Review of Pricing Arrangements in Residential Aged Care - Questions and Answers

These questions and answers address issues about the Government's response to the recommendations of the Review of Pricing Arrangements in Residential Aged Care and changes to Government funding for aged care arising from that response.

Page last updated: 11 May 2004

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Frequently Asked Questions

Investing in Better Care

More Aged Care Places

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Building Better Aged Care Homes

Strengthened Protections for Residents' Bonds

Better Skills for Better Care

Providing the Right Care in the Right Place

Improved Information About Aged Care Homes

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Frequently Asked Questions

Q. Why are the changes announced in the Package necessary?

As the Australian population ages there will be greater need for aged care in the community and in aged care homes. The Australian Government has responded by providing substantial additional funding to ensure services best meet the needs of older Australians.

Q. How is the Australian Government responding to this issue?

The Australian Government increased residential care subsidies by $50 million a year (indexed), pending the outcomes of the Review of Pricing Arrangements in Residential Aged Care. This funding assisted providers to attract and retain more aged care nurses by offering them pay rates closer to those of nurses in the public hospital sector.

The Government will now provide $2.2 billion in 2003-04 and over the next four years to help ensure there is an appropriate supply of high quality aged care services so that older Australians can access the care they need.

Q. Is the Government introducing new accommodation bonds for older Australians entering aged care homes?

No. The existing arrangements will not change. Currently, low care residents of aged care homes who have the ability to contribute to the cost of their accommodation have the option of paying an accommodation bond or a periodic payment. High care residents, except those who have opted to receive care on an extra service basis, do not pay bonds.

Q. Will existing residents be required to pay more under the package?


Q. Will new residents be required to pay more under the package?

Approved providers will be able to increase the accommodation charge for new high care resident who have the ability to contribute to the cost of their accommodation by up to $2.34 a day. No resident will pay more than $16.25 per day under the charge.

Q. How much support will the Australian Government provide to older Australians over the next four years?

Including the funding announced in the package, the Australian Government will provide $30 billion to support the aged care needs of older Australians over the next four years.
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Investing in Better Care

Q. How will the package improve quality of service in aged care homes?

The additional funding provided by the package will allow aged care providers to attract and retain skilled care workers to ensure the delivery of high quality care and to build and maintain high quality accommodation.

The package also includes measures to increase education and training opportunities for care workers to increase the availability of a skilled workforce.

New conditional adjustment payment

Q. Why do we need a new conditional adjustment payment?

The new payment will assist providers to deliver high quality services to older Australians needing care.

It will also encourage providers to improve management and make best use of resources.

Professor Hogan's Review of Pricing Arrangements in Residential Aged Care found that while some aged care providers manage well, other providers are in need of assistance and encouragement to improve management practices.

The new conditional adjustment payment is aimed at getting aged care homes to focus on ways of improving efficiency through better management. All aged care homes need to do more than just 'make ends meet' if they are to provide high quality care now, plan ahead for the future, and continue to improve the quality of accommodation in their homes.

Q. How much funding will the Australian Government provide for the conditional adjustment payment?

Additional funding of $877.8 million over four years will be provided to support this initiative.
  • This increases the average annual payment per resident, currently about $30,500, by about $2,000 by 2007-08.
  • The payment will result in an extra seven per cent growth in funding by 2007-08 (1.75 per cent cumulative each year over four years) on top of indexation.
  • The payment will be dependent on each provider giving its staff information and opportunities regarding workforce training, making audited accounts publicly available each year, and taking part in a periodic workforce census.
The above information will be used to develop benchmarks on performance to assist providers to achieve appropriate efficiencies and improve the quality of care through improved business and management practices.

There will be a review of the need for, and value of, the supplement after four years.

Simplification of the Resident Classification Scale

Q. What is the Resident Classification Scale and what changes are being made to it?

The Resident Classification Scale is a system of classifying aged care residents based on their level of dependency and care needs. There are currently eight levels, with each level attracting a different amount of Australian Government subsidy.

The scale will be simplified to three levels to form the basis of a new funding system to be introduced in 2006.

Q. Will existing residents be affected by the changes to the scale?

Existing residents will continue to receive the care they need under the new arrangements.

Providers will continue to be paid the current level of subsidy for existing residents. As is currently the case, there will be no additional assessments unless their care needs change.

Aged care providers will be required to provide appropriate quality care to all residents in line with the accreditation standards and the quality of care principles.

Residents will benefit as a result of nurses having more time to spend on care, rather than administration.

Q. How will the changes to the scale affect aged care providers?

The new scale will give providers greater income security by reducing the uncertainty in an eight-point scale and will reduce associated administrative costs. Unless their circumstances change, all existing residents will stay at their current funding level so that no provider will receive less funding for the residents concerned when the new scale is introduced.

The details of the new funding arrangements will be developed in consultation with the community and approved providers over the coming months.

New Supplements for Residents with Dementia and Challenging Behaviours, and Complex Palliative Care

Q. Why are the new supplements needed?

Residents with dementia who exhibit challenging behaviours and residents requiring complex palliative nursing, have higher care needs.

The new funding arrangements will target funding to these residents in recognition of these needs. This will help to ensure that aged care homes are adequately funded to provide these residents with high quality care.

Q. Will the industry be consulted about the development and implementation of the new funding arrangements?

Yes. The community and providers will be consulted on how the new arrangements will be implemented.
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More Aged Care Places

Q. What changes are being made to the number of aged care places funded by the Australian Government?

The Package significantly increases the number of aged care places that the Australian Government will subsidise.

The Australian Government will increase the aged care provision ratio from the existing level of 100 operational places to 108 for every 1,000 people aged 70 or over, allowing even more Australians to receive aged care services.

This means an estimated 27,900 new aged care places will be allocated over the next three years, including 13,030 in 2004.

These places are on top of the 35,371 places already allocated over the last four years which are progressively coming on line.

Q. Will the new provision ratio meet the increased demand due to population ageing?

The new aged care provision ratio will ensure that the number of aged care places will grow in line with the ageing of the population.

Q. How will the Government improve timely access to aged care services?

The increase in the provision ratio to 108 operational places per 1000 people aged 70 or over will allow more older Australians to receive aged care services.

To achieve the ratio an estimated 27,900 new aged places will be allocated over the next three years, including 13,030 in 2004.

As well, places will be announced three years in advance so providers have more time to plan ahead. This will allow beds to open more quickly once allocated.

Q. How does the reweighting of the provision ratio affect residential places?

The balance between residential and community care will be reweighted to double the proportion of places offered in the community (from 10 to 20 places per 1,000 people aged 70 or over) in line with the preferences of older people to remain in their own homes for as long as possible.

The new aged care provision ratio (108 operational places for every 1,000 people aged 70 or over) will provide significantly more aged care places than the existing ratio (100 operational places for every 1,000 people aged 70 or over).

The level of provision of high care places remains unchanged at 40 places for every 1,000 people aged 70 or over. Therefore, the number of high care beds will continue to increase in line with the population aged 70 or over.

Q. What is transition care and how many places will be offered?

Transition care assists older people following a hospital stay, and their families, by allowing them time to assess their options while receiving rehabilitation services and support to increase their independence and confidence.

This allows older people to determine whether they can return home with additional support from community care services or need to consider entering an aged care home. Up to 2,000 places will be provided for transition care over the next three years.
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Building Better Aged Care Homes

Q. Will existing residents pay a higher accommodation charge?

No, existing residents will not be affected.

Q. Why do aged care homes need more capital?

The Review into Pricing Arrangements in Residential Aged Care found that aged care providers are already making a substantial investment in new building, refurbishment and upgrading work, with more than $1.762 billion of capital works being undertaken in the past two years.

However, a substantial additional investment will be required over the next decade to ensure that providers keep pace with the higher number of people requiring aged care services.

The Review found that both public and private contributions to the cost of accommodation needed to be increased to ensure that the required investments would take place.

Q. How will the Government help aged care providers meet this need?

Drawing on the Review's analysis, and after allowing for the increased emphasis on community care, the Government estimates that the aged care sector will require $10.3 billion to service its capital requirements for new buildings and upgradings, and their existing debt, over the next ten years.

Without additional assistance, public and private contributions (concessional resident supplement and accommodation bonds and charges) would have amounted to $9.1 billion over this period, leaving a shortfall of $1.3 billion.

This package will ensure that this shortfall is met entirely, with the vast proportion - nearly $1 billion - coming from the Australian Government.

Q. What are the measures in this Package that will help providers meet the shortfall in capital financing requirements?

The Australian Government's capital payments to aged care providers on behalf of concessional, transitional, assisted and respite residents will be increased by $438.6 million over four years through an increase in relevant supplements (or an average of around $100 million a year over the next ten years).

At the same time, new high care residents who can afford to make a contribution to their accommodation costs will be asked to make a contribution. This will not apply to existing residents.

The current limit of five years on accommodation charges for new residents will also be lifted so that these residents make a capital contribution throughout their stay in the aged care home. These changes do not affect existing residents. The arrangements for respite residents are unchanged.

The package improves the capacity of aged care providers to borrow and repay capital so that they can build new residential care places and refurbish existing places to an appropriate standard.

At the same time, the Australian Government will provide all aged care providers with an additional one-off payment in 2003-04 of $513.3 million (or $3,500 per resident) in recognition of the forward plan developed in consultation with the aged care sector for improved space, privacy and amenity standards under the 2008 building certification arrangements, and in particular for improved fire safety. For example, the additional funding would be sufficient to meet the cost of installing sprinklers in the vast majority of homes.

Q. What are the details of the capital initiatives?

The concessional resident supplement will be increased from $13.49 to a maximum daily rate of $16.25 a day, and other rates of concessional resident supplement will be increased proportionally, indexed annually.
  • Respite supplement will be increased in line with the increase in the concessional resident supplement, by $2.76 a day;
  • Transitional resident supplement will be increased to match the new maximum rate of the concessional resident supplement, to $16.25 a day;
  • The maximum rate of the accommodation charge for new high care residents who can afford to make a contribution will be increased from $13.91 to $16.25 a day, indexed annually; and
  • The five-year limit on charging accommodation charges for new permanent high care residents will be removed and charges will apply for the duration of a resident's stay.

Q. How is the Government ensuring that all people, regardless of income, will have equitable access to aged care?

Parity has been achieved between the accommodation charge and the concessional resident supplement to ensure that the income streams from these sources are equal. This means one group is not favoured over the other.

Fairer assets testing

Q. How will the new arrangements differ from the existing ones?

Currently, providers undertake asset testing assessments, usually at the time a new resident is accepted into care. Residents receive concessional status if they have assets less than two and a half times the annual basic single pension ($29,000 at March 2004) and meet other limited criteria. Providers receive an Australian Government supplement for each concessional resident. Assessments made by providers are reviewed to ensure accuracy.

Under the new arrangements, asset testing of new residents will be undertaken by Centrelink, rather than by providers. Veterans will be assessed by the Australian Department of Veterans'Affairs.

The new arrangements will benefit both residents and aged care providers.

  • They will remove an administrative burden for providers and increase income surety as assessments will no longer be subject to review.
  • Residents will be better placed to make decisions about their care needs because they will have greater certainty about their financial situation and status prior to entry.

Q. Why Centrelink?

Centrelink is best placed to conduct asset testing and the new arrangements should be fairer and more consistently applied to residents across Australia.

Centrelink may already have asset information for many residents eligible for concessional status.

Q. Will current residents be affected by the new asset testing arrangements?

No, current residents will not be affected.

Q. Will self-funded retirees be subject to the new arrangements?

Yes. Self-funded retirees entering residential care were subject to the previous arrangements and will also be subject to the new arrangements.
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Strengthened Protections for Residents' Bonds

Q. Why is greater protection required for residents' bonds?

Residents pay accommodation bonds and it is very important that residents' savings and assets are secure. A review of the current prudential arrangements for accommodation bonds identified the need for this enhancement to give greater peace of mind to the residents and their families.

Q. How will the changes provide greater protection of residents' bonds?

A new fund will be established to increase the protection for residents' bonds. The provider funded guarantee fund will ensure that, in an extreme circumstance where an approved provider is unable to fulfil its responsibilities, funds will be available to cover any outstanding bond balances.

The measure will strengthen the existing arrangements that were first introduced under the Aged Care Act 1997.

Q. Will the provider continue to have access to the accommodation bonds?

Accommodation bonds will continue to be managed by the aged care provider. The proposed guarantee fund will provide an additional pool of emergency funds levied from all providers to cover an extreme case of default.
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Better Skills for Better Care

Q. Why are the workforce measures necessary?

An adequate and skilled workforce is central to the provision of high quality aged care. As the older population grows, more nurses and aged care workers will be needed.

The recent census and survey of the aged care workforce, The Care of Older Australians: A Picture of the Residential Aged Care Workforce, found that whilst the majority of the workforce have post-school qualifications, there remains a significant number of employees in the sector who have experienced some difficulties in accessing education and training opportunities. It also found around one quarter of the aged care workforce are from non-English speaking backgrounds and may need assistance with improving their language and literacy skills.

Q. What will the workforce measures in the package do?

These initiatives will train more nurses and create additional training and better career opportunities for people already working in the aged care sector.

The Government will assist the development of a well trained aged care workforce to meet the needs of our ageing population by providing $101.4 million over four years for:

  • 400 additional undergraduate higher education places in nursing each year;
  • up to 4,500 more vocational training places each year for aged care workers, up to Enrolled Nurse level;
  • up to 1,500 places each year for aged care workers to train for Certificates of Attainment for Medication Management; and
  • up to 2,000 additional places each year in the Workplace English Language and Literacy (WELL) program.

Q. How will personal care workers benefit from these measures?

The Residential Aged Care Census and Survey indicated that about 80 per cent of personal carers have a Certificate Level III qualification in aged care. The Government's new measures will assist the aged care sector to provide education and training opportunities for the 20 per cent of Personal Care workers who do not currently have a Certificate III qualification. This will support the desire of the sector to achieve a minimum qualification of Certificate Level III in aged care for all direct care workers.

To improve the career opportunities for personal care workers in the aged care sector, these measures will also assist those people with Certificate III qualifications to upgrade their skills to the next level, or to become Enrolled or Registered Nurses.

Q. Why is there a need to provide Workplace English Language and Literacy (WELL) programs specifically for workers in the aged care sector?

The census and survey of the aged care workforce demonstrated that about 25 per cent of the aged care workforce are from non-English speaking backgrounds. Increasing literacy and language skills will allow aged care workers to move more quickly to higher level qualifications that require competency in these areas, thereby increasing the pool of skilled care workers in the aged care sector.

Q. How will the package address the shortage of registered nurses?

The initiative will help address the shortage of registered nurses by providing 400 additional undergraduate higher education places in nursing, increasing to 1,094 over four years. These places are in addition to the nursing places provided as part of the higher education reform package.
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Providing the Right Care in the Right Place

Q. What do Aged Care Assessment Teams do?

Aged Care Assessment Teams, which are administered by the State and Territory governments, assess the physical, medical and social needs of frail older Australians to assist them in making choices about appropriate care services.

Q. What will the funding be for?

The new funding for an improved assessment system will allow Aged Care Assessment Teams to provide more timely assessments of older people requiring care and enable higher levels of case management and review of care needs.

This funding will also enable the teams to assist older people to better understand the aged care system as they move through it.

Q. What is meant by case management?

Older Australians may need to have a variety of services to meet their care needs and case management services can assist in arranging and coordinating these services. A case manager, working with the older person's family or carer, can assist in determining short and long term care and support required and provide information and assistance in putting these in place.

Q. What will it cost consumers?

Assessment services are provided at no charge.
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Improved Information About Aged Care Homes

Q. What information will be available?

A new web site will be developed which will help people find information about aged care homes, including the style and availability of accommodation, quality status and fees charged.

Q. Will aged care homes be given a standards rating?

The Government will work with the community and providers to explore the feasibility of a standards rating system as a simple way of bringing together all information about residential aged care homes, to be included on the web site. This will ensure that residents, prospective residents, and their families can be well informed about the services and types of accommodation available.

Q. How will the ratings be determined?

Although the detail of the proposed rating system has yet to be determined, a range of information currently available in different locations will be brought together under a profile of each home.

This could include the level of Australian Government funding, compliance with the Accreditation Standards, the building certification score, the suitability of the home to provide care for special needs groups (such as people from culturally and linguistically diverse backgrounds or people with dementia), staffing policies, the home's compliance with fire safety regulations and prudential reporting requirements in relation to accommodation bonds.

Q. What will happen to accreditation?

The current accreditation system will continue. The accreditation system is a comprehensive assessment of each residential aged care home against 44 outcomes contained within four Accreditation Standards. Homes must be accredited by the Aged Care Standards and Accreditation Agency in order to be eligible to receive Australian Government funding.

This initiative will provide further important information about the quality and style of accommodation, care and services available at homes.
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