aged care facilities – Alice Mantel

Financial reforms under the new Aged Care Act

The new Aged Care Act 2024 is expected to commence from 1 July 2025. This article attempts to explain the changes that are likely to happen in relation to residential care focusing on consumer contributions and means testing.

The intention of this major revision of the existing Aged Care Act is to:

improve the lives of older people accessing aged care services in their homes, community settings and residential aged care homes;
encourage aged care providers to deliver high-quality care.

The proposed rights-based law:

addresses approximately 60 Royal Commission into Aged Care Quality and Safety recommendations;
incorporates feedback from several public consultations about proposed aged care reforms;
responds to the Aged Care Taskforce about sustainably funding aged care into the future.

However, for most people, the most important, and not finalised, changes will relate to the expected cost of receiving care – whether that is at home or when resident in an aged care facility. The proposed changes appear to focus on the resident’s financial disclosure responsibilities and an onerous assessment process that are likely to result in a very large increase in the cost of receiving aged care services. At this stage (February 2025) the details have not yet been finalised and it is likely that more changes will be made.

Means testing reforms

The reforms consist of:

means testing the hotelling supplement which is currently paid in full by government;
abolishing the current means tested care fee and associated annual and lifetime caps;
introducing a new means tested contribution to non-clinical care, including a new daily cap on payments and a new lifetime cap;
mandatory reporting to keep residents’ means assessments current.

The no worse-off principle

A no worse-off principle will apply to everyone in residential aged care on 30 June 2025.
Existing residents retain their existing contribution arrangements for the entirety of their stay in residential care.

What will stay the same

The government will continue to fund the majority of aged care. All residents will continue to pay a Basic Daily Fee. The way different types of income and assets are assessed in the residential aged care means assessment will not change. Current financial hardship assistance arrangements will continue.

What will change

Means testing – Current means tested care fee will be abolished • Introduction of Hotelling Contribution • introduction of Non-Clinical Care Contribution • Mandatory reporting • accommodation costs • Grandparenting of fee arrangements.

Changes to means testing – A resident’s means tested amount is based on their assessable income and assets. It will continue to be the sum of their income tested amount and asset tested amount. Income and asset taper rates are changing.

Hotelling Supplement contribution – Starting 1 July 2025, the Hotelling Supplement will be means tested for new residents. Residents who can afford to pay their full accommodation costs will contribute to daily living costs such as food, cleaning, laundry and utilities.

The means test will require a contribution from residents with:

assets over $238,000, or
income over $95,400, or a combination of both.

The contribution will be up to the maximum Hotelling Supplement of $12.55 per day (20 September 2024 rates). The government will pay providers the difference.

Non-Clinical Care Contribution – The Government will fully fund all clinical care costs in residential aged care. For new residents from 1 July 2025, the new means-tested Non-Clinical Care Contribution (NCCC) will replace the Means Tested Care Fee. This contribution will be for non-clinical care costs such as bathing, mobility assistance and lifestyle activities. It will only apply to residents who can afford to pay the full Hotelling Supplement contribution.

The non-clinical care means test will require a contribution of 7.8% of assets over $502,981 or 50% of income over $131,279 or a combination of the two up to a daily limit of $101.16. It is paid until the resident has contributed $130,000 or been in residential aged care for 4 years, whichever occurs first. The government will pay the difference.

Mandatory reporting – Providers will regularly report individual refundable deposit balances. Residents will be required to report changes to their personal and financial circumstances. Residents can elect to be classified ‘means not disclosed’ and consequently won’t be asked to report financial circumstances, will not be eligible for government support with accommodation costs or Non-Clinical Care Contribution. They can later elect to complete a means assessment but this cannot be back-dated to their entry to care.

Grandparenting for current residents -The current fee arrangements will continue for residents already in care before 1 July 2025. This includes the: pre 1 July 2014 cohort and the post 1 July 2014 cohort. Individuals will be able to ‘opt out’ of their grandparented fee arrangements at any time.

Law Council calls for more action on elder abuse

The Law Council of Australia has continued to call for measures that will better protect older Australians.

“Elder abuse is insidious and more prevalent than I think any of us would like to believe,” Law Council of Australia President, Mr Tass Liveris said.

“Incidents of abuse may be physical, social, financial, psychological or sexual and can include mistreatment and neglect.

“What makes it most devastating is that the perpetrator is often someone the older person trusts and relies on, such as a family member, friend or carer.

“We must stamp out elder abuse and protect vulnerable members of our community.”

The Law Council is calling for:
• Appropriate, sustained and increased funding for specialist legal assistance and aged care advocacy services, government agencies, and relevant State and Territory tribunals that work towards reducing elder abuse.
• Implementation of outstanding priorities identified in the Australian Law Reform Commission and Royal Commission into Aged Care Quality and Safety (Royal Commission) reports and the National Plan to Respond to the Abuse of Older Persons 2019-2023, including:
• developing a new Aged Care Act which is consistent with the recommendations of the Royal Commission report by 1 July 2023; and
• ensuring that those in residential aged care facilities have legal redress to protect them from abuse, whether perpetrated by care providers (including in the use of restrictive practices) or fellow residents.

At the end of last year, the Law Council of Australia welcomed the decision by Commonwealth, State and Territory Attorneys-General to prioritise enduring power of attorney (EPOA) law reform to reduce the risk of older Australians being subject to financial abuse and looks forward to this work coming to fruition.

EPOA arrangements are intended to ensure a person’s interests are protected when they lose capacity to make decisions for themselves. However, in the absence of adequate legal safeguards, financial elder abuse by appointed decision-makers may be facilitated by such arrangements.

Law Council of Australia, 15/06/2022, https://www.lawcouncil.asn.au/media/media-releases/australia-must-address-elder-abuse

Retirement village exit rules changed

New legislation means that NSW retirement village contracts will now include a timeframe that ensures timely payments for a former resident’s exit entitlements.

These changes apply only to registered interest holders with a long-term registered lease that gives them at least 50% of any capital gain.

They do not apply to:
• registered interest holders who own a lot in a strata or community scheme village or own shares in a company title or trust village that gives them their resident right; or
• unregistered interest holders.

New retirement village laws started in January 2021. The changes reflect complaints made about how exit entitlements were previously managed and provide a timeframe for former residents to receive their exit entitlements. Summarised, the changes:
• enable residents to receive exit entitlement money before their unit sells (if the sale has been ‘unreasonably delayed’);
• provide an option for residents to fund their move into aged care by accessing part of their estimated exit entitlement money;
• ensure residents no longer have to pay ongoing charges for general services for more than 42 days after they leave the retirement village (commences on 1 July 2021 onwards).

New legislation has been introduced which affects existing and all new retirement village contracts. Previously registered interest holders had to wait until a new resident either moved into or leased their old unit before they were able to receive their share of the sale proceeds (the “exit entitlements”). This could mean that if the village operator delayed the sale of a unit after the resident left, the former might not receive their exit entitlements for anywhere between two and five years.

Under the new legislation, a registered interest holder can apply to the Secretary of the Department of Finance, Services and Innovation for an exit entitlement order directing the village operator to pay the exit entitlements to the former resident even though the unit has not sold. The order can require payment after six months for Sydney metropolitan, Wollongong and Blue Mountains residences and within one year anywhere else in NSW. This order will only be made if the village operator has “unreasonably delayed” the sale considering the time taken to refurbish the unit and whether the operator as selling agent has performed all their duties within reasonable time.

Such an application can only be made by a former resident but not their estate. If the order is made, the exit entitlement must be paid with 30 days of the order.

If the registered interest holder moves out of the retirement village into a residential aged care facility and has not received their exit entitlement, the resident may ask that the operator make one or more daily accommodation payments to the facility on behalf of the resident within 28 days of the resident’s request. As more than 60% of residents move directly into aged care, their move can be delayed if they do not have access to funds to pay the daily accommodation payments to the facility and the unit does not sell quickly. These amendments are intended to make the transfer easier for residents and family members.

For more detail, see Fair Trading website, https://www.fairtrading.nsw.gov.au/about-fair-trading/legislation-and-publications/changes-to-legislation/changes-to-retirement-village-laws

Serious Incident Response Scheme begins in aged care facilities

With the release of the final report of the Royal Commission Into Aged Care, one of its most frightening details is that in 2019-20, over 851 alleged sexual assaults were reported in aged care facilities. However, as resident-on-resident assaults for the most part go unreported, the real figure is likely “as high as 2,520, or almost 50 per week”.

Despite such high statistics, the report’s 148 recommendations make no specific recommendations as to how that issue that predominantly affects older women should be managed.

The issue is expected to be managed by an enhanced reporting system known as the Serious Incident Response Scheme (SIRS) that begins on 1 April.

The scheme requires aged care providers to identify, record, manage, resolve and report all serious incidents that occur, or are alleged or suspected to have occurred.

Aged care providers also need to have in place an effective incident management system to manage all incidents, respond to incidents, and take steps to minimise the risk of preventable incidents reoccurring. The incident management system covers a broader range of non-reportable incidents and includes incidents that involve staff or visitors.

Under the existing system, aged care providers do not have to report incidents that involve a perpetrator who has a cognitive impairment and the operators have got strategies in place because it is felt that an impaired person cannot be successfully prosecuted.

“In some cases, family members encourage their loved ones to move into residential care because they felt that it would be safer for them”, the report notes. “But, on the contrary, people living in residential aged care likely face a much higher risk of assault than people living in the community.”

Under SIRS, there is a wider range of serious incidents that are reportable than those reported under current compulsory reporting requirements. Importantly, providers will have to report incidents of abuse and aggression between consumers, including where the resident who commits the incident has a cognitive or mental impairment.

Under the SIRS protocol, aged care must report all ‘Priority 1’ incidents within 24 hours to the Aged Care Quality and Safety Commission. ‘Priority 1’ incidents include those that cause or could reasonably have caused physical or psychological injury or illness requiring some form of medical or psychological treatment. Instances of unexplained absence from care and any unexpected death of a consumer are always to be regarded as Priority 1 reportable incidents.
From 1 October 2021, all ‘Priority 2’ incidents, that is reportable incidents that do not meet the criteria for ‘Priority 1’, must also be reported within 30 days.

In addition, the SIRS requires every residential aged care service to have in place an effective incident management system – a set of protocols, processes, and standard operating procedures that staff are trained to use.

For further information, refer to the Aged Care Quality and Safety Commission website, https://www.agedcarequality.gov.au/sirs