Residential aged care funding – Budget update

Mark Richardson:

Hello everyone and welcome to our eighth residential aged care funding reform webinar. As with previous webinars please note that today’s event is being recorded and will be available later for those who would like to watch it again or who are not able to attend.

Before I go any further I would like to acknowledge the traditional owners and custodians of the lands on which we are meeting today. I am in Canberra on the lands of the Ngunnawal and the Kamberri people. I would like to pay my respects to their Elders past, present and emerging. I would also like to extend that acknowledgement and respect to any Aboriginal and Torres Strait Islander people who are here with us today.

My name is Mark Richardson. I am the Assistant Secretary of the Residential Care Funding Reform Branch at the Department of Health and Aged Care. I am joined today by my colleague Emma Gleeson, Assistant Secretary of the Workforce Branch. There will be a Q&A session at the end of the webinar. You can lodge questions in the Slido box on the right-hand side of your screen. If you can’t see Slido you can also access it via a link in the chat on the bottom right of your screen.

I should say upfront that I won’t be able to answer specific questions about the Independent Health and Aged Care Pricing Authority or IHACPA’s pricing methodology. This advice was provided to Government in the context of the Budget and has not yet been made public. However if you do have questions please send them through and they will be answered once it is appropriate to do so.

We will attempt to respond to as many questions as possible at the end of the webinar. All questions and answers including ones that we may not get to will be available after the webinar and published on our website. We would also like to know what you think of today’s webinar and how we can improve for future sessions. So if you can complete the short survey at the end of today’s session that would be most appreciated.

The main purpose of today’s webinar is to unpack some of the detail regarding the recent 2023-24 Budget announcements impacting the residential aged care sector and help providers understand what it means for them. However before I do so I would like to point out some key facts about the quantum of the funding increases since the residential aged care reform journey began in 2021-22 in response to the Royal Commission into Aged Care Quality and Safety.

The Government’s announcement in last Tuesday’s 2023-24 Budget of an additional $11.1 billion for residential aged care over the next four years from 1 July this year builds on around $15.7 billion of previous Budget announcements from 2021-22 over the forward estimates to 2026-27 and includes funding for initiatives such as the initial $10 Basic Daily Fee or BDF supplement and 30% funding uplifts for the viability and homeless supplements. The implementation of the Australian National Aged Care Classification or AN-ACC funding model which incorporates the funding elements from the previous ACFI model including the basic subsidy, a $10 Basic Daily Fee supplement and the funding uplift to the viability and homeless supplements, the additional measures for care minutes including an initial 200 care minutes from October this year and 215 care minutes from October next year, as well as funding for the 24/7 registered nurse or RN supplement from 1 July this year to help providers meet the cost of delivering 24/7 RN care.

In total these funding commitments represent around an additional $27 billion over six years from 2021-22 for residential aged care.

To put this in perspective this means that since 2020-21 the average funding per resident per day has gone up from $186 under ACFI to an estimated $260 in 2023-24 under AN-ACC representing an increase of $74 or approximately 40% in average funding per resident per day in three years.

I should point out that the analysis of the average funding under ACFI includes care funding only, that is the basic subsidy, viability and homeless supplements, to ensure we’re comparing apples with apples with the new AN-ACC price when combined with the new hotelling supplement.

Now let’s have a closer look at the $11.1 billion funding injection from this year’s Budget which fulfils the Government’s commitment to fund the Fair Work Commission’s decision to increase award wages by 15% for selected residential aged care workers as well as the annual increase to the AN-ACC price to align it with the real cost of delivering care for people living in residential aged care homes.

As you can see on this slide this additional funding is made up of an additional $10.1 billion in AN-ACC funding to implement the new AN-ACC price of $243.10 as recommended by IHACPA to fund the 15% Fair Work Commission wage increase as well as other increases in care costs since AN-ACC was introduced on 1 October last year, an additional $116 million to establish a new $10.80 hotelling supplement per resident per day, an additional $6 million to establish a new one off grant opportunity under the existing AN-ACC transition fund to support residential aged care services with specific characteristics such as those in isolated communities and in remote and very remote locations to cover higher care costs related to their location for the 2023-24 financial year only. An additional $743 million to cover the costs of delivering 215 care minutes over three years from 2024-2025 following the 15% Fair Work Commission wage increase, and an additional $178 million to align the 24/7 RN supplement with the 15% increase in award wages.

Now I should point out that of the $11.1 billion $8.5 billion is associated with the Fair Work Commission wage increase and $2.7 billion accounting for rounding is associated with indexation to cover increases in costs such as inflation, other care wage increases such as the minimum wage increase and the superannuation guarantee. In addition from 1 October 2023 there will be changes to the care minute allocations associated with each AN-ACC class. This is in response to new evidence of care costs reported in the Quarterly Financial Report or QFR and to better align care funding to care costs for all classifications.

To sum it all up the increase to the AN-ACC price together with the new $10.80 hotelling supplement, the new transition fund grant opportunity, additional funding for the 215 care commitment, the 24/7 RN supplement and care minute adjustments means there will be substantially more support for residential aged care providers to attract and retain the high quality workforce, better meet the mandatory 24/7 registered nurse responsibility from 1 July 2023 and care minutes responsibility from 1 October 2023 and ultimately to deliver increased direct care time to residents that reflect their individual care needs.

Importantly it also means all providers regardless of whether they pay at or above award rates will get a funding boost from August 2023 following the submission of their July claims.

I’ll now hand over to Emma who will talk to you about the Fair Work Commission decision before I take you through the various funding measures I just mentioned in more detail.

Emma Gleeson:

Thank you Mark and hello everyone. The Fair Work Commission decision on the 21st of February this year to increase minimum award wages by 15% is the largest ever increase for employees working in aged care. As you’re aware this wage increase which takes effect from the first full pay period on or after the 30th of June 2023 applies to a range of employees. Specifically under the Nurses Award this covers for the purposes of residential aged care registered nurses, enrolled nurses and assistants in nursing.

Under the Aged Care Award it covers personal care workers and recreation or lifestyle activities officers.

Also the 15% increase applies to the most senior food service employee. That’s Levels 4 to 7 in the Aged Care Award. To be clear this is for the head chef or cook and doesn’t cover the chefs and cooks who aren’t the most senior food service employee working at a particular service.

The Government is aware of the financial pressures in the aged care sector and funding the Fair Work Commission’s interim decision through the measures announced at the Budget demonstrates the Government’s commitment to working with providers to ensure that we can attract and retain our valuable workforce. I note the Fair Work Commission has not ruled out further increases for direct care workers in the sector over and above the 15% and will also be deciding on whether further increases should be provided to other staff including cleaners, gardeners and administration staff.

For residential aged care providers will receive additional funding to meet the wage uplift through the AN-ACC funding model and other aged care supplements. So on that note I will hand back to Mark to take you through the measures from this Budget to fund the Fair Work Commission decision.

Mark Richardson:

Great. Thanks Emma. Now let’s take a look at the new AN-ACC price and associated funding that will apply from 1 July 2023. As you are aware IHACPA’s role is to provide annual, independent, aged care pricing advice to Government based on costing studies to ensure aged care funding is directly informed by the actual costs of delivering care. These studies are also intended to ensure the AN-ACC funding model itself including the National Weighted Activity Units, the Base Care Tariffs and AN-ACC classifications is refined over time to maintain its ongoing relevance as the model for distributing equitable funding to the aged care sector.

The new AN-ACC price of $243.10 was recommended by IHACPA in its first pricing advice to Government on aged care since it took on its new functions in August 2022.

It excludes the $10 Basic Daily Fee supplement that was rolled into the AN-ACC price when the new funding model was introduced on 1 October last year which I will discuss in more detail in coming slides.

The price of $243.10 therefore represents a price increase of $36.30 or 17.6%. The table on the left of this slide shows how IHACPA calculated this by subtracting the $10 Basic Daily Fee supplement from the current $216.80 AN-ACC price and indexing the resulting $206.80. In summary the indexation included a Fair Work Commission wage component increase of $22.76 and an indexation component for inflation and other wage adjustments such as the minimum wage and the superannuation guarantee for an increase of $13.54.

In effect the additional funding for the Fair Work Commission decision supports an increase in the sector average wages of an estimated 13.65% for all workers in these professions. That is RNs, ENs, assistants in nursing, PCWs and lifestyle workers, not just the 15% increase for workers on the award.

As I mentioned at the start over the next four years this increase in the AN-ACC price represents a significant funding boost of $10.1 billion over four years from 2023-24 to meet the cost of delivering residential aged care.

Breaking the $10.1 billion down $7.6 billion or the $22.76 is to cover the costs of increased wages to meet the Government’s commitment to fund the Fair Work Commission’s interim decision, with the remaining $2.5 billion or $13.54 representing indexation to cover other cost increases such as inflation, other wage increases and the superannuation guarantee.

So what does all of this mean for your actual funding? As you know the AN-ACC price is equivalent to one National Weighted Activity Unit or an NWAU with NWAU weightings multiplied by the AN-ACC price to work out the amount of fixed or base care tariff funding and variable or resident case mix funding each provider receives under AN-ACC. The AN-ACC price change for 1 July 2023 means one NWAU will be equivalent to $243.10.

I mentioned before that part of IHACPA’s role includes advising on the AN-ACC model including the adequacy of the Base Care Tariff categories, the AN-ACC classes and the weightings that apply based on independent costing studies. However as AN-ACC was only implemented in October last year a full costing study to inform recommendations for changes to the funding model for the 2023-24 financial year was not possible. We expect that costing studies to be undertaken in 2023 may be used to inform both the AN-ACC pricing and any potential refinements to the funding model for 2024-25.

With that in mind the tables on this slide and the next slide show the funding outcome for each AN-ACC component as they are currently designed based on the new AN-ACC price of $243.10 and the existing weightings.

For the fixed or Base Care Tariff funding component on this slide the subsidy payable to services where funding is based on occupied places will increase to between $119.12 to $223.65 per bed day or to between approximately $43,500 to $81,600 per year from 1 July this year.

And between $165.31 to $437.58 per bed day or to between approximately $60,300 to $159,700 per year for services where funding is based on operational places.

For the variable or case mix funding component on this slide funding for permanent residents will increase to the amounts outlined in the green table to the right with the new funding ranging from $46.19 for a low care AN-ACC Class 2 resident to $243.10 for the highest care needs residents such as Class 1 and Class 13 or to between approximately $16,900 to $88,700 per year. And for respite residents funding will also increase to between $73.90 and $210.04 for the three respite classes depending on the person’s care needs or to between approximately $27,000 to $76,700 per year.

Now I mentioned at the start that the new AN-ACC price of $243.10 excludes the former $10 Basic Daily Fee supplement which was rolled into the current AN-ACC price when the AN-ACC funding model was introduced on 1 October 2022.

AN-ACC was not designed to distribute hotel funding such as catering, cleaning and gardening as these costs are not generally considered to vary significantly based on the care needs of individual residents.

As a result the incorporation of the former $10 Basic Daily Fee supplement into AN-ACC led to an inequitable spread of this payment due to the distributional impact of AN-ACC. That is the Base Care Tariffs and AN-ACC class weightings that we’ve just seen on previous slides.

Because of this inequity there was a clear need to remove hotel funding from care funding.

Importantly though it also provides a mechanism for the Government to fund higher wages for head chefs and cooks – that is non-care staff – included in the Fair Work Commission 15% wage increase decision, and for the Government to support any future decisions by the Fair Work Commission for non-care workers such as cleaners, gardeners and administration staff.

As shown by the graph on the left of this slide the $10.80 is made up of the former $10 Basic Daily Fee supplement, 44 cents to account for indexation and 36 cents to account for the cost of funding the Fair Work Commission decision to award a 15% pay increase to head chefs and cooks. This additional 36 cents is equivalent to the additional $116 million over four years from 1 July this year that I mentioned earlier in the presentation.

It is important to note that in total the $10.80 hotelling supplement is worth $3.5 billion over four years from 2023-24.

To reiterate the new hotelling supplement will help providers meet the costs of hotelling services not covered by the capped Basic Daily Fee paid by residents, allow hotelling funding to be equally distributed and unaffected by weightings under the AN-ACC funding distribution model, provide a mechanism for the Government to fund higher wages for head chefs and cooks included in the Fair Work Commission 15% wage increase decision, make it easier for the Government to support any future decisions by the Fair Work Commission for non-care workers such as cleaners, gardeners and administration staff, and importantly will create a clear delineation between care funding or AN-ACC funding and hotelling funding supporting the Government’s expectation that AN-ACC funding should only be used for care such as higher wages for direct care workers and not diverted to fund hotelling and accommodation costs.

I should also add for clarity that unlike the previous $10 Basic Daily Fee supplement providers do not have to complete a form to access this supplement. The new $10.80 hotelling supplement will be automatically paid to all residential aged care providers by Services Australia based on the number of per bed day claims.

Using the new AN-ACC price of $243.10 we have undertaken some analysis to determine the expected AN-ACC funding across the Base Care Tariff categories compared to the current AN‑ACC price. We have combined this with a new $10.80 hotelling supplement so that we are comparing apples with apples with a current AN-ACC price of $216.80. One of the key findings is that funding per bed day in 2023-24 is expected to be, which I touched on at the start, an average of $260 across the sector representing an increase of approximately 17% for the current average funding of $223 per bed day.

Drilling down further into the data our analysis indicates as seen on this slide that on average from 1 July this year standard Modified Monash Model or MMM 1 to 4 services are expected to receive approximately $258 per bed day compared to a previous $221. Standard MMM 5 services are expected to receive approximately $267 per bed day compared to a previous $229. Standard MMM 6 and 7 services are expected to receive approximately $328 per bed day compared to a previous $283.

Specialised homeless services are expected to receive approximately $344 per bed day compared to a previous $298. Specialised Aboriginal and Torres Strait Islander MMM 6 services are expected to receive approximately $437 per bed day compared to a previous $380. And specialised Aboriginal and Torres Strait Islander MMM 7 services are expected to receive approximately $740 per bed day compared to a previous $650.

To help providers estimate what the new AN-ACC funding will likely be from 1 July this year we have brought back the online AN-ACC funding and care minutes estimator which some of you may have used to prepare for AN-ACC go live on 1 October last year.

You can now also use this to get an estimate of your hotel funding supplement. The estimator can be accessed from the Department’s website through the URL at the bottom of this slide or by scanning the QR code seen on this slide.

Consistent with before we went live with AN-ACC in October last year the estimator provides a point in time estimate only based on the information inputted into the tool. Actual funding levels can only be calculated and paid from August once providers have submitted their July claims. Like before we have provided this tool to help you with your planning.

We are aware that many providers are keen to know the Government’s expectations on how the sector should be using the extra funding for wage increases. So I’ll now hand you back to Emma who will provide some guidance on this.

Emma Gleeson:

Thanks Mark. The Government’s investment in the wage increases is unprecedented and the expectation is that this funding must be passed onto workers for their full benefit. Higher pay for aged care workers means providers can attract and retain staff to relieve workforce pressure as well as supporting the sector to increase average care minutes and ensure that a registered nurse is on duty 24/7.

Under the Fair Work Act aged care providers are legally obliged to pay the award rate however over and above this legal requirement there is a very clear expectation that providers must also pass on all funding allocated for increased wages. For providers who pay above award through enterprise agreements or individual contracts the expectation is you will use all available funding provided by the Government to continue to pay above the award.

For those that pay the award the expectation is also that you pass on any additional funding available to workers. The Department is currently working with unions and peaks to provide guidance to the sector on these expectations. We of course note that providers must account for on costs on the way through and these costs are covered by the increase in the AN-ACC price and the hotelling supplement as described by Mark earlier.

I’d also like to note that the annual wage review decision is anticipated in mid-June. This is likely to further adjust award rates upwards noting the residential aged care funding takes into account wage inflation based on historical trends.

In terms of accountability and transparency of provider expenditure the Department will continue to monitor how much providers spend on wages through the Quarterly Financial Report and you can expect to see wage related additional reporting fields that will need to be completed commencing from this quarter. Using this data we will maintain transparency of wage rates through publication of key sector trends in the quarterly financial snapshot. And as part of these regular reporting requirements we will also be asking providers to attest that they have passed on the funding to their workers. In addition from January next year expenditure on labour costs will also be published at a service level.

As announced at this year’s Budget the Government has also allocated $98.7 million over four years from 1 July this year to fund a one-off grant opportunity to help residential aged care providers meet historical leave liabilities impacted by the Fair Work Commission decision. This was in response to issues raised by providers in regard to the leave liabilities on their balance sheet which will automatically increase on the 30th of June this year. We can advise that the one‑off grant opportunity will cover the costs for in scope workers’ eligible leave liabilities that have increased due to the decision including annual leave, personal leave and long service leave. We can also advise that providers will be able to apply for a 50% portion of this balance as at 30 June 2023.

In terms of timing we expect to be able to release the grant opportunity in the second half of this year. We will use the information already collected in the ACFR and the Quarterly Financial Report to verify providers’ grant applications. Please be assured that we will provide more information to the sector about how the grant opportunity will operate including information about eligibility and how to apply for the grant. In the meantime providers should subscribe to the website listed on the screen, grants.gov.au to receive notifications when the grant round is open.

That’s it from me. Back to Mark to take you through the rest of the presentation.

Mark Richardson:

Great. Thanks Emma. That was very helpful. Look looking at this year’s Budget again $6 million has been allocated for the 2023-24 financial year to create a new grant opportunity under the existing AN-ACC transition fund to provide more targeted support to residential aged care services with specific characteristics such as being located in an isolated community and/or services in remote and very remote locations who do not fit into the current profile of BCT categories.

So far the services we have identified for this grant funding opportunity are large services with high occupancy in MMM 6 to 7 locations and isolated services in MMM 3 to 4 areas.

For example we recognise that while services in Kalgoorlie are located in a MMM 3 location they are surrounded by MMM 7 regions and may experience the same additional costs of an isolated service. We can advise the new grant opportunity is expected to open in July 2023.

As this is a new funding opportunity there will be new guidelines and an application process. However like the existing AN-ACC transition fund we will identify and invite providers of eligible services to apply for the grant through the Community Grants Hub. This funding will ensure these services with specific challenges due to their remote and isolated locations have additional funding to meet the costs of delivering care until IHACPA has completed their 2023-24 costing studies which may recommend changes to the Base Care Tariff funding from 2024-25.

Moving on to the additional funding to support providers to deliver 215 care minutes the Government committed $1.9 billion in October 2022-23 Budget over two years from 2024-25 to help providers meet the increase from a sector average of 200 to 215 care minutes from 1 October 2024.

As you can see on the graph on the left hand side of this slide as part of the forward estimates process this has now increased to $3.1 billion over the next three years from 2024-25. As I mentioned at the beginning of the webinar this Budget provides an extra $743 million including indexation of $181 million from the 2024-25 financial year to support providers to deliver the additional care minutes following the 15% Fair Work Commission wage increase.

Building on the $3.1 billion this brings the total amount of funding for the increase to 215 care minutes to around $3.8 billion as shown by the bar chart to the left of this slide.

Now I want to reiterate that the target of an average of 215 care minutes including 44 minutes of registered nurse time will be set at the sector level because there still seems to be some confusion in the sector about how the care minutes target works. In practice a service’s care minute target may differ from the sector wide average target whether that be the initial 200 care minutes or the future 215 care minutes depending on the service’s resident case mix in the previous quarter. If a service’s target is different from the sector wide average the service only needs to provide their service level care minutes target. For example a service may have an average care minutes target of 190 care minutes including 37 minutes of registered nurse care time based on their resident case mix from the previous quarter. This means the service will need to deliver their required average care minutes at the service level not that each resident receives the same number of care minutes as everyone has different care needs and therefore different care time.

I would also like to take this opportunity to remind you that only care provided by RNs, ENs, PCWs and assistants in nursing can be counted for the purposes of meeting the care minute targets. The Government committed $473.3 million in the October 2022-23 Budget to fund the new 24/7 RN supplement starting on 1 July 2023 to coincide with the commencement of the 24/7 RN responsibility.

As you can see on the graph on the left-hand side of this slide as part of the forward estimates process this has now increased to $622.9 million over the next four years from 2023-24.

As you would be aware this payment helps residential facilities with an average of up to 60 residents meet the costs of providing 24/7 RN care that is not covered through the AN-ACC funding model. To align with the 15% Fair Work Commission wage increase the Government has allocated an additional $178 million to fund the cost of delivering 24/7 RN care including $43 million in indexation, bringing the total cost to $80.9 million over four years from 2023-24.

This slide shows the supplement rates that will be payable to eligible providers from July this year compared to the previously published rates. As can be seen here the maximum amount for a MMM 1 to 4 facility with up to five residents will be $27,667 compared to the previous published rate of $21,416.67 per month.

Assuming that the occupancy level remains the same each month this increase means providers may receive a total supplement amount of approximately $332,000 per year. And for a MMM 5 to 7 facility with up to five residents the maximum amount per month will be $77,082 compared to the previously published rates of $61,083.33. Again assuming that there are no changes to the occupancy level each month providers may receive up to approximately $925,000 per year based on the rate payable from 1 July. The maximum supplement payable decreases on a sliding scale as the number of residents at the facility increases. As mentioned the supplement cuts off for residential facilities with more than 60 residents per day on average over the month.

So other than the rates there will be no changes to the original design of this supplement.

The last couple of points I want to make about the 24/7 RN supplement before moving onto the next topic, because we continue to get enquiries about this, are that if a residential facility is exempt from the 24/7 RN responsibility they are not eligible for the supplement. However they can opt out at any time during the exemption period if they are able to meet the 24/7 RN responsibility and receive the supplement instead. And the supplement does not apply to flexible care services that are Multi-Purpose Services which are also not subject to the 24/7 RN responsibility.

So that was our update on the AN-ACC price and other funding for the residential aged care sector that was announced during the Budget. The final part of this webinar will focus on the announced changes to the care minute allocations used to determine the targets for each residential aged care service. Government is announcing the changes now to give providers around five months to make any necessary changes to staffing and rostering arrangements to ensure the new care minutes responsibility will be met from 1 October this year.

As you will be well aware by now the care minutes responsibility is a significant part of the aged care reform agenda and has been a centrepiece of the Government’s policy to improving the overall quality of care provided in the residential aged care setting. It responds directly to the Royal Commission’s finding that staffing levels are vital to the quality of care that people living in residential aged care receive. Government introduced non-mandatory care minute targets for each residential aged care service on 1 October last year to allow providers time to adjust for delivery of this responsibility.

The targets are based on the AN-ACC classes assigned to residents that were in care during the previous quarter. This includes for residents receiving palliative care and residential respite care. More specifically the targets are determined using the care minute allocations associated with each AN-ACC and respite class that reflects the amount of time providers may provide to residents based on their acuity or care needs.

As announced Government’s making changes to the care minute allocations for each AN-ACC and respite class which will be used to determine the quarterly care minute targets for each residential aged care service from 1 October this year to coincide with when the care minutes responsibility becomes mandatory.

The first table on this slide shows the new care minutes allocations for each of the AN-ACC classes from 1 October compared to what they are now with reductions for the minutes associated with AN-ACC classes 2 to 7 for residents with lower care needs and increases to the minutes associated with AN-ACC class 1 for palliative care residents and AN-ACC classes 9 to 13 for those with higher acuity and care needs.

The second table shows the changes that will apply to the three respite classes with decreases in the care minutes allocations for the lower care need classes, that is class 101 and 102, and an increase to class 103 to reflect the higher care needs of residents assigned to this class.

Likewise for the RN component of the overall care minutes responsibility the changes follow a similar pattern across the AN-ACC and respite classes to better match funding with the costs of delivering RN care.

So why are changes being made to the care minute allocations? In short changes are being made now before the care minutes responsibility becomes mandatory from 1 October this year to ensure that funding matches the cost of delivering care minutes and that as a consequence residents receive the care they need. This is in response to the findings from analysis of actual AN‑ACC classification data and newly available Quarterly Financial Report or QFR wage data which showed care funding to care minute targets or the costs associated with delivering care minutes was not consistent across the classes.

Ensuring consistency between the ratio of funding to care minutes will ensure that each service’s average care minutes responsibility or care cost is correctly aligned with its overall care funding better matching care time with resident needs, and that any perverse incentives for providers that cherry pick residents classified at a certain level of care to maximise funding are removed.

Importantly it ensures a calibration between funding and care minutes. That is more funding, more care minutes and more staff and vice versa. To this point a change to the care minute allocations across the AN-ACC classes is essential to ensure that there is not just sufficient funding to deliver care and meet a service’s legislated obligations but to pay the higher wage rates associated with the Fair Work Commission decision.

A key point to note is that the refinements Government is making is entirely in line with the flexible design of the AN-ACC funding model. We expect that the care minute allocations associated with each AN-ACC class will continue to be refined to ensure funding is aligned with care minutes and that residents receive the right level of care.

Going forward we expect changes will be based on the latest IHACPA costing study evidence of relative care time and costs between different resident types. As I mentioned before IHACPA’s current residential aged care costing study is expected to be completed in the 2024-25 Budget.

So what does this mean in practical terms? First, the care minute adjustments will not affect the current sector requirement to deliver an average of 200 care minutes per resident per day nor the implementation of an increase to 215 care minutes from 1 October 2024.

Second, most services will see very small changes if any to their service level care minute responsibilities because quarterly care minute targets are averaged across all residents in a service which means that any increases to care minutes for higher needs residents will generally be cancelled out by care minute decreases for those with lower care needs.

The changes also mean that services with a higher proportion of lower care needs residents will see a decrease to their care minute targets and in effect be able to meet their care minutes responsibility by delivering fewer care minutes than what they are at present ensuring these services remain viable and accessible by not requiring them to deliver care time that is not in proportion to their care funding.

On the other end of the scale although services with more residents with higher care needs, that is higher AN-ACC classes, will need to deliver on average more care time from 1 October this year they will also receive the biggest increase in funding as a result of the increase to the AN‑ACC price as I outlined in previous slides.

Overall the changes ensure better targeting of care minutes and the care workers who deliver them to where care is needed most to meet all residents’ needs while achieving more efficient use of in demand skilled workers. In terms of how the changes will impact star ratings overall care minute targets based on the revised care minute allocations will be used for the staffing star rating component from the December quarter. That is from October to December 2023. The existing care minute targets will be used for the staffing star rating up until this period.

As the staffing star rating is determined by the extent of services meeting their care minute targets within a specified range the rating for the vast majority of providers is unlikely to be impacted particularly if staffing arrangements are adjusted accordingly.

Now I mentioned that the changes take effect in five months from 1 October to coincide with the care minutes responsibility becoming mandatory. To help with your planning and rostering please check out our online AN-ACC funding and care minutes estimator on the Department’s website to estimate your care minutes responsibility from 1 October 2023. Again you can find the estimator by going to our website or by using the QR code which you saw in an earlier slide. Don’t worry if you didn’t get a chance to scan it before. We will show this again at the end of this presentation along with the links to other AN-ACC and care minute resources.

I want to also mention that changes will be made to allow providers to access their actual service level care minute targets two weeks before a quarter starts rather than the current practice of within two weeks after the quarter starts.

This is consistent with the principles of natural justice and that we are making this change to ensure that providers have certainty about what their target is before the quarter begins. It will also assist you to plan your staffing needs to meet the responsibility ahead of time. This change will take affect from the December quarter. That is the period from October to December 2023. Meaning that from around mid-September through the My Aged Care Service and Support Portal you will be able to access your December quarter care minute targets.

What this means is that from this point calculations for care minute targets will be based on the AN-ACC classes for residents that were in care during the three months immediately prior to the care minutes calculation.

To help explain what I mean the diagram on this slide hopefully provides a clear picture on how we will calculate targets for the December quarter. As you can see the calculation period will be based on the AN-ACC classifications for the service’s actual resident case mix for the months of June, July and August. The resulting care minute targets, for example 190 total care minutes per resident per day including 37 RN minutes, will be available on the My Aged Care Service and Support Portal by mid-September.

The service will then need to deliver on these care minute targets at the service level of all residents that are in care during the October to December period.

Using the target of 190 care minutes per resident per day as an example the total amount of minutes that must be delivered at the service level during this period can be determined by multiplying that target by the number of occupied bed days.

Again, what the service will deliver is at the service level, not that each resident receives the same number of minutes as everyone has different care needs and therefore requires a different amount of care time.

One last comment before I wrap up the presentation as we’ve been asked many times, is that any changes to a service’s resident case mix during the target delivery period will not impact on the care minutes responsibility for that period. That is – and using the example in this slide again – the target remains at an average of 190 minutes per resident per day irrespective of any changes to the service’s resident case mix. This is to ensure that services have certainty about the specific targets they are required to meet.

So that completes the presentation for today. Look we have a little bit of time left, ten minutes to open up for the Q&A session. Just quickly you can lodge your questions in the Slido box on the bottom right hand of your screen. And also very quickly just to reiterate I can’t answer detailed questions around IHACPA’s pricing methodology given that that information was provided to Government in the Budget context and has not been yet made public. However as I mentioned at the start please send those questions through as we will try to answer them when the timing is appropriate.

But let’s get into the first question.

Okay. So I think the first question here, I’ll just read it out for everyone.

Q: Why have adjustments for care minutes been made based on care costs? Shouldn’t adjustments be made based on care need?

So look that’s a good question and I think the most important point to make I guess in answer to this question is that time equals money, therefore care costs reflect care time. And just to go into that in a little bit more detail AN-ACC class funding is based on costing studies from the RUCS and that reflects the relative care required for each AN-ACC class. We have better aligned care minutes or the care costs with the AN-ACC funding and as a result this ensures that care time is based on care need.

And look I just want to I guess take the time to reiterate as we went through in the presentation a better allocation of care minutes will ensure each AN-ACC classification’s funding and care time or costs are in similar proportions across the AN-ACC classes.

This will also avoid cherry picking of residents which we have been made aware of that some in the sector are undertaking and importantly ensure providers are funded to deliver the 15% wage increase as required by the Fair Work Commission.

So just moving on to the next question and once again I’ll read that out. Emma I think this one’s for you.

Q: Are public sector facilities under the nurse and midwives award eligible for this increase?

Emma Gleeson:

Thanks Mark. And I think this question relates to a state-based award rather than the federal nurses award. So the Fair Work Commission decision relates to the Aged Care Award, the Nurses Award and Schedule E of the Social Community Home Care and Disability Award. So that’s where the legal requirement to increase wages by 15% comes from. However the Government will provide funding through an increase to the AN-ACC price for all residential aged care providers which will cover the 15% increase for the direct care workers covered under the federal awards. But the funding does cover those employed under different awards, different state‑based awards, and as I said earlier it’s the Government’s expectation that all the funding we provide for wages is passed through to the workers taking into account on costs, and that’s whether those workers are on an enterprise agreement, on a relevant federal award or another state-based award. Thanks Mark.

Mark Richardson:

Thanks Emma. Once again just moving on to the next one and I think this one’s for me. I’ll read it out again.

Q: Can you clarify if AN-ACC continues to cover costs for hotelling? If not how is indexation being taken into account here?

Okay. Look the short answer to this is no. With the removal of the former Basic Daily Fee supplement from AN-ACC, AN-ACC no longer provides funding for hotelling. So look I think as I went through in the presentation a key reason for this is that Government has been keen to make a very clear delineation or distinction between the different funding buckets. That is AN-ACC funding is for care costs such as care wages, allied health and medical consumables including administration costs relating to the delivery of care. And just to outline hotel funding, I guess hotel funding is for hotel costs such as cleaning, gardening and catering.

And to go into I guess the indexation component of that question these costs are covered by the Basic Daily Fee or the BDF which is set at 85% of the single basic age pension. This means that the BDF increases in line with the age pension indexation process which occurs twice a year in March and September. And I guess just to reiterate since we’re talking about the hotelling supplement, or sorry the BDF I should say, the hotelling supplement itself has been provided in recognition that there are additional costs in this space over and above the BDF payment.

Okay. The next question and I’ll answer this one as well but I’ll read it out as I have been with the others.

Q: Why has AN-ACC been used to fund the Fair Work Commission wage rise?

So look that’s a great question. Look the short answer is the calibration between AN-ACC funding and care minutes. And we went through some detail in the presentation around this. That calibration effectively ensures that there’s a right distribution of AN-ACC funding to facilities to not just deliver those care minutes but also deliver the Fair Work Commission wage increase. Noting that care minutes are linked to registered nurses, enrolled nurses, nursing assistants and personal care workers.

But just to extend on this the hotelling supplement has been set up – and I probably should have mentioned this in the previous question – that’s been set up to pay for the higher wages for head chefs and cooks. Specifically I guess the hotelling supplement is the same per bed per day across facilities and it’s not distributed as per the AN-ACC funding model does. So it’s far more suitable for those non-care workers such as the head chefs and cooks and also establishes a mechanism to fund other non-care professionals should the Fair Work Commission make decisions in that space in the future.

The next question, and Emma I think this one’s for you.

Q: What is the expectation from Government regarding passing on the work value case funding to staff paid over the award?

Emma Gleeson:

Thanks Mark. And hopefully I covered this in the presentation but just to be clear to remove any risk of doubt, but anyone who pays above the award through an enterprise agreement or an individual contract the expectation is that you will use all available funding provided by Government to continue to pay above the award. As I said earlier we’re working with the unions and peak bodies to provide guidance on the expectations and we hope to get that out shortly. It’s all available funding needs to be passed on.

Thanks Mark.

Mark Richardson:

Thanks Emma. Look I’m jumping around a bit here but given that we’ve only got a couple of minutes left I think another question here that’s probably important in the context of the Fair Work Commission decision for you Emma again.

Q: When will there be a pay rise for cleaners and administration staff?

Emma Gleeson:

So we can’t really speculate on timing. That’s up to the Fair Work Commission. So they’re commencing what is called stage 3 of the work value case in aged care and so that will consider both further increases for direct care staff and the other support staff including the cleaners and the administrative staff. We’ll keep providers updated on the progress of the case.

Mark Richardson:

Great. Thanks Emma. Look I think we have time for one more question, one last question. It’s pretty detailed but I think it’s good to answer this one.

Q: When the AN-ACC starting price of $216.80 was announced the Department said the average funding would be $225 per resident per day in 22-23. Why is current funding less than this, ie $223 per resident per day?

Well first of all that’s very observant and that is correct. We did forecast $225. I guess the first part of that answer is I think the forecast was pretty accurate at the end of the day. $223 isn’t too far off. But the specific reason for why it’s slightly less than what we were forecasting is that I guess the AN-ACC classification results have been slightly different to what we were forecasting in that acuity is slightly lower. Because acuity is lower or the AN-ACC classes on average are slightly lower the average funding per resident per day is also lower, namely the $223. But I think it’s also important to point out that care minutes targets have also been slightly lower because all of this has calibrated as we’ve gone through so that there’s been I guess an adjustment in that space as well compared to what was originally forecast.

Look we’re right at the end now so I think we’ll have to take all the other questions and answer them on our website as I said before. Look very quickly I guess there’s some links here on this website and also QR codes. So please scan those and access further information if you would like it over and above today’s webinar. But I just want to put in a plug for the fact that we’re doing another webinar at the beginning of June on the 24/7 RN responsibility so please I guess keep an ear out for that. We’d love you to attend so that you understand what’s happening in that space.

And just very lastly before we finish up can you please complete that survey that we mentioned at the start. But thank you for your attendance. Much appreciated.