SMALLEY and SECRETARY, DEPARTMENT OF HEALTH AND AGEING
[2010] AATA 904
•16 November 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 904
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/0273
GENERAL ADMINISTRATIVE DIVISION ) Re QUEENIE SMALLEY Applicant
And
SECRETARY, DEPARTMENT OF HEALTH AND AGEING
Respondent
DECISION
Tribunal Miss E A Shanahan, Member Date16 November 2010
PlaceMelbourne
Decision The Tribunal sets aside the decision under review and substitutes its decision that $236,030.59 of the compensation received by Miss Smalley is to be treated as relating to future costs of provision of residential care; and that this future care commenced on 4 March 2008.
....................[signed]......................
Member
AGED CARE – residential nursing facility care – common law damages – contribution to the cost of future care – life expectancy – statutory interpretation
Administrative Appeals Tribunal Act 1975 s 37
Aged Care Act 1997 ss 44-17, 44-20, 85-8
Residential Care Subsidy Principles 1997 s 21.28
Shi v Migration Agents Registration Authority (2008) 235 CLR 286
REASONS FOR DECISION
16 November 2010 Miss E A Shanahan, Member BACKGROUND TO THE APPLICATION
1. Miss Smalley sustained a subtrochanteric fracture of the left femur on 8 April 2000. This fracture necessitated internal fixation with a plate and screw. The surgery was performed on 12 May 2000 at the Maroondah Hospital. Post-operatively, Miss Smalley developed a deep vein thrombosis and a Methicillin Resistant Staphylococcus Aureus (MRSA) wound infection with wound dehiscence (the wound fell apart). These conditions required prolonged hospitalisation and the eventual removal of the fixators. Miss Smalley’s fracture did not unite and she has been confined to bed since the original accident of 8 April 2000. She requires specialised nursing care on a residential basis at the Shepparton Aged Care Home.
2. The management of her fracture and her ongoing needs for high-level nursing home care has been complicated by morbid obesity, a longstanding anxiety disorder, Paget’s disease of the bone, osteoarthrosis of the right hip with avascular necrosis of the femoral head, recurrent chest infections and a cerebrovascular accident (stroke) which occurred in October 2007.
3. Miss Smalley made a claim for negligence against the surgeon and the hospital treating her left femur fracture. On 4 March 2008 this claim was settled for $1,100,000. The settlement did not provide apportionment for future care. Following the payment of legal costs and medical expenses already incurred, the net amount available to Miss Smalley was initially estimated to be $757,950.91. After a review of other costs, this amount was reduced to $535,738.94.
4. Miss Smalley is required to contribute to the provision of her care in the Shepparton Aged Care Home. The amount of her contribution has been calculated on Australian Bureau of Statistics (ABS) figures, based on her age and life expectancy. Her life expectancy has been reduced due to her co-existing chronic illnesses.
5. On 9 September 2008 the delegate of the Secretary of the Department of Health and Ageing (the Secretary) determined that, pursuant to s 44-20 of the Aged Care Act 1997 (the Act), $487,217.69 of the damages awarded to Miss Smalley related to expenses to be incurred in respect of her residential care.
6. The Secretary reconsidered that decision. She set it aside and made a new decision on 23 December 2008, which reduced Miss Smalley’s contribution to the cost of her residential care to $466,280.02.
7. On 13 January 2009 Miss Smalley applied to the Administrative Appeals Tribunal for a review of the decision of 23 December 2008. The basis for this application was the same as that leading to the reconsideration of the decision of 9 September 2008, namely that:
· the determination did not consider the proportion of liability accorded to Miss Smalley in the settlement of her common law action based on a 50 per cent loss of chance of a successful outcome for the treatment of her fractured femur;
· the delegate failed to take into account other expenses for which Miss Smalley would be liable, including occupational therapy, physiotherapy, activities of daily living requisites and complementary attendant care in a nursing home; and
· the delegate failed to make provision for general damages for pain and suffering and loss of enjoyment of life.
8. Dr Ron Scholes and Dr Stephen Campbell, Geriatricians, have assessed Miss Smalley at different times during the past four years. Initially, Miss Smalley sought their opinion in relation to the care she required and earlier assessments provided by Michelle French and Associates prior to the common law action. Dr Scholes and Dr Campbell thought these earlier estimates were excessive, probably because they had been prepared on the presumption that Miss Smalley may wish to remain at home rather than in an aged care facility. They recommended various modifications to the required care.
9. On 20 September 2007 Dr Scholes advised that Miss Smalley, then aged 69 years, had a life expectancy of 17.7 years according to the ABS. In light of Miss Smalley’s immobility, morbid obesity and the need for permanent urinary catheterisation, Dr Scholes reduced her life expectancy by 20 per cent to 14.2 years. Dr Scholes reconsidered Miss Smalley’s position on 3 July 2010 and provided a report to her legal representatives on 9 July 2010. Since his review in September 2007, Miss Smalley had required hospitalisation for a cerebrovascular accident in October 2007 and had experienced episodes of respiratory infection. On examination, he believed she was in atrial defibrillation. Dr Scholes revised his previously estimated life expectancy of 14.2 years to less than five years.
10. The Secretary asked Dr Campbell to reassess Miss Smalley and he saw her on 1 November 2009. In his report of 6 September 2010, he determined that in view of Miss Smalley’s co-existing diseases, the occurrence of a stroke in 2007 and pneumonia in the same year, Miss Smalley’s life expectancy was decreased from the 16.8 years as quoted by the ABS for a 72-year old woman to five and a half years. He reduced Miss Smalley’s life expectancy by 33 per cent due to her obesity. He further reduced Miss Smalley’s life expectancy by 50 per cent due to her immobility and stroke. He reduced the effect of the stroke on her life expectancy because three years had elapsed since that event. Dr Campbell concluded his report with the statement that:
Overall, I estimate that Ms Queeney [sic] Smalley has a life expectancy of 5 years from the date of this report.
At the request of the Secretary, Dr Scholes also commented on Dr Campbell’s report. On 13 September 2010 he wrote:
I have read this report and agree fully with the conclusion.
11. In light of the report from Dr Scholes and Dr Campbell, the Secretary recalculated the cost of providing future residential care. The new calculation began from the settlement of Miss Smalley’s claim in negligence or loss of chance on 4 March 2008, based on a life expectancy of seven years and six months. The Secretary accepted most of the costs incurred prior to settlement, including the legal costs and the additional services costed by Dr Campbell in his report of 18 December 2009. This resulted in Miss Smalley having an amount of $535,738.94 left to her credit.
12. The Secretary also accepted that Miss Smalley’s contribution to her care should be calculated on a daily amount of $78.07, which is the difference between the high and low care subsidy. The Secretary has accepted the report Dr Campbell that Miss Smalley would have required low-level care regardless of her incapacitating left femoral facture. Miss Smalley’s required contribution to her care over a period seven and a half years was calculated at $236,030.59.
THE HEARING
13. Mr Mark Goldblatt, instructed by Rogers and Every Lawyers, appeared for the Miss Smalley and Miss Fiona McKenzie, instructed by DLA Phillips Fox, appeared for the Secretary. The Tribunal was provided with documentation filed in accordance with s 37 of the Administrative Appeals Tribunal Act 1975 (Exhibit R1) and the parties tendered further documentation. The following documents were tendered on behalf of Miss Smalley:
· the report of Dr Stephen Campbell dated 18 December 2009 – Exhibit A1;
· the report of Dr Ron Scholes dated 9 July 2010 – Exhibit A2;
· a document entitled Reasons For Determination - Miss Queenie Smalley being the reasons for the determination dated 9 September 2008 – Exhibit A3; and
· a letter from the Department of Health and Ageing to Doctors Campbell and Scholes requesting a joint opinion regarding Miss Queenie Smalley’s life expectancy – Exhibit A4.
The Secretary tendered:
·the calculations of Miss Smalley’s required contribution to her future care based on the life expectancy of five years from 6 September 2010 – Exhibit R2;
·the actual calculations on an annual basis repayment Miss Smalley is required to make – Exhibit R3;
·a document entitled Residential Care Subsidy – Exhibit R4;
·the basic daily resident fees of the Shepparton Aged Care Home – Exhibit R5; and
·the report of Dr Campbell and counter signed by Dr Scholes on 13 September 2010 – Exhibit R6.
RELEVANT LEGISLATION
14. Section 44-17 of the Act provides for reductions in the residential care subsidy stating that:
The reductions in subsidy for the care recipient under step 3 of the residential care subsidy calculator in section 44-2 are such of the following reductions as apply to the care recipient in respect of the *payment period:
(a) the extra service reduction (see section 44-18);
(b) the adjusted subsidy reduction (see section 44-19);
(c) the compensation payment reduction (see section 44-20).
15. Section 44-20 relates to the compensation payment reduction as follows:
(1)The compensation payment reduction for the care recipient in respect of the *payment period is the sum of all compensation payment reductions for days during the period:
(a)on which the care recipient is provided with residential care through the residential care service in question; and
(b) that are covered by a compensation entitlement.
(2)For the purposes of this section, a day is covered by a compensation entitlement if:
(a)the care recipient is entitled to compensation under a judgment, settlement or reimbursement arrangement; and
(b)the compensation takes into account the cost of providing residential care to the care recipient on that day; and
(c)the application of compensation payment reductions to the care recipient for preceding days has not resulted in reductions in subsidy that, in total, exceed or equal the part of the compensation that relates, or is to be treated under subsection (5) or (6) as relating, to future costs of providing residential car
…
(5)If a care recipient is entitled to compensation under a judgment or settlement that does not take into account the future costs of providing residential care to the care recipient, the Secretary may, in accordance with the Residential Care Subsidy Principles, determine:
(a)that, for the purposes of this section, the judgment or settlement is to be treated as having taken into account the cost of providing that residential care; and
(b)the part of the compensation that, for the purposes of this section, is to be treated as relating to the future costs of providing residential care.
Note: Determinations are reviewable under Part 6.1.
(6) If:
(a) a care recipient is entitled to compensation under a settlement; and
(b)the settlement takes into account the future costs of providing residential care to the recipient; and
(c)the Secretary is satisfied that the settlement does not adequately take into account the future costs of providing residential care to the care recipient;
the Secretary may, in accordance with the Residential Care Subsidy Principles, determine the part of the compensation that, for the purposes of this section, is to be treated as relating to the future costs of providing residential care.
Note: Determinations are reviewable under Part 6.1.
…
In this matter, the determination was made under s 44-20(5).
16. The Residential Care Subsidy Principles 1997 (the Principles) apply. Part 11, entitled Compensation Payment Reduction, specifies matters to be considered by the Secretary in exercising the powers under s 44-20(5) and s 44‑20(6) of the Act in making a determination affecting the compensation payment reduction for a care recipient who is entitled to compensation under a judgement or settlement. Sections 21.28(1) and (2) of the Principles state:
(1) The Secretary must take into account the following matters:
(a) the amount of the judgment or settlement;
(b)for a judgment — the components stated in the judgment and the amount stated for each component;
(c) the proportion of liability apportioned to the care recipient;
(d)the amounts spent on residential care at the time of judgment or settlement.
Examples of components of judgment for paragraph (b):
1. Loss of income.
2. Costs of future care.
(2)The Secretary may take into account any other matters the Secretary considers relevant, including:
(a)the amounts that are likely to be paid to or withheld by other Government agencies because of the judgment or settlement;
(b) the amounts spent on care other than residential care at the time of the judgment or settlement;
(c) the likely cost of residential care for the care recipient;
(d) other costs of care for which the care recipient is likely to be liable;
(e)the amount of the accommodation bond paid or payable by the care recipient.
SUBMISSIONS
17. Before the hearing, the parties agreed that the facts were not in dispute. The parties did not call any evidence. The parties and the Tribunal relied on the contents of the T-Documents and the tendered exhibits in relation to the facts. The issues identified were the start date of the most recent life expectancy estimate, and therefore when Miss Smalley’s requirement to pay the difference between standard (or low) and special (or high) care arises. The Applicant argued that the five-year life expectancy should operate from 4 March 2008. The Secretary argued that it commenced on 6 September 2010.
18. In her Statement of Facts and Contentions dated 11 June 2009, Miss Smalley contended that the Secretary had failed to take into account the requirement of s 44‑20(4) with respect to a settlement wherein liability had been apportioned, in determining that the amount of $466,280.12 represented the expenses of future residential care (decision of 23 December 2008). In Miss Smalley’s settlement, damages had been based on the second defendant’s liability of 50 per cent and the first defendant’s liability of zero per cent. Mr Goldblatt did not raise this contention in his submissions. Miss Smalley had also argued that the care she received in Shepparton Aged Care was not residential care.
19. Mr Goldblatt submitted that the Secretary’s determinations were inconsistent. Initially, on 9 September 2008, the determination was based on a 14.2-year life expectancy determined on 20 September 2007. The determination of 23 December 2008 was calculated on a 13.6-year life expectancy (reduced to 10 years). And lastly, a life expectancy of 7.5 years was estimated on 6 September 2010. Counsel submitted each life expectancy estimate applied from the date of settlement of Miss Smalley’s action in negligence. Mr Goldblatt contended that the term date of settlement did not appear in either the Act or the Principles.
20. Miss Smalley’s October 2007 stroke and pneumonia required hospital admission and contributed to a diminished life expectancy and her morbid obesity was long standing. Mr Goldblatt contended that the life expectancy calculation of 6 September 2010 applied prior to the date of settlement and that the Tribunal should not consider the trial of living between October 2007 and September 2010. If Dr Campbell’s and Dr Scholes’ agreed assessment had been conducted in March 2008, their estimation of Miss Smalley’s life expectancy should have been the same, namely five or less than five years.
21. Mr Goldblatt submitted that the Tribunal should find this revised life expectancy began from the date of settlement and calculate Miss Smalley’s compensation payment reduction accordingly.
22. Ms McKenzie contended that what the Secretary may or may not have done in earlier determinations was irrelevant. She urged the Tribunal to follow the decision of the High Court in Shi v Migration Agents Registration Authority (2008) 235 CLR 286, where the court found the Tribunal’s decision should be based on the circumstances prevailing at the date of the Tribunal’s own decision (per Kirby J, at [17]). The most recent evidence of Miss Smalley’s life expectancy of five years from 6 September 2010 is the agreed opinion of Dr Scholes and Dr Campbell. This translates to a life expectancy of seven and a half years from the date of settlement of her claim for damages.
23. Ms McKenzie also provided written submissions on behalf of the Secretary outlining the legislation, the facts, and the Secretary’s calculation of Miss Smalley’s future costs of residential care from 4 March 2008, being $236,030.59.
TRIBUNAL’S DELIBERATIONS
24. Miss Smalley has been bed bound and in need of high level nursing care since she underwent surgical treatment of a subtrochanteric fracture of the left femur on 8 April 2000.
25. In 2003 she commenced an action in negligence against her treating surgeon and the hospital, for damages totalling $2,308,313.21. The parties settled the claim on 4 March 2008 for $1.1 million based on expert medical evidence that Miss Smalley’s chance of achieving boney union of the fracture was only 50 per cent even if the hospital had treated the MRSA infection adequately. The settlement did not apportion the damages. Miss Smalley, a pensioner, had paid the minimal contribution to the cost of her care at Shepparton Aged Care from 23 July 2001. Having settled her claim, Miss Smalley’s future care attracted s 44-20 of the Act.
26. The Secretary accepted the medical advice that Miss Smalley would have eventually required low level care and thus the daily residential care subsidy payable by Miss Smalley was to be assessed on the difference between high and low care levels, which in March 2008 was $78.07 per day. In order to calculate the total likely cost of future residential care for Miss Smalley, the daily rate was to be multiplied by 365.25 days and by her life expectancy, with the application of a three per cent annual indexation.
27. The Secretary estimated that Miss Smalley’s balance of the settlement moneys, after the repayment of Medicare Australia, the Department of Health and Aging residential care prior to the settlement and other personal and legal costs was $757,950.91. She estimated her future residential care costs were estimated at $487,217.69 over a period of eight years.
28. The Secretary’s decision of 23 December 2008 reduced that sum to $466,280.02. The initial decision and the reconsideration took into account Dr Scholes’ estimation that Miss Smalley’s life expectancy was 14.2 years as of 20 September 2007. Although, to calculate the total future care costs, the Secretary reduced her life expectancy to 10 years, to preserve monies for Miss Smalley’s personal use.
29. The Secretary sought the opinions of Dr Scholes and Dr Campbell regarding Miss Smalley’s life expectancy by letter dated 19 August 2010. On 9 July 2010 Dr Scholes revised his earlier estimate to less than five years. On 6 September 2010 Dr Campbell provided an estimate of five years from that date. Dr Scholes agreed with this estimate on 13 September 2010. The Secretary accepted these opinions and recalculated Miss Smalley’s contribution to her care over a period of seven and a half years commencing on 4 March 2008 at $236,030.59.
30. From 4 March 2008 to the date of the hearing, 20 September 2010, Miss Smalley paid the facility $150,868.08. The facility charged Miss Smalley the full daily rate, without any subsidy. On the Tribunal’s estimations, Miss Smalley’s contribution of the balance of $86,837.49 would amount to a further two years and eight months contribution.
31. Prior to the hearing the parties agreed that the only issue was whether the most recent life expectancy estimate of five years was to begin from 6 September 2010, as clearly stated by Doctors Campbell and Scholes, or from 4 March 2008.
32. The Act does not refer to date of settlement. Section 44-20(1) clearly states that the payment period is the sum of all compensation payment reductions for days during the period … on which the care recipient is provided with residential care...
33. Miss Smalley has repaid the Department of Health and Aging the cost of her care between 23 July 2001 and 4 March 2008. The amounts the Secretary determined in the initial determination, the reconsideration, and the revised estimate following 6 September 2010 relating to future care are based on predicted life expectancy.
34. It is not the role of the Tribunal to determine Miss Smalley’s life expectancy. The estimates have varied from 14.2 years in September 2007 to 13.6 years in 2008 to five or less years in 2010. The limiting factors with respect to life expectancy, the morbid obesity, pulmonary infections and stroke, were present at the date the compensation payment reductions came into effect. The Tribunal accepts the estimate of five or less years of 6 September 2010.
35. What Mr Goldblatt has termed the Secretary’s inconsistencies in the determinations arise primarily from the variations in life expectancy predictions by expert geriatricians over the past three years and from the adjustments to the future care costs that have been made in accordance with s 21.28(2)(d) of the Principles.
36. The argument advanced in Miss Smalley’s Statement of Facts and Contentions relating to the proportion of liability apportioned to the care recipient (s 21.28(1)(c) of the Principles) is not substantiated. Similarly, the argument that Shepparton Aged Care is not able to provide high-level care is not substantiated. Section 44-20(4) of the Act relates to the care recipient’s proportion of liability and does not have effect where the compensation is paid in a lump sum. Shepparton Aged Care is accredited to provide residential care. The facility’s reports, including photographs of Miss Smalley in her adjustable bed with adjacent mechanical nursing aids, support the conclusion that she receives high-level care.
37. The Secretary has submitted that the Tribunal should reach the decision on the current evidence rather than past estimates of Miss Smalley’s life expectancy, in accordance with the High Court of Australia’s decision in Shi. In Shi the Court (Kirby, Hayne, Heyden, Crennan and Kiefel JJ) addressed the question of:
… was the Tribunal obliged to consider the facts and circumstances as they existed at the time of its own decision? (per Kirby J, at [24])
The answer is yes, provided the legislation empowering the primary decision-maker did not place a temporal limitation on the Tribunal’s powers. Kirby J noted that this has been the practice of the Tribunal for several decades.
38. Section 85-8 of the Act does not impose any statutory limitations on the review of decisions by the AAT.
TRIBUNAL’S DECISION
39. The Tribunal bases its decision on the current expert evidence that, as of 6 September 2010, Miss Smalley has a predicted life expectancy of five years. Having verified the Secretary’s calculations of the cost of future care, the Tribunal determines that Miss Smalley’s total contribution (the compensation payment reduction) is $236,030.59 and that future care commenced on 4 March 2008.
I certify that the thirty-nine [39] preceding paragraphs are a true copy of the reasons for the decision herein of
Miss E A Shanahan, MemberSigned: .............................[signed]........................................
Associate Grace HorzitskiDate of Hearing 20 September 2010
Date of Decision 16 November 2010
Counsel for the Applicant Mr M Goldblatt
Solicitor for the Applicant Mr G Thorn, Rogers & Every Lawyers
Counsel for the Respondent Ms F McKenzieSolicitor for the Respondent Ms K Robbins, Department of Health and Ageing, Legal Services Branch
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