ACFA's Consulation Paper Changes to the Supported Resident Ratio Rules in Residential Aged

Appendix B

Consultation Paper: seeking comments on possible options for changes to the supported resident ratio rules in residential aged care.

The Government has asked the Aged Care Financing Authority (ACFA) to provide advice by 31 December 2016 on cost neutral mechanisms to ensure access to care for supported residents.

Current Arrangements

Supported residents are care recipients who have been determined by means testing to be eligible to receive Government assistance with their accommodation costs through the payment of concessional resident supplement or accommodation supplement.

There are currently two different mechanisms used by Government to promote access to care for supported residents.

Regional Ratios

All residential aged care services are required to meet the supported resident ratio for the region in which they are located.

The regional supported resident ratio is based on social-economic factors and it varies between regions from a minimum of 16 percent to a maximum of 40 percent. It is a condition of allocation of places that services within each region provide that percentage of places for residents receiving Government assistance with their accommodation costs.

The regional supported resident ratio does not apply to services that provide extra service or to the distinct parts of a service that provides extra service.

The 40 percent supported resident ratio rule

To receive the maximum amount of accommodation supplement payable for a supported resident on a particular day, the service must have more than 40 per cent of total residents (excluding extra service residents) who are classified as supported residents. If a service does not meet this ratio, then the amount of accommodation supplement paid is reduced by 25 per cent.

For example, the current maximum rate of accommodation supplement for each supported resident in a service which is newly built or has been significantly refurbished since 20 April 2012 is $54.29 per day. However, that maximum rate is reduced by 25 percent to $40.72 per day for each day that the service fails to exceed a 40 percent supported resident ratio.

The calculation of a service’s supported resident ratio takes into account all residents defined as relevant residents as per the Subsidy Principles 2014but excludes extra service places.

ACFA has analysed the efficiency, effectiveness, and appropriateness of the current arrangements in ensuring access to care for supported residents going forward, with a particular focus on whether the means testing and accommodation pricing arrangements introduced in 1 July 2014 have had a disadvantageous effect on access to care for supported residents

As part of this work, on 12 May 2015 ACFA released the Access to Care for Supported Residents discussion paper. A total of 20 submissions were received in response to that discussion paper and major themes from the submissions include:

Abolish the more than 40 percent ratio
Develop a separate funding model for rural and remote services
Open up aged care places to market forces of supply and demand
Trial the workability of a supported resident trading scheme
Retain the status quo
Retain mandatory regional ratios
Remove the exemption from the supported resident ratio obligation provided to some extra service places
Impacts of 1 July 2014 changes to aged care payment arrangements
Consider broader Government long term strategies.

ACFA has considered the submissions that were made in response to the discussion paper and has reviewed data provided by the Department of Health which shows that all regions exceeded their regional supported resident ratio in 2014-15.

That data also shows that the percentage of supported residents in residential care nationally has grown marginally in the past three years, ranging from 44.4 percent in 2012-13; 44.3 percent in 2013-14; and 46.8 percent in 2014-15. The increase in 2014-15 is not unexpected as the 1 July 2014 means testing changes increased the asset threshold for persons to be classified as supported residents.

Based on this information a number of options were developed including:

Retaining the status quo.
Removing the exemption of extra service places from both the 40 percent supported resident rule and the regional supported resident ratio.
Removing the regional supported resident ratio.
Retaining the 40 percent supported resident rule but amending the penalty regime that is applied to services that fail to exceed that ratio.
Removing the 40 percent rule and replacing it with an updated regional ratio and applying a 25 percent deduction to services for failure to meet their regional ratio.
Amending the method of applying the 40 percent supported resident rule.

On the basis that all regions are exceeding their regional supported resident ratio and the overall percentage of supported residents is increasing, ACFA considers that thetwo options with the most merit in the context of the task given by Government are:

Removing the regional supported resident ratio.
Amending the method of applying the 40 percent supported resident rule.

ACFA is seeking feedback on these two options which are set out in more detail below.

What changes are being considered?

Proposal one: Remove the regional supported resident ratio

Since the inception of a regional supported resident ratio requirement,the percentage of supported residents receiving care in most services has comfortably been in excess of the ratio that applies to that region.

Accordingly ACFA are of the view that there is not a strong case for the continuation of this requirement and this was echoed in submissions to the 2015 consultation process.

Catholic Health Australia stated:….there is little justification for continuing with regional supported resident ratios. As previously recommended by Catholic Health Australia in the context of reducing unnecessary regulation, the legislation concerning regional ratios could be repealed, with minimal - if any - impact on access.

The Salvation Army Aged Care Plus commented: The ACFA consultation paper stated that 90% of services across Australia exceeded the mandatory number of supported places required by the regional target and that 60% of serviceshad dedicated over 40% of their beds to supported residents. This suggests that there is strong competition in the market for this target group and poses the question as to whether there is a need for government to legislate mandatory ratios at all.

Therefore ACFA is intending to propose to Government to revoke the legislative requirements regarding the regional supported resident ratios requirements and no longer require services to meet them as a condition of allocation of places. This proposal is made on the basis that the regional ratio is having nil practical effect and that an amended 40 percent supported resident rule can be relied on as a cost neutral mechanism for ensuring access to care for supported residents on an ongoing basis.

Proposal two: Amend the application of the 40 percent supported resident rule

The assessment of whether or not an aged care home has exceeded a 40 percent supported resident ratio is calculated on a calendar day basis and some homes fluctuate above and below 40 percent on different days within a month.

The application of the 25 percent reduction in the amount of supplement payable can lead to a varying amount of accommodation contribution being payable by some low means care recipients on a given day. This is because the amount of the contribution cannot exceed the amount of accommodation supplement payable in the home on that day.

As stated by Benetas: A further unintended consequence is the confusing price volatility for residents….. and further…. a number of facilities …... are trading above and below the 40% threshold during any month. This variability is problematic at an operational level. These daily resident fee changes cannot be automatically updated in the business’s accounting system, so updating these variations is an additional manual process, adding to the administration load and staff cost.

Furthermore, as stated byAnglicare SA Ltd:The impact of the 25% discount to the full rate of the accommodation supplement is significant and does not reflect the proportion by which the Supported Resident Ratio obligation is not met. For example, in some facilities a fall below the required 40% may result from a loss of one client. In a regional or rural area, the ability to fill the vacancy with an eligible client in short time frame may be limited; however in the interim they may achieve a 35% ratio.

Accordingly ACFA is intending to proposeto Government that the supported resident ratio should be calculated for a service over a month to obtain an average ratio and that average ratio should be used to determine the rate of accommodation supplement that is payable for a month at a time rather than for a day at a time.

For example, under this proposal the 25 percent reduction to the rate of accommodation supplement would not be applied for any individual days in April that the service failed to exceed the 40 percent supported resident ratio if the service achieved an average supported resident ratio of more than 40 percent for that month as a whole.

If however the service did not exceed an average 40 percent supported resident ratio for April as a whole, a 25 percent reduction to the rate of accommodation supplement would be applied for that month as part of the following monthly reconciliation process.

Extending the period over which the 40 percent supported resident rule is measured and then applying the resulting rate for a month at a time would smooth out daily changes in the rates of accommodation supplement and accommodation contribution payable in services which fluctuate above and below the 40 percent ratio and will reduce the administrative burden on services and impact for residents regarding fees in those services.

What’s not changing?

The service level 40 percentsupported resident ratio will continue to operate as an incentive for aged care services to provide care to residents receiving government assistance with their accommodation costs.

As is currently the case, the supported resident ratio will not be applied to services with extra service status or to those distinct parts of a service with extra service status.

There will be no changes to the accommodation payment arrangements.

We are seeking your feedback

The consultation paper is open for comment until Friday 14 October 2016. Feedback can be sent by email

or by post to:

ACFA Secretariat

Department of Health

MDP 560

GPO Box 9848

Canberra ACT 2601