EXPLANATORY STATEMENT
Issued by the Authority of the Minister for Ageing
Aged Care Act 1997
Amendment to the Residential Care Subsidy Principles 1997
The Aged Care Act 1997 (‘the Act’) regulates the Australian Government’s role in supporting quality aged care in Australia. One function of the Act is to determine the rules under which parties that provide aged care may operate. These parties are described as being ‘approved providers’ under the Act. There are also rules that set out how approved providers must deal with persons receiving residential care, or approved to receive residential care. These persons are often described as ‘care recipients’ and ‘prospective care recipients’. One of the areas covered by the Act relates to the payment of residential care subsidies to approved providers in respect of the care they supply to care recipients.
Background – Principles made under the Aged Care Act 1997
Subsection 96-1(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.
Subsection 96-1(2) of the Act makes any Principles made under subsection 96-1(1) of the Act disallowable instruments.
The Residential Care Subsidy Principles are one of the sets of Principles made under the Act.
Subsection 44-16(1) of the Act allows for additional primary supplements to be provided for through the Residential Care Subsidy Principles.
Context of the Residential Care Subsidy Amendment Principles 2005 (No. 1)
These amending Principles respond to recommendations made by the Review of Pricing Arrangements in Residential Aged Care, the report of which was published in May 2004. The Review recommended that additional funding should be made available to approved providers of residential care to maintain the viability of the residential aged care industry and quality of service pending medium term reform to increase efficiency. The Review also recommended that this additional funding should be introduced in such a way as to improve financial management within the industry, and to ensure that financial information was available to consumers and other stakeholders, and to allow the compilation of industry wide financial performance and staff management data for benchmarking purposes.
The Government provided additional funding of $877.8 million (over four years) in the 2004-05 Budget to approved providers, to be paid by way of a new supplement known as the Conditional Adjustment Payment (CAP). In the Budget, the Government indicated that receipt of the CAP would be conditional on an approved provider producing audited financial reports and making them publicly available, participating in a periodic workforce census and encouraging workforce training. The Government also indicated that the value of the CAP would be 1.75 per cent of the basic subsidy payable in respect of a care recipient in 2004-05 rising to 7 per cent in 2007-08, and that the need for and value of the supplement will be reviewed in 2007-08.
The Residential Care Subsidy Amendment Principles 2004 (No. 3), which commenced on 1 July 2004, gave partial effect to the Government’s announcement by allowing payment of the CAP until 30 June 2005 to approved providers of residential care, to allow consultation with the community and the industry on the form of the proposed eligibility criteria.
These amending Principles further amend the Residential Care Subsidy Principles to give effect to the eligibility criteria and to allow payment of the CAP until 30 June 2008.
Details of the amendments are set out in the Attachment.
Related Issues – Rate of payment of the CAP
Subsection 44-16(3) of the Act allows the Minister to determine, in respect of a supplement provided for in the Principles under subsection 44-16(1) of the Act, the amount of the supplement, or the way in which the amount of the supplement is to be worked out.
The Minister has determined that the amounts of CAP for a particular day are the amounts worked out in accordance with the method set out below.
1. Calculate the CAP Proportion for the particular day as follows:
(a) for a day in the financial year ending on 30 June 2005 — 0.0175 and
(b) for a day in a later financial year ending on or before 30 June 2008 — the sum of:
(i) the CAP Proportion for a day in the previous financial year; and
(ii) 0.0175.
2. Calculate the Base Amount for a particular care recipient and a particular day as follows:
The Base Amount is equal to the basic subsidy amount for the day for the care recipient as determined by Subdivision 44-B of the Act.
3. Calculate the amount of the CAP for a particular care recipient and a particular day as follows:
The amount of the CAP is equal to the CAP Proportion times the Base Amount.
Attachment
NOTES ON CLAUSES
Clause 1 provides that the amendments are to be cited as the Residential Care Subsidy Amendment Principles 2005 (No.1).
Clause 2 provides that the amendments commence on the day after they are registered.
Clause 3 amends the Residential Care Subsidy Principles 1997 as set out in the Schedule.
Clause 4 is a transitional measure that ensures that the provisions for the Conditional Adjustment Payment in the current Residential Care Subsidy Principles – those inserted by the Residential Care Subsidy Amendment Principles 2004 (No. 3) – remain in effect for an approved provider for payment periods (currently months) in the period that starts on the commencement of these amending Principles and ends immediately before 1 April 2005, when the first eligibility criteria, the workforce training criteria, comes into effect.
Schedule 1: Amendments
Items 1 to 4 insert subheadings in Part 10 of the Residential Care Subsidy Principles. The subheadings make it clearer which sections in the Residential Care Subsidy Principles apply in respect of each additional primary supplement.
Item 4 also substitutes eight new sections for the existing sections 21.26A and 21.26B in the Residential Care Subsidy Principles.
The new section 21.26A specifies that CAP is payable until 30 June 2008. CAP was previously only payable until 30 June 2005.
The new section 21.26B defines terms used in the Principles.
The new section 21.26B also sets the procedures that the Secretary of the Department of Health and Ageing (or their delegate) must follow if an approved provider applies for permission to report against different time frames than those envisaged by the Principles, namely financial years ending 30 June for the financial reporting requirement and calendar years for the workforce training requirement. This provision is a transitional measure intended to allow those approved providers who currently report for other purposes against other time frames to transfer to the new reporting timeframes. It is intended to remove these provisions in 2007.
Section 21.26C sets out the requirements for notices that approved providers are required to give the Secretary of the Department of Health and Ageing (or their delegate) with respect to their eligibility for the Conditional Adjustment Payment.
Section 21.26D specifies that the Conditional Adjustment Payment will be paid in respect of a care recipient in respect of a payment period that commences on or after the day that the workforce training eligibility criteria comes into effect if the approved provider complies with the three requirements specified in clauses 21.26E, 21.26F and 21.26G.
Section 21.26E gives effect to the eligibility requirement that approved providers encourage workforce training. The criterion requires that the approved provider encourage staff training at the residential care service that provides care to the care recipient.
The workforce training criterion also requires that the approved provider give a notice to the Secretary of the Department of Health and Ageing (or their delegate) by 1 March each year that they encouraged workforce training at the residential care service in the immediately prior calendar year and provide information on the training opportunities that they offered in the immediately prior calendar year. The first notice will be due by 1 April 2005 and will cover the period 1 July 2004 to 30 December 2004. If an approved provider supplies the notice after 1 March in a given year (except 2005) then CAP is not payable in respect of any payment period that commences on or after 1 March in that year and before the date on which the notice is supplied.
If an approved provider was not responsible for operating the residential care service throughout the previous calendar year then they are deemed to meet this criterion, as they cannot be held accountable for the availability of training during the period that they were not responsible for the operations of the service.
Section 21.26F gives effect to the eligibility requirement that approved providers prepare financial reports in accordance with the accounting standards, have those reports audited, and make the reports available, on request, to care recipients and prospective care recipients, or their representatives, and to persons or agencies authorised by the Secretary of the Department of Health and Ageing (or their delegate) of the Department of Health and Ageing. Approved providers can choose to meet this requirement either at the approved provider level or at the individual residential care service level.
The financial reporting criterion requires approved providers to produce, in accordance with the Australian accounting standards, general purpose financial reports that give a true and fair view of the financial position and performance of the approved provider (or residential care service) as though they were reporting entities within the meaning of the Statement of Accounting Concepts. Moreover, all approved providers must treat residential aged care as a reportable segment in their general purpose financial reports. Where an approved provider was only responsible for the operations of a residential care service for part of the previous financial year then they are required to prepare a general purpose financial report for the period for which they were responsible for the operations of the residential care service.
Approved providers can apply to the Secretary of the Department of Health and Ageing (or their delegate) for exemption from an accounting standard if it would be impracticable for the approved provider to comply with that standard. It also allows approved providers to seek exemption from the requirement that they treat residential aged care as a reportable segment in their general purpose financial reports on the same basis. The section sets the procedures that the Secretary of the Department of Health and Ageing (or their delegate) must follow if an approved provider applies for such an exemption. This provision is a transitional measure intended to allow those approved providers who currently prepare their financial reports on other bases time to transfer to the new reporting basis. It is intended to remove these provisions in 2007.
The financial reporting criterion also requires approved providers to have their financial reports audited by a registered company auditor. The Secretary of the Department of Health and Ageing (or their delegate), in response to an application by an approved provider, may authorise a person who is not a registered company auditor to audit the accounts if they are satisfied that the person has appropriate qualifications and experience. This is intended to deal with situations, such as in remote areas, where it may be impracticable for an approved provider to engage a registered company auditor.
The financial reporting criterion also requires an approved provider to give a copy of their audited financial report to any care recipient, or their representative, cared for by the entity to which the financial report relates who asks for a copy of the report. It also requires an approved provider to give a copy of their audited financial report to any prospective care recipient, or their representative, considering admission to a residential care service to which the financial report relates who asks for a copy of the report. It also requires an approved provider to give a copy of their audited financial report to any person or agency authorised by the Secretary of the Department of Health and Ageing (or their delegate) who asks for a copy.
The financial reporting criterion also requires an approved provider to give a notice to the Secretary of the Department of Health and Ageing (or their delegate) by 1 November each year that they complied with the financial reporting criterion in the relevant financial year. If an approved provider supplies the notice after 1 November in a given year then CAP is not payable in respect of any payment period that commences on or after 1 November in that year and before the date on which the notice is supplied.
Section 21.26G gives effect to the eligibility requirement that approved providers participate in periodic workforce censuses conducted for or by the Department of Health and Ageing. The criterion requires that the approved provider participate in a census to the satisfaction of the person conducting the census and within the timeframes specified for the census.
If an approved provider does not participate in a census within the specified time frame then they can supply their census return to the Department of Health and Ageing after the specified end date. In this case, CAP is not payable in respect of any payment period that commences on or after the specified end date of the census and before the date on which the census return is received by the Department of Health and Ageing.
If an approved provider was not responsible for operating the residential care service throughout the period covered by the census then they are deemed to meet this criterion.
Section 21.26H provides that the decisions made by the Secretary of the Department of Health and Ageing (or their delegate) in response to applications by approved providers for either permission to report against different timeframes or for exemption from particular accounting standards are reviewable decisions under the Act.