilities.

Table D: by number of places, August 2014, per cent

Provider size analysis

RADs remain more prominent in single home providers compared to multiple home providers.

Choice of payment / Change to the lump sum pool
Provider size / RAD remains the preferred method of payment among consumers in small and large providers. / All three sizes of providers contributed positively to the overall growth in the lump sum pool.

Table E: by provider size, August 2014, per cent

Extra service v non extra service[2]

Under the previous arrangements, a resident entering a high care extra service place could be asked to pay a lump sum bond. Thereremains a clear preference in consumer choices toward RADs in extra service facilities.

Choice of payment / Change to the lump sum pool
Extra service / There remains a clear preference toward consumer choices of RADs in extra service facilities. / Between July and August, there was an increase in the amount of lump sum payments held or receivable across all categories. Between June and August, mixed care recorded a slight decrease in lump sum payments.

Table F: by extra service, August 2014, per cent

Part 2.Access to Care

Advice on the impacts of the means testing changes on access to care will be reliant on two factors:

Detailed analysis undertaken using administrative Departmental data on persons entering care; and
Information obtained through the Authority’s engagement with the sector.

ACFA has also continued to engage with the sector and the Department to obtain early feedback on implications in this area.

Admissions to residential care in July and August

There was a spike in admissions to residential care pre 30 June 2014 followed by lower than usual admissions in July and August as shown in the table below. An increase in respite admissions at the expense of permanent admissions was also evident in July and August. Detailed tables are in the Attachment.

Trends in admission to residential care

It is likely these changes are primarily transitionary, driven by a combination of factors, including:

a desire of some to enter care before the 1 July means testing changes took effect;
providers and residents waiting for means test assessments beforefinalising entry arrangements;
delays in DHS issuing means testing assessments; and
all stakeholders taking time to adapt to the new system.

However, ACFA will continue to monitor these impacts in coming months to determine the extent to which issues are transitionary or more systemic and ongoing.

ACFA notes that DHS has advised the sector that additional resources have been directed towards reducing administrative delays going forward.

Occupancy rates in residential care

There has been a small decrease in occupancy rates in residential care in total as shown in the table below. Additional tables are in the Attachment.

Occupancy Rates in Home Care

ACFA will examine admissions to home care in future reports.The data set on home care is not yet sufficiently robust for analysis at this stage.

Part 3.Support for the sector and consumers in transition

Transitional Business Advisory Service (TBAS)

The Government subsidises a free advisory service for aged care providers, with a particular focus on the impact of the new accommodation payment arrangements applying from 1 July 2014. A summary of the current usage of the service is below:

From commencement of operations on 3 April 2014 until 30 September 2014, there were 672 Tier 1 queries (basic advice provided over the telephone).
As at 30 September 2014, there were 40 applications for the more detailed Tier 2 services involving a desk audit of the provider’s position and readiness for the reforms and 22 applications for Tier 3 services providing a more highly detailed examination of their position and readiness, along with the provision of accompanying support and advice.

The most frequently asked questions (received as Tier 1 queries) are being collated with more general observations about transitional issues being faced by the sector and progressively published on the Department of Social Services website, and referenced in the reform implementation updates distributed to providers. This makes the information provided through TBAS available to the sector more broadly.

Reform Information

Information on the reforms has been updated and made available on both the Department of Social Services website and the MyAgedCare website, including a fee estimator on MyAgedCare ( Consumers and providers can also contact the MyAgedCare call centre for information and assistance.

There have been some concerns expressed by the sector that some providers were unaware of certain new requirements around income testing and means testing arrangements. The relevant Departments have been updating information materials and sending additional communication materials to providers to address these concerns.

The Department of Human Services has made available a dedicated phone line for providers and consumers concerned over delays in means test assessments who can seek updates and expedition of urgent cases.

Attachment –

Additional charts on admissions and occupancy data by Various Sectors

[1]High and low care classifications are based on over 70% of care days being delivered with an ACFI classification of high or low care respectively.

[2] Extra Service and Non-extra service classifications are based on over 70% of care days being delivered to residents occupying an Extra Service place or a Non-Extra Service place respectively.