EXPLANATORY STATEMENT
Issued by the authority of the Minister for Ageing
Aged Care Act 1997
Residential Care Subsidy Amendment Principles 2009 (No. 1)
The Aged Care Act 1997 (the Act) provides for the 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 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 set of Principles made under the Act is the Residential Care Subsidy Principles 1997 (the Residential Care Subsidy Principles).
The purpose of the Residential Care Subsidy Amendment Principles 2009 (No. 1) (the Amending Principles) is to make consequential amendments in line with changes made to both the Act and the Social Security Act 1997 which are due to take effect on 20 September 2009. The Amending Principles are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
On 20 September 2009, the Australian Government is increasing the rate of the basic age pension to ensure that older Australians receive enough income to keep pace with the cost of living. People in residential aged care make a contribution to their cost of living (for example, food, cleaning and utilities) through payment of a fee to the residential aged care service provider - the standard resident contribution. The maximum amount of standard resident contribution is set out in the Act and is directly linked to the basic age pension amount (currently 85 per cent of the basic age pension).
To enable the appropriate and equitable flow of pension increase to both the care recipient and the approved provider, amendments to the Act ensure that pensioners in aged care benefit from the increased pension, as well as providers of the residential aged care service.
People on fixed incomes who do not benefit from the pension increase are protected from paying higher fees in aged care. Aged care residents who are in care on 19 September 2009, and who are self funded retirees or part pensioners for whom the pension increase is less than the planned increase in the standard resident contribution, will be protected and remain on their existing fee rate until they leave care. Newly entering residents (on or after 20 September 2009) who are self funded retirees or part pensioners who do not benefit from the new pension arrangements will be subject to a phased rate. These residents will initially pay the same rate as protected residents. Over four years their fees will be phased up every six months until the fees are equal to 84 per cent of the basic age pension.
In parallel with the amendments that were made to the Act, the Amending Principles make changes to the Residential Care Subsidy Principles to ensure that cross references to the basic age pension amount operate in the same manner both before and after 20 September 2009.
Details of the amendments to the Residential Care Subsidy Principles are listed at Attachment A.
Consultation
The changes outlined in the Amending Principles are consequential to the Pension Review which engaged in an extensive consultation process, involving a series of public forums, meetings with state and territory government officials, a call for written submissions and a series of small focus groups.
Information about the changes to the Residential Care Subsidy Principles will be disseminated via print and electronic media to approved providers.
ATTACHMENT A
NOTES ON CLAUSES
Clause 1 states that the name of the Amending Principles is the Residential Care Subsidy Amendment Principles 2009 (No. 1).
Clause 2 provides that the Amending Principles commence on 20 September 2009.
Clause 3 states that Schedule 1 amends the Residential Care Subsidy Principles 1997.
Schedule 1 Amendments
Item 1
Item 1 changes the definition of ‘homeowner’ in subsections 21.3(2) and (3) of the Residential Care Subsidy Principles. Currently, one of the relevant considerations for determining whether a person is an ‘assisted’ or ‘concessional ‘resident under sections 44-7 or 44-8 of the Act is whether the person has been a homeowner for 2 years or more. Subsections 21.3(2) and (3) of the Residential Care Subsidy Principles, provide that a homeowner does not include a person if the value of the person’s interest in the home does not exceed 2.5 times the basic age pension (for concessional resident status) or 4 times the basic age pension (for assisted resident status).
From 20 September 2009, the basic age pension will increase. In the absence of any changes to the definition of homeowner this would mean that the threshold for assisted and concessional resident status would also change. This amendment therefore adjusts the definition of homeowner so that the eligibility criteria remain unchanged despite the increase in the basic age pension.
From 20 September 2009, the Principles will provide that for the purposes of determining whether a person is:
- a concessional resident - a homeowner does not include a person if the value of the person’s interest in the home does not exceed 2.25 times the basic age pension. This equates to 2.5 times the basic age pension as it existed immediately prior to 20 September 2009; and
- an assisted resident - a homeowner does not include a person if the value of the person’s interest in the home does not exceed 3.61 times the basic age pension. This equates to 4 times the basic age pension as it existed immediately prior to 20 September 2009.
Items 2 and 3
These items amend paragraphs 21.32D(2)(a) and (b) and 21.32D(3)(a) and (b) so that different multiplying factors are applied from 20 September 2009 setting the amounts to be excluded in ordinary income determinations for pre-2008 reform residents. This ensures that the arrangements for pre-2008 reform residents remain consistent before and after 20 September 2009, despite the increase in the basic age pension amount.
Items 4 and 5
These items amend the definitions of ‘the maximum pension’ (P) and ‘the social security income test free threshold’ (T) in subsection 21.32D(4). These changes are required to ensure that: the provisions operate in the same way before and after 20 September 2009; and the references to the Social Security Act 1991 within those definitions remain applicable despite changes to that Act that resulted from the Social Security and Other Legislation Amendment (Pension Reform and Other 2009 Budget Measures) Act 2009.
Item 6
Section 21.27 of the Residential Care Subsidy Principles sets out classes of care recipients eligible for hardship supplement. One of these classes is pre-2008 reform residents who do not receive an income support payment but have ordinary fortnightly income within a certain range. This range is defined by reference to a formula. Item 6 amends sub-subparagraph 21.37(1)(c)(iii)(B) to substitute the formula with a fixed upper fortnightly income limit of $1774.42. This ensures that those people who are currently part of the defined class (and are therefore eligible for hardship supplement) remain eligible after the 20 September 2009 changes.