EXPLANATORY STATEMENT
Issued by the authority of the Minister for Ageing
Aged Care Act 1997
Residential Care Subsidy Amendment Principles 2008 (No. 2)
The Aged Care Act 1997 (the Act) provides for the funding of aged care services. Persons who are approved under the Act to provide residential aged care services (approved providers) can be eligible to receive residential care subsidy payments in respect of the care they provide to approved care recipients.
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.
One of the sets of Principles made under the Act is the Residential Care Subsidy Principles 1997 (Residential Care Subsidy Principles).
The purpose of the Residential Care Subsidy Amendment Principles 2008 (No.2) (the Amending Principles) is detailed below. The Amending Principles are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
Residential Care Subsidy Amendment Principles 2008 (No. 1)
The Aged Care Amendment (2008 Measures No. 1) Act 2008 amended the Act to simplify, and make fairer, the fees and charges paid by residents of aged care facilities as well as the subsidy paid by the Commonwealth Government for residents who cannot fully meet their own care and accommodation costs. The Residential Care Subsidy Principles deal with eligibility for the subsidy, how it is paid, and what amount is paid.
One of the changes made to the Act (in order to give effect to the new system of aged care payments) was the creation of a new class of residents for which residential care subsidy is payable under Chapter 3 of the Act. The new class of ‘supported residents’ joins the existing classes of residents known as ‘assisted residents’ and ‘concessional residents’.
As the result of the creation of this new class, consequential changes are required throughout the Act and are also required throughout the Aged Care Principles. The purpose of Items 2 to 6, 10 and 14 in these Amending Principles is to amend references in the Residential Care Subsidy Principles to refer to this new class.
As part of the changes to aged care payments, the Aged Care Amendment (2008 Measures No. 1) Act 2008 also included a new type of supplement which is payable to supported residents – the accommodation supplement. Item 7 includes a new Part 4A in the Residential Care Subsidy Principles which specifies the matters on which different amounts of the accommodation supplement can be based.
The matters are the proportion of residents in a service that are concessional, assisted and supported residents, and whether the service meets certain building requirements. These building requirements are specified in a new Schedule 1.
The Amending Principles also make consequential changes to Parts 5A of the Residential Care Subsidy Principles to limit the matters for determining the amount of charge exempt resident supplement prescribed in 21.13B, for the purpose of paragraph 44-8A(4)(c) of the Act, to existing residents (pre-2008 reform residents). Matters for determining the amount of charge exempt resident supplement for post‑2008 reform residents are prescribed in the Act.
The Amending Principles also detail the time for assessing assets, for the purpose of paragraph 44-5B(1)(c) of the Act, to determine whether a post-2008 reform resident is a supported resident.
The Amending Principles also introduce two new primary supplements payable for eligible post-2008 reform residents and limits the existing transitional supplement to pre-2008 reform residents. The two new primary supplements are the accommodation charge top-up supplement for eligible care recipients who receive income support payments, and the transitional accommodation supplement for eligible care recipients in low-level care.
Part 13 of the Residential Care Subsidy Principles specifies, for the purpose of section 44‑24 of the Act, amounts taken to be excluded from determinations of the income of care recipients. A care recipient’s income influences the amount that the Government residential care subsidy is reduced. The subsidy reduction equates to the amount that the resident is then required to pay toward the cost of their care. This is referred to as the income-tested care fee. In order to meet the Government’s policy objective that no existing resident will pay a higher income-tested care fee as a result of the new arrangements, Item 13 provides a method for determining the amount of income to be disregarded when calculating the amount the Government care subsidy is reduced as a result of a resident’s income.
The Amending Principles also change the provision in classes of people eligible for a hardship supplement by limiting 21.37(1)(c) to existing residents (Item 15). This provision, which relates to care recipients who have a low income but are not in receipt of an income support payment, is no longer required. Under the new arrangements, care recipients in this class will be eligible for the new accommodation supplement.
Consultation
The Department of Health and Ageing undertook extensive consultation on the policy that is implemented through the Aged Care Amendment (2008 Measures No. 1) Act 2008 which amends the Act. These Amending Principles flow from these amendments.
Details of the amendments to the Principles are listed at Attachment A.
ATTACHMENT A
NOTES ON CLAUSES
Clause 1 states that the name of the Amending Principles is the Residential Care Subsidy Amendment Principles 2008 (No. 2).
Clause 2 states that the Principles commence immediately after the Residential Care Subsidy Amendment Principles 2008 (No. 1) commence. This will occur on 20 March 2008.
Clause 3 states that Schedule 1 amends the Residential Care Subsidy Principles 1997.
Schedule 1 Amendments
Item 1
This item includes a definition of new resident in the definitions in section 21.3. The definition states that “new resident has the meaning given by section 21.11B.” See Item 7 below for a description of new section 21.11B.
Item 2
This is a consequential amendment that results from the creation of a new class of residents (supported residents) for which residential care subsidy is payable under Chapter 3 of the Act.
The note in section 21.3 (definitions) provides that certain other expressions used in the Residential Care Subsidy Principles are defined in the Act. Item 2 amends the list of expressions in the note to include ‘supported resident’.
Items 3 to 6
These are consequential amendments that result from the creation of a new class of residents (supported residents) for which residential care subsidy is payable under Chapter 3 of the Act.
Section 48-3 of the Act states that non-compliance deductions may apply if conditions relating to the proportion of care to be provided to concessional residents and assisted residents and, from 20 March 2008, supported residents have not been met.
Part 3 of the Residential Care Subsidy specifies, for the purpose of section 48-3 of the Act, the circumstances to which non-compliance deductions do not apply. Items 3 to 6 include ‘supported residents’ wherever ‘concessional residents’ and ‘assisted residents’ occur in this Part.
Item 7
The Aged Care Amendment (2008 Measures No. 1) Act 2008 amended the Act to include a new subsidy payable for residential aged care, the accommodation supplement (section 44-5A of the Act). The accommodation supplement is payable in respect of supported residents in certified residential aged care services where care is not provided on an extra service basis. Paragraph 44-5A(4)(b) of the Act provides that the Minister may determine different amounts of the accommodation supplement based on matters specified in the Residential Care Subsidy Principles. New Part 4A in the Amending Principles specifies these matters.
The matters are whether the service provides residential care (other than respite care) to the specified mix of residents, and whether the service meets the building requirements.
The specified mix of residents is either:
(a) more than 40 per cent of residents receive some form of Government accommodation support, that is they are supported, concessional or assisted residents; or
(b) more than 40 per cent of post-2008 reform residents are supported residents
If a service does not meet the mix of residents in either (a) or (b) above, a lower rate of accommodation supplement is payable in respect of the supported residents in the service. The method to calculate the rate is determined by legislative instrument under subsection 44-5A(3) of the Act.
The building requirements are detailed in new Schedule 1 (see Item 16). If a service does not meet the building requirements specified in Schedule 1, a lower maximum amount of accommodation supplement is payable for supported residents in the service. The lower maximum accommodation supplement and the method to calculate the amount payable is determined by legislative instrument under subsection 44-5A(3) of the Act.
Item 8
This item amends the current provision to include supported residents in subsection 21.13(1). This is a consequential amendment that results from the creation of a new class of residents (supported residents) for which residential care subsidy is payable under Chapter 3 of the Act.
This item also amends subsection 21.13(2) to refer to the definition of new resident included in new section 21.11B. The definition of new resident is utilised in the determinations of the rate of concessional resident supplement and accommodation supplement, and excludes residents receiving care on an extra service basis. These classes of residents are excluded because, by definition, they cannot be eligible for concessional resident supplement or accommodation supplement, and therefore, do not factor into the calculation of the rate of concessional resident supplement or accommodation supplement.
Item 9
This item makes consequential changes to Part 5A to limit the matters for determining the amount of charge exempt resident supplement prescribed in 21.13B, for the purpose of paragraph 44-8A(4)(c) of the Act, to pre-2008 reform residents. These matters, which relate to the amount of concessional resident supplement, are applicable for pre-2008 reform residents only. Matters for determining the amount of charge exempt resident supplement for post-2008 reform residents, which relate to the amount of the accommodation supplement, are prescribed in the Act.
Item 10
This item is a consequential amendment that results from the creation of a new class of residents (supported residents) for which residential care subsidy is payable under Chapter 3 of the Act.
Subsection 44-10(1) of the Act, as amended, specifies that the value of a person’s assets for the purposes of section 44-5A, 44-5B (meaning of supported resident), 44‑7 (meaning of concessional resident) 44-8 (meaning of assisted resident) or 44‑8AB is to be specified in the Residential Care Subsidy Principles.
Item 10 amends section 21.14 of the Residential Care Subsidy Principles, which describes the purpose of that part, to include supported residents.
Item 11
Section 44-5B of the Act, as amended, provides the meaning of supported resident. In general, post-2008 reform residents are supported if their assets are below the maximum assets threshold determined by the Secretary under paragraph 44-5B(1)(c) of the Act at the time the resident enters residential care, or such other time specified in the Residential Care Subsidy Principles.
The amount of a resident’s assets influences whether a resident is supported, the amount of accommodation supplement that will be paid by the Government for the resident, and the maximum amount of the accommodation charge that the resident can be asked to pay.
New section 57A-8A of the Act provides that the maximum amount of the accommodation charge that a resident can be asked to pay is capped at the rate which applied when the resident first entered care and cannot increase when a resident moves between services unless the break in care between services exceeds 28 days. In the event that a resident’s assets were to increase, the resident cannot be asked to pay a higher charge than was applicable at the time the resident first entered care.
The accommodation charge can, however, decrease if the resident’s assets are lower (when reassessed) than they were when the resident first entered care. A resident can request a new assets assessment when then resident changes homes.
Item 11 of the Amending Principles inserts a new section 21.15A in the Residential Care Subsidy Principles that sets the time of the assets assessment at the time the resident entered care for the first time after 19 March 2008, or at the time that the resident moves to a new service if the residents assets have been reassessed and are lower than they were when the resident first entered residential aged care after 19 March 2008.
The assets assessment also determines the amount of the accommodation supplement paid by the Government for supported residents. Setting the time for assessing assets in this way ensures that the provider receives, as a combination of resident charges and accommodation supplements, the same accommodation payment for residents, even if residents circumstances change.
Item 12
Part 10 of the Residential Care Subsidy Principles provides for additional primary supplements for the purpose of section 44-16 of the Act. Division 3 of Part 10 provides for transitional supplements.
Item 12 of the Amending Principles introduces two new transitional primary supplements payable for eligible post-2008 reform residents and limits the existing transitional supplement to pre-2008 reform residents. The two new primary supplements are the accommodation charge top-up supplement for eligible care recipients who receive income support payments, and the transitional accommodation supplement for eligible care recipients in low-level care.
Transitional supplement
The existing transitional supplement is payable for residents who occupied a hostel or nursing home bed at the commencement of the Act, before which services were not required to be certified, or entered a service that was not certified.
Transitional supplement is payable in respect of residents who would have been eligible for concessional resident supplement, had the service been certified when the residents first entered care. However, the legislation (section 44-6 of the Act refers) requires that a service must be certified at the time the resident enters care in order for the resident to be eligible for concessional resident supplement. A resident who is already occupying a service when it becomes certified cannot become eligible for concessional resident supplement. Given this limitation, transitional supplement is payable in respect of these residents.
This limitation does not exist under the new arrangements for post-2008 reform residents. The new provisions in the Act do not prevent the payment of accommodation supplement for a supported resident once the service becomes certified, even if the service was uncertified when the resident entered.
Given the above, the Amending Principles limit the transitional supplement to pre‑2008 reform residents.
Accommodation charge top-up supplement
The accommodation charge top-up supplement is a new ‘transitional’ additional primary supplement payable for eligible post-2008 reform residents.
Subsection 44-16(1) of the Act provides that the Residential Care Subsidy Principles may provide for additional primary supplements. New section 21.25D describes the accommodation charge top-up supplement and the circumstances in which the supplement is payable. The purpose of this supplement is described below.
Certain residents who receive an income support payment have their accommodation charges capped under subsection 23.81P(6) of the User Rights Principles 1997 at a lower rate than that for residents who do not receive an income support payment. These are post-2008 reform residents who are eligible to pay an accommodation charge.
These residents are paying less in accommodation charges than the applicable maximum rate set out in step 1 in section 4 of the Aged Care (Residential care subsidy – amount of accommodation supplement) Determination 2008. Depending on the resident’s assets, the accommodation supplement will go some way (and in some cases, all the way) towards making up this gap. However, in some cases the accommodation supplement will not equal the gap between the applicable maximum rate and the maximum daily accommodation charge that can be paid by the resident. The accommodation charge top-up supplement seeks to remove any potential disadvantage to approved providers who are providing care to these residents by paying the provider the accommodation charge top-up supplement.
The method for calculating the amount of the accommodation charge top-up supplement is determined by legislative instrument under subsection 44-16(3) of the Act.
Transitional accommodation supplement
The transitional accommodation supplement is a new ‘transitional’ additional primary supplement payable for eligible post-2008 reform residents who enter care after 19 March 2008 and before 20 September 2011.
Subsection 44-16(1) of the Act provides that the Residential Care Subsidy Principles may provide for additional primary supplements. New section 21.25E describes the transitional accommodation supplement and the circumstances in which the supplement is payable.
The purpose of the transitional accommodation supplement is to smooth the introduction of the new accommodation payment arrangements (taking effect from 20 March 2008). To this end, the Australian Government will pay aged care providers the transitional accommodation supplement in respect of certain post-2008 reform residents who enter care after 19 March 2008 and before 20 September 2011 and who are eligible to pay an accommodation bond.
The amount of transitional accommodation supplement, which is determined by legislative instrument under subsection 44-16(3) of the Act, is
- For residents who enter after 19 March 2008 and before 20 September 2010, the full pensioner supplement rate ($6.64) less the amount of accommodation supplement payable for the care recipient.
- For residents who enter after 19 September 2010 and before 20 March 2011, 2/3 the rate of the pensioner supplement ($4.43) less the amount of accommodation supplement payable for the care recipient.
- For residents who enter after 19 March 2011 and before 20 September 2011, 1/3 the rate of the pensioner supplement ($2.21) less the amount of accommodation supplement payable for the care recipient.
Initially the transitional accommodation supplement will fully offset the loss of pensioner supplement and largely offset the loss of the additional basic daily fee (paid by self‑funded retirees or pensioners who have paid a ‘big bond’) for post-2008 reform low-care residents. This will allow approved providers time to adjust to the new accommodation payment arrangements.
Once the transitional accommodation payment is payable, it will continue to be paid for the entire period that the resident is in residential care. If the resident moves, and the break in residential care is less than 28 days, the same rate of the supplement will be payable in the following service.
Item 13
Part 13 of the Residential Care Subsidy Principles specifies, for the purpose of section 44‑24 of the Act, amounts taken to be excluded from determinations of the income of care recipients. A care recipient’s income influences the amount that the Government residential care subsidy is reduced. The subsidy reduction equates to the amount that the resident is then required to pay toward the cost of their care. This is referred to as the income-tested care fee.
Prior to 20 March 2008, the amount of income-tested fee payable was calculated on the basis of 25 per cent of non-pension income over a threshold amount. From 20 March 2008, the amount of income-tested fee is calculated on the basis of 5/12 of all assessable income above a higher threshold. For residents who are in receipt of a means-tested income support payment, the fee calculated under the new method is the same. For the majority of other residents, the fee calculated under the new method is lower. However, for some residents with higher incomes, the fee calculated under the new method is higher.
In order to meet the Government’s policy objective that no existing residents will pay a higher income-tested care fee as a result of the new arrangements, Item 13 provides a method for determining the amount of income to be disregarded when calculating the amount the Government care subsidy is reduced as a result of a resident’s income. The outcome is that, once the determined amount of income is disregarded, the income-tested fee calculated under the new arrangements will be the same as the fee calculated under the previous arrangements.
New section 21.32D provides that the section applies to pre-2008 reform residents (subsection (1)) and provides calculations based on the amount of the resident’s income, the maximum basic pension, the maximum pension and the social security income test free threshold (subsections (2) and (3)). These expressions are defined in new subsection (4).
New subsection (2) provides the calculation for residents receiving pensions because of blindness and new subsection (3) provides the calculation for all other pre‑2008 reform residents. Different calculations are provided because different thresholds applied to these classes of residents under the pre 20 March 2008 arrangements.
Item 14
This is a consequential amendment that results from the creation of a new class of residents (supported residents) for which residential care subsidy is payable under Chapter 3 of the Act.
Part 14 of Residential Care Subsidy Principles specifies, for the purpose of section 44‑29 of the Act, matters to which the Secretary must have regard in deciding whether to determine the amount of the viability supplement. One of these matters specified in subsection 21.35A(1), table, item 4, is the proportion of concessional or assisted residents. This item amends the table to also include supported residents.
Item 15
Division 1 of Part 15 of the Residential Care Subsidy Principles specifies classes of care recipients eligible for hardship supplement for the purpose of section 44-30 of the Act. Residents within these classes are automatically eligible for hardship and do not need to apply. The classes are certain residents under 21 years of age (paragraphs 21.37(1)(a) and (b)); and residents who have a low income but do not receive an income support payment (paragraph 21.37(1)(c)).
Residents with a low income, but who do not receive an income support payment, were included as a class of people to which the hardship supplement applied because they are not eligible for concessional resident supplement, as concessional resident supplement is limited to residents who receive an income support payment.
This item inserts a new provision before subparagraph 21.37(1)(c)(i) which limits eligibility under 21.37(1)(c) for hardship supplement to existing residents (pre‑2008 reform residents).
This change was made because, under the new arrangements, residents in this class are not automatically excluded from being eligible for the new accommodation supplement. This is because the accommodation supplement is not limited to residents who receive an income support payment.
Item 16
This item inserts a new schedule in the Residential Care Subsidy Principles which details the building requirements for the purpose of subsection 21.11B(3) (see Item 7).
Clause 1.1 sets out the definitions of building, Building Code of Australia, fire and safety requirements, and pre and post-end-July 1999 building.
Clause 1.2 sets out the fire and safety requirements while clauses 1.3 and 1.4 set out the privacy and space requirements for pre and post-end-July 1999 buildings respectively.
Compliance with the fire and safety and privacy and space requirements detailed in this schedule is required to receive the higher level of accommodation payments (from supplements paid by the Government and charges paid by residents).