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Update on Changes to the Aged Care Funding Instrument

Explanation about changes to the Aged Care Funding Instrument (ACFI) announced on 21 June 2012

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Update on Changes to the Aged Care Funding Instrument (ACFI)

Some aged care providers have raised concerns about changes to the Aged Care Funding Instrument (ACFI) which were announced on 21 June 2012. Two specific issues have been raised which are explained in this information paper:

• Returning ACFI subsidy growth to long-term trend rates; and
• The ACFI redirection changes to be made as part of the Living Longer. Living Better. aged care reform package.

In late 2011, the Government increased its residential care estimates by $2.3 billion for the period from 2011-12 to 2014-15 to reflect higher than anticipated growth. Since that time, the department has been consulting extensively with the sector on options to bring future growth back to trend:

• The ACFI Monitoring Group met four times in 2011 and 2012. This group includes representatives from ACSA and ACAA as well as consumers and clinicians.
• Further detailed consultations have been held with providers and peak associations since the Living Longer. Living Better. aged care reforms were announced on
  20 April 2012.

It is important to note that the ACFI changes announced on 21 June 2012 are to achieve the Government’s intention to bring the rate of future growth in funding back to the long-term trend rate and to redirect funding for other aged care reforms. However, they are not intended to reduce funding for aged care subsidies.

Over the period from 2011-12 to 2015-16:

• Average annual growth is estimated to be 2.7% above indexation;
• Total residential care subsidies will increase by around $2.1 billion; and
• Average daily subsidies will increase from $131 to $149 per resident in today’s dollars (ie, excluding indexation).

The following table shows the growth in care subsidies (basic subsidy plus CAP) in 2012-13 dollars. The future years are projected figures and all are above indexation.

Growth in care subsidies

	2002-03	2006-07	2007-08	2011-12	2012-13	2016-17
Average subsidy	$89.17	$99.43	$102.20	$131.54	$134.04	$149.17
Average annual growth over 5 years period	-	2.8%	-	6.5%	-	2.7%

The table below shows how much the Government estimates it will spend on residential care including the changes outlined above and compares this with the amount prior to the estimates variation in late 2011. Even after the $1.6 billion ACFI redirection measure is taken into account, more funding is available in the forward estimates than was budgeted for in the 2011 Budget papers.

How much the Government estimates it will spend on residential care

	2011-12	2012-13	2013-14	2014-15	2015-16
After 2012 Budget ($m)	8,806.3	9,116.3	9,587.6	10,312.0	10,994.9
Prior to 2011 variation ($m)	8,279.1	8,619.9	9,183.4	9,869.6	10,249.7

From July 2012, the department will meet monthly with a group consisting of providers, consumers and clinicians to monitor the effect of the changes. This will give an opportunity to take early action if the changes are not working as intended.
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