Fees and Payments Principles 2014

EXPLANATORY STATEMENT

Issued by the authority of the Assistant Minister for Social Services

Aged Care Act 1997

Fees and Payments Principles 2014

The Aged Care Act 1997 (the Act) provides for the regulation and funding of aged care services. Persons who are approved under the Act to provide aged care services (approved providers) can be eligible to receive subsidy payments in respect of the care they provide to approved residents.

Section 96-1 of the Act allows the Minister to make Principles providing for various matters required or permitted by a Part or section of the Act.

The purpose of the Fees and Payments Principles 2014 (the Principles) is to describe some of the requirements relating to aged care payments. One type of aged care payment dealt with in the Principles is an accommodation payment. Accommodation payments are an amount of money agreed between an approved provider and a person seeking entry from 1 July 2014 to a residential aged care service, or eligible flexible aged care service, operated by an approved provider. A person can only be asked to pay an accommodation payment if they have sufficient means to be able to contribute towards the cost of their aged care accommodation. The person has the choice of paying the agreed accommodation payment as a lump sum refundable accommodation deposit, an equivalent daily accommodation payment or a combination of both. The daily accommodation payment must be equivalent to the refundable accommodation deposit, and any combination of refundable accommodation deposit and daily accommodation payment must also be equivalent to the agreed accommodation payment.

The Principles:

• require approved providers to publish the maximum accommodation payment for a room or part of a room along with a key features statement and a description of the payment options available;
• enable the Aged Care Pricing Commissioner (the Pricing Commissioner) to approve prices above the maximum amount of accommodation payment determined by the Minister; and
• provide the methodology for equivalence between refundable accommodation deposits and daily accommodation payments.

An approved provider and a resident seeking entry to a residential aged care service must agree on an amount of accommodation payment, up to the maximum amount published by the provider. The resident has 28 days after entering care to decide whether to make their accommodation payment by refundable accommodation deposit, or an equivalent amount of daily accommodation payment, or a combination. The agreed maximum amount of accommodation payment must be paid as a daily accommodation payment unless and until a refundable accommodation deposit is paid.

If an approved provider wishes to charge an amount that is higher than the maximum amount determined by the Minister, the approved provider must apply for and obtain approval for a higher maximum accommodation payment from the Pricing Commissioner. The Principles set out the matters that the Pricing Commissioner must have regard to when deciding whether or not to approve a proposed higher maximum amount of accommodation payment.

The Principles also provide for the Pricing Commissioner to give conditional approval to accommodation payments for accommodation that is yet to be built or refurbished.

The Principles are a legislative instrument for the purposes of the Legislative Instruments Act 2003.

Consultation

In 2013, significant changes were made to the Act. These changes were developed in close consultation with the aged care sector, including consumers, industry and professional bodies.

In addition to wide public consultation undertaken by both the Productivity Commission and Government as part of the development of the changes to the aged care legislation, there has been extensive consultation on the details of implementation, including the changes to accommodation payments. The objective of the consultation on accommodation payments has been to work with industry, financiers and consumers to ensure that the changes can encourage investment in residential aged care whilst remaining sustainable for residents and government.

In September 2012 the Aged Care Financing Authority (the Authority) released a public discussion paper on the methodology to govern the level (or levels) of the accommodation payments that an approved provider can levy on care recipients for entry to an aged care home from 1 July 2014, including advice on acceptable rates of return, efficiency, how the level/s of accommodation payments should be set and how equivalency between a refundable lump sum and a daily payment should be ensured.

In addition, independent consultants were engaged to provide advice on these issues. There were 38 unique responses received from this consultation. The Authority conducted a subsequent consultation on its draft recommendations on accommodation payments in November of 2012.
 

The previous Government’s announcement on accommodation payments was made on 21 December 2012 and included a requirement to publish prices and the requirement for accommodation payments above the threshold amount to be approved by the relevant Government authority (the Pricing Commissioner).

Consultation on the draft aged care reform legislation early in 2013 also resulted in feedback from industry and consumers regarding accommodation payments. Key themes regarding the accommodation payment reforms from this consultation were:

 Industry was concerned about having to set prices for accommodation following a prescribed process and having to document that process; and

 Consumers and consumer groups reacted positively to the proposals for the significant improvement in accommodation pricing fairness and transparency.

The Community Affairs Senate Committee Inquiry into the Aged Care (Living Longer Living Better) Bill 2013 provided a further opportunity for public consultation. This inquiry received 112 written submissions and conducted public hearings in most capital cities. The Committee’s report recommended that Government support providers through the transition to the new accommodation payment system by closely monitoring the impact of its implementation and by providing targeted assistance to businesses that require it.

The previous Government in its response to this inquiry agreed to closely monitor the impact of the reforms to accommodation payments and the Authority was asked to perform this function, reporting to Government monthly during the first six months after implementation then quarterly.

The previous Government released exposure drafts of the Fees and Payments Principles on accommodation payments and the Minister’s Determination of the maximum amount of accommodation payment.

Submissions received were entirely from providers and provider peak bodies, relatively few in number, generally seeking clarifications on the principles and requesting further details on the application process for Pricing Commissioner-approved prices. The key issue raised was that the prescriptive price-setting process to set prices below the threshold determined by the Minister would be excessive regulation and not proportional to the risk to consumers.

In November 2013, the Government subsequently announced that there would not be any requirement to follow or document a prescribed price setting process resulting in a significant reduction in regulatory burden compared with the original proposal.

Regulation Impact Statement

A Regulation Impact Statement (RIS) was prepared for the Principles. The RIS was approved by the Office of Best Practice Regulation (OBPR ID14985).

Commencement

Part 1 and Part 3 of the Principles commence on 31 January 2014. Part 2 of the Principles commences on 1 July 2014.

ATTACHMENT

Details of the Fees and Payments Principles 2014

Part 1 – Preliminary

Section 1 – Name of principles

This section states that the name of the Principles is the Fees and Payments Principles 2014.

Section 2 – Commencement

This section provides that Part 1 and Part 3 of the Principles commence on 31 January 2014. Part 2 of the Principles commences on 1 July 2014.

Section 3 – Authority

This section provides that the authority under which these Principles are made is section 96-1 of the Aged Care Act 1997 and sub items 26(3), (4) and (6) of Schedule 2 to the Aged Care (Living Longer Living Better) Act 2013. Schedule 2 commenced on 1 January 2014.

Section 4 – Definitions

This section defines certain terms used in the Principles.

The Act means the Aged Care Act 1997 as in force from 1 July 2014.

The approval day, for a Pricing Commissioner approved amount, means the later of 1 July 2014 and the day on which the approval of the amount takes effect.

The approval year, for a Pricing Commissioner approved amount, means the period of one year beginning on the approval day for the Pricing Commissioner approved amount or any later anniversary of that day.

An index number, for a quarter, means the All Groups Consumer Price Index number, being the weighted average of the eight capital cities, published by the Australian Statistician in respect of that quarter.

The Minister’s maximum accommodation payment amount means the maximum amount of accommodation payment that the Minister has determined under section 52G-3 of the Act.

A multi-purpose service has the meaning given by section 15.3 of the Flexible Care Subsidy Principles 1997.

A part, of a room that is intended to provide accommodation for two or more residents, means an area of the room that is intended to be occupied as personal space by one resident.

The price agreement day refers to the date the resident and the provider agree to the maximum accommodation payment.

The Pricing Commissioner approved amount means a higher maximum amount of accommodation payment (expressed as a refundable accommodation deposit amount) approved by the Pricing Commissioner under subsection 52G-4(5) of the Act.

A quarter means a period of three months commencing on 1 January, 1 April, 1 July or 1 October of a year.

A relevant service means a residential care service or an eligible flexible care service.

Certain other expressions used in the determination are defined in Schedule 1 to the Act.

Section 5 – Eligible flexible care services

This section allows multi-purpose services to charge accommodation payments. Multi-purpose services are a type of residential flexible care service.

Part 2 – Rules about charging accommodation payments

Section 6 – Application of Part 2

Part 2 sets out rules about charging accommodation payments. These rules must be complied with by approved providers of residential care services and multi-purpose services from 1 July 2014. Approved providers must also comply with other rules set out in section 52G-2 of the Act.

Section 7 – Approved provider must publish information about maximum accommodation payment amount etc.

Subsection 7(1) requires approved providers to make the following information publicly available:

• a statement describing the key features of the room or part of the room;
• the maximum accommodation payment amount, which must be expressed as a lump sum refundable accommodation deposit amount, and an equivalent daily accommodation payment amount, that the provider can charge a resident on a day for a room, or a part of a room. The method for working out the equivalent daily accommodation payment amount is provided in section 8;
• information explaining the payment options available to residents; and
• at least one example of a combination payment of part refundable accommodation deposit and part daily accommodation payment. Providers may choose any combination for the example. A provider may decide to have an example based on a person paying a quarter, a third, a half or any other amount of refundable accommodation deposit with the balance of the accommodation payment paid as daily accommodation payments.

Subsection 7(2) of this section describes what must be contained in a key features statement of a room, or a part of a room in a relevant service. The features that must be included in the key features statement include:

• the location of the service;
• a description of the quality, condition, size and amenity of the room or the part of the room and in common areas;
• the number of residents who may be provided with accommodation in the room;
• whether the room has a shared bathroom or a private ensuite;
• any specific accommodation or design features in the room or the part of the room and in common areas; and
• any additional costs associated with the room or the part of the room (such as extra service fees or costs relating to any additional care or services offered by the service) and the services offered for those costs. Where accommodation is provided, or is available, on an extra service basis, the provider is required to make publicly available the extra service fee and to describe everything included in the extra service fee in the key features statement for the accommodation.

The information described in subsections 7(1) and (2) must be:

• published on the approved provider’s website (if it has one);
• be given to the Secretary for publication; and
• be included in written material given to prospective care recipients. The information must be given to prospective care recipients before they enter into an accommodation agreement with the approved provider.

Section 8 – Equivalence between provider’s refundable accommodation deposit amount and daily accommodation payment amount – general

This section describes the method for working out the amount of daily accommodation payment that is equivalent to a given amount of refundable accommodation deposit for the purpose of publishing prices.

The provider’s daily accommodation payment amount is calculated by multiplying the Maximum Permissible Interest Rate (MPIR) by the refundable accommodation deposit amount for the relevant day and dividing this amount by 365 days. To calculate an equivalent refundable accommodation deposit amount from a daily accommodation payment amount, the daily accommodation payment amount is multiplied by 365 and divided by the MPIR.

The MPIR for the relevant day is calculated by multiplying the general interest charge (which is determined by the Taxation Administration Act 1953) for the day by the number of days in the calendar year, less three percentage points. As at 31 January 2014, the MPIR is 6.59 per cent per annum.

The section also:

• explains how to calculate the daily accommodation payment amount of a combination payment. The accommodation payment, expressed as a refundable accommodation deposit, is reduced by the amount that will be paid by a refundable accommodation deposit. It is then multiplied by the MPIR and divided by 365; and
• makes it a responsibility of approved providers to ensure that, on any day, there is equivalence between a published refundable accommodation deposit and the daily accommodation payment for a room or part of a room in a service.

Section 9 – Approved provider must not charge more than provider’s maximum accommodation payment amount

This section prohibits approved providers from charging more than the maximum accommodation payment amount for a room, or a part of a room that they have published (as at the resident’s price agreement day). However, the provider and resident may negotiate a lower accommodation payment.

Providers must also:

• comply with paragraph 52G-2(c) of the Act, which states that providers must not charge a resident an accommodation payment that is higher than the Minister’s maximum amount of accommodation payment or a higher maximum amount that has been approved by the Pricing Commissioner; and
• not accept a payment that would result in a resident paying an accommodation payment that is greater than the amount agreed to in the accommodation agreement.

Section 10 – Equivalence between provider’s refundable accommodation deposit amount and daily accommodation payment amount – for a particular person

This section requires that approved providers must ensure there is equivalence between the refundable accommodation deposit and the daily accommodation payment for a resident. The section also sets out how to calculate the equivalent daily accommodation payment amount.

The daily accommodation payment amount, for the resident, is calculated by working out the difference between the agreed accommodation payment (expressed as a refundable accommodation deposit amount) and any amount of refundable accommodation deposit paid by the resident on or before the relevant day for the room or the part of the room, multiplying this amount by the MPIR on the resident’s pricing agreement day and dividing this amount by 365 days. To calculate an equivalent refundable accommodation deposit amount from a daily accommodation payment amount, the daily accommodation payment amount is multiplied by 365 and divided by the MPIR on the resident’s pricing agreement day.

The MPIR for the resident’s pricing agreement day is calculated by multiplying the general interest charge, determined by the Tax Administration Act 1953, on the resident’s pricing agreement day by the number of days in the calendar year less three percentage points.

The MPIR used to calculate equivalence between the refundable accommodation deposit and daily accommodation payment will be fixed at the date the resident and the provider agree on the maximum amount of accommodation payment (the price agreement day).

Part 3 – Approval of higher maximum accommodation payment amount

Section 11 – Interpretation

This section provides that in Part 3 a reference to a relevant service (or a room, or part of a room in a relevant service) includes a reference to a proposed relevant service (or a proposed room, or part of a room in the service). This means that applications can be made to the Pricing Commissioner for existing accommodation and for proposed accommodation.

Applications can include any room or proposed room, any part of a room or proposed part of a room, and any service or proposed service.

Section 12 – Applications for approval to charge higher maximum accommodation payment amount             

This section enables approved providers to apply to the Pricing Commissioner for a maximum amount of accommodation payment that is higher than the maximum amount determined by the Minister.

An application:

• may be made on or after 31 January 2014, which is the commencement date for this Part of the Principles;
• must be made in writing, in a form approved by the Pricing Commissioner and accompanied by any documents specified by that approved form;
• may relate to a room or rooms, or part of a room or parts of rooms, in a relevant service. An application must not relate to more than one service;
• must specify the higher maximum accommodation payment amount for each room, or each part of a room, in the relevant service for which approval is sought. The higher maximum accommodation payment must be expressed as a refundable accommodation deposit amount. However, approved providers may specify different higher maximum accommodation payment amounts for different rooms, or different parts of rooms.

The Pricing Commissioner may request further information in relation to an application. If the provider does not give the Pricing Commissioner the requested information within 28 days of the request (or such other period specified in the request), the application is taken to have been withdrawn.

Section 12 also provides that if the Pricing Commissioner has already made a decision in relation to a room (or part of a room), another application for a higher maximum amount of accommodation payment for a room or part of a room must not be made until after four months of a decision by the Pricing Commissioner regarding that room or part of the room (a decision may be to approve or not approve a higher accommodation payment). Approved providers may, however, apply to the Pricing Commissioner for a higher maximum accommodation payment amount in respect of another room, or another part of a room, in the relevant service.

Section 13 – Decision by Aged Care Pricing Commissioner

This section:

• requires the Pricing Commissioner to consider certain factors when deciding whether to approve a higher maximum amount of accommodation payment; and
• allows the Pricing Commissioner to approve an application subject to conditions.

A note reminds readers that approved providers must not charge any residents an accommodation payment before 1 July 2014.

Factors to be considered

In deciding whether to approve a higher maximum accommodation payment for the room, or a part of the room, in the relevant service, the Pricing Commissioner must consider:

• the proposed higher maximum accommodation payment amount;
• the location of the service;
• the quality, condition, size and amenity of the room or the part of the room and in common areas;
• the number of residents who may be provided with accommodation in the room;
• whether the room has a shared bathroom or a private ensuite;
• any specific accommodation or design features in the room or the part of the room and in common areas; and
• any additional care or services included in the accommodation payment amount and offered at no additional cost to the person being provided with the accommodation. This must not include care and services that the approved provider is required to provide, as specified in the Quality of Care Principles 1997.

The Pricing Commissioner may also consider the cost of providing the accommodation and any other relevant matter. In considering the cost of providing the accommodation in an application for a proposed room or proposed part of a room, the Pricing Commissioner may consider the proposed cost of the construction or refurbishment. This does not limit the other matters that the Pricing Commissioner may consider in the cost of providing the accommodation, existing or proposed, such as financing costs.

Conditional approvals

The Pricing Commissioner may also approve higher amounts of accommodation payments for proposed accommodation, such as accommodation yet to be built or yet to be refurbished, subject to conditions that the approval not take effect until:

• the provider gives the Pricing Commissioner, in writing:

        information demonstrating the accommodation is completed and the completed accommodation is equivalent to or better than was proposed;

        information setting out the total actual cost of the completed construction or refurbishment; and

• the Pricing Commissioner is satisfied, after having regard to the above, that the completed accommodation is equivalent to or better than was proposed and that if the actual cost of the construction or refurbishment is significantly lower than the proposed cost, and if this lower cost had been the proposed cost in the application for approval, that the Pricing Commissioner would still have approved the higher maximum accommodation payment amount.

The Pricing Commissioner must decide whether he or she is satisfied of the above matters and within 28 days of receiving the information from the provider, notify the provider (in writing) of the decision. If the Pricing Commissioner is satisfied by the information, the notice of the decision to approve the higher maximum accommodation payment amount must specify the date on which the approval takes effect.

A decision not to approve a higher maximum amount of accommodation payment, because the Pricing Commissioner is not satisfied of the matters detailed above, is a reviewable decision under section 85-1 of the Act.

Section 14 – Notification of Aged Care Pricing Commissioner’s decision

This section requires the Pricing Commissioner to notify, in writing, an applicant of a decision whether or not the higher maximum amount of accommodation payment is approved. This must be done within 60 days of receiving an application. The 60 days does not include any period where the Pricing Commissioner is waiting for requested information.

If the approval does not relate to a proposed room that is subject to conditions, the notice must set out the date on which the approval is to take effect.

If the approval is for a proposed room and is subject to conditions, the notice must describe the conditions (in accordance with section 13).

Notes to the section remind the reader that:

• a decision not to approve a higher maximum amount of accommodation payment is a reviewable decision under Part 6.1 of the Act; and
• an approved higher maximum amount of accommodation payment only applies to residents who at the date of the approval had not entered into an accommodation agreement with the provider, and who enter the relevant service on or after the date of approval.

Section 15 – Duration of approval

This section provides that an approval for a higher maximum amount of accommodation payment ceases to take effect if there is a change in the location of the residential care service or at the end of four years beginning on the approval day, whichever takes place earlier.

Section 16 – Indexation of Pricing Commissioner approved amount

This section provides for the higher maximum amount of accommodation payment approved by the Pricing Commissioner to be indexed annually by the All Groups Consumer Price Index, but does not require indexation be done. Indexation may be applied by the approved provider to the approved higher maximum amount of accommodation payment from the second year of approval. The indexed price will only apply to residents entering care from the day the higher maximum amount of accommodation payment is indexed.

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Fees and Payments Principles 2014

The Fees and Payments Principles 2014 (the Principles) are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the legislative instrument

The purpose of the Principles is to describe some of the requirements relating to accommodation payments. Accommodation payments are an amount of money agreed between an approved provider and a person seeking entry from 1 July 2014 to a residential aged care service, or eligible flexible aged care service, operated by an approved provider. A person can only be asked to pay an accommodation payment if they have sufficient means to be able to contribute towards the cost of their aged care accommodation.

The accommodation payment may be expressed in the form of a lump sum, known as a refundable accommodation deposit, or an equivalent daily accommodation payment, or a combination of refundable accommodation deposit and daily accommodation payment. A person has 28 days after entering a residential care service to choose which payment option they prefer.

The Principles require approved providers to publish the maximum accommodation payment for a room or part of a room along with a key features statement and the payment options available. The Principles also enable the Aged Care Pricing Commissioner to approve prices above the maximum amount of accommodation payment determined by the Minister.

Human Rights Implications

The Principles are compatible with the right to an adequate standard of living and the right to the enjoyment of the highest attainable standard of physical and mental health as contained in article 11(1) and article 12(1) of the International Covenant on Economic, Social and Cultural Rights, and article 25 and article 28 of the Convention on the Rights of Persons with Disabilities.

The Principles promote these rights by providing consumers with increased transparency regarding accommodation payment pricing and by requiring increased accountability for approved providers to set prices that are in line with the standard of accommodation offered.

Conclusion

The Principles are compatible with human rights as they promote the human right to an adequate standard of living and the highest attainable standard of physical and mental health.

Senator the Hon Mitch Fifield

Assistant Minister for Social Services