Report on the impact of the

1 July 2014 financial reforms

on the aged care sector

Quarter ending 30 September 2015

iv

Table of Contents

Executive Summary 1

Accommodation payments 1

Access to care 2

1 Introduction 3

1.1 Overview 3

1.2 About this report 3

2 Data and methods 3

2.1 Survey of residential care providers 4

2.2 Administrative data 4

3 Accommodation payments 5

3.1 Choice of accommodation payment 6

3.2 Changes to the lump sum pool post July 2014 6

3.3 Accommodation payment by geography 7

3.4 Accommodation payment by service ownership 8

3.5 Accommodation payment by care type 9

3.6 Accommodation payment by facility size 10

3.7 Accommodation payment by provider size 11

3.8 Accommodation payment by extra service 12

4 Access to care 14

4.1 Residential care 14

4.2 Respite care 18

4.3 Occupancy in residential care 19

5 Access to Home Care 21

5.1 Home care admissions 21

5.2 Home Care occupancy by package level 22

6 Support for the sector and consumer in transition 23

List of Figures

Figure 1 Consumer choice of accommodation payment, July 2014 to September2015, Australia 6

Figure 2 Overall pool of lump sum accommodation payments held or receivable,June 2014 to September2015, Australia 7

Figure 3 Consumer choice of accommodation payment, July 2014 to September2015, bylocation 8

Figure 4 Consumer choice of accommodation payment, July 2014 to September2015, by ownership type 9

Figure 5 Consumer choice of accommodation payment, July 2014 to September2015, by care type 10

Figure 6 Consumer choice of accommodation payment, July 2014 to September2015, by facility size 11

Figure 7 Consumer choice of accommodation payment, July 2014 to September 2015, by provider size 12

Figure 8 Choice of payment, July 2014 to September2015, by extra service status 13

Figure 9 Monthly trend in the number of care recipients, July 2012 to September2015 14

Figure 10 Monthly admissions to permanent care, July 2012 to September2015 15

Figure 11 Monthly admissions to permanent and respite care, July 2012 to September2015 16

Figure 12 Monthly trends in admission to permanent residential care by state/territory, July 2013 to September2015 17

Figure 13 Trends in admission to permanent residential care by remoteness, July 2013 to September2015 18

Figure 14 Residential respite care admissions, discharges and total number of respite care residents, July 2013 to September2015 19

Figure 15 Daily average number of bed days, care days and occupancy rate, July2013 to September2015 20

Figure 16 Trends in occupancy of permanent residential care by ownership type, July 2013 to September2015 20

Figure 17 Admission trend, Home Care by level, July 2013 to September 2015 21

Figure 18 Home care occupancy trend by package level, July 2013 to July 2015 22

Figure 19 Home care occupancy trend by state, July 2013 to July 2015 23

List of Tables

Table 1 Survey coverage by service location, September 2015 7

Table 2 Lump sums value growth by service location, September 2015 8

Table 3 Survey coverage by ownership type, September 2015 9

Table 4 Lump sums value growth by ownership type, September 2015 9

Table 5 Survey coverage by care type, September 2015 10

Table 6 Lump sums value growth by care type, September 2015 10

Table 7 Survey coverage by facility size, September 2015 11

Table 8 Lump sums value growth by facility size, September 2015 11

Table 9 Survey coverage by provider size, September 2015 12

Table 10 Lump sums value growth by provider size, September 2015 12

Table 11 Survey coverage by extra service status, September 2015 13

Table 12 Lump sums value growth by extra service status, September 2015 13

iv

Executive Summary

Accommodation payments

Over the period from July 2014 to September 2015, lump sum Refundable Accommodation Deposits/Contributions (RADs) remained the preferred method of making accommodation payments, with 42% of residents opting for this choice of payment.

Consumer choice of accommodation payment, July 2014 to September2015, Australia


The estimated overall pool of lump sum accommodation payments held or receivable as at September 2015 was $21.1 billion. This brings the growth in the lump sum pool to $4.1 billion over the period from July 2014 to September 2015. Of the total lump sum pool, 59% (or $12.4 billion) was bonds held or receivable, and 41% (or $8.7 billion) was RADs held or receivable.

Overall pool of lump sum accommodation payments held or receivable, June 2015 to September2015

Access to care

As noted in earlier reports there was a marked increase in permanent admissions to residential care pre 30 June 2014, followed by a sharp decline before admissions started to gradually increase again. This was accompanied by an increase in respite admissions post 30 June 2014 which has since started to return towards trend levels. Nevertheless respite admissions still remain higher than pre 30 June 2014.

Monthly trend in the total number of residential care recipients, July 2012 to September2015

There were 34,277 admissions to Home Care in the 12 months to September 2015. Looking into the admission pattern since July 2013, data showed that the admissions to Level 2 packages peaked in June 2014 and then declined before starting to increase from December 2014. Admissions to Level4 packages peaked in July 2014 but have generally remained consistent with trend. Admissions to Level 3 packages remained stable up to December 2014, but increased following the release of the ACAR in December 2014.

Admission trend, Home Care by level, July 2013 to September 2015

1 Introduction

1.1 Overview

The reforms to aged care introduced on 1 July 2014 saw a number of significant changes.

In residential care:

·  New accommodation payment arrangements were introduced for new residents in residential care, involving the removal of restrictions on daily charges in high care and allowing residents in high care to pay for their accommodation in lump sum form. Accompanying these changes were reforms to give residents full choice over how to pay for their accommodation. New residents can now pay in lump sum form via a Refundable Accommodation Deposit (RAD), in periodic form via a Daily Accommodation Payment (DAP) or in a combination of the two.

·  Stronger means testing arrangements were introduced for new residents in residential care with a combined income and asset test now determining both means tested care fees and eligibility for Government support for accommodation costs.

In Home Care:

·  Stronger income testing arrangements were introduced for new consumers receiving Home Care Packages with the expectation that income tested care fees would now be charged uniformly across the sector.

The Government asked ACFA to monitor the impact of these changes on both providers and consumers and report regularly to Government. Monitoring activities have involved specific data collection through a survey on accommodation payments, analysis of administrative data available to the Department on admissions to residential and home care and engagement and feedback from the sector.

1.2 About this report

This report is the third quarterly report analysing data from July 2015 to September2015. Since July 2014, ACFA has provided six monthly reports covering July 2014 to December 2014, and two quarterly reports covering the period between January 2015 and June 2015.

2 Data and methods

This report uses both survey data and the Department of Health administrative data. A survey has been used to collect data specifically on choice of accommodation payment method and the changes in the lump sum accommodation payments held and receivable. The admissions and occupancy information and access to care data have been obtained from the Department’s standard administrative collection.

2.1 Survey of residential care providers

Since July 2014, a survey of residential care providers has been conducted to collect data on:

·  The number of accommodation bonds held and their value as at 30 June 2014.

·  The number of bonds/RADs held and their value at the end of the months of July 2014 to December 2014, and at the end of the March, June and September quarters of2015.

·  The proportion of RADs, DAPs and combination payment options chosen in the months of July 2014 to December 2014, and at the end of the March, June and September quarters of2015.

2.1.1 Survey description

The survey was conducted monthly from August 2014 to January 2015 covering the months of July 2014 to December 2014. The survey is now run quarterly. The first quarterly survey covered the period from January 2015 to March 2015. The September 2015 quarterly report is the third quarterly report and covers the period from July 2015 to September 2015. At the end of each quarter, every residential care provider is contacted by a survey agency to take part in the survey. The survey is completely voluntary. The survey uses a structured questionnaire to collect standard data from all residential care providers. Providers have the option of using either a hard copy questionnaire or an electronic version.

2.1.2 Response rate and estimation method

Of the 2,736 aged care services approached in September 2015, over 1,125 completed the survey for 76,350 places. This represents a 41% response rate at service and 40% at place level. When estimating total lump sum payments for the entire sector, ACFA applies survey weights to estimate the total lump sum from survey results.

2.1.3 Data quality

Less than half of all aged care services have consistently participated in the survey over the survey waves. Care should be taken when interpreting the survey estimates to represent the entire aged care resident population, as characteristics of the residents of services who responded to the surveys may be different to characteristics of the residents of services who did not respond to the surveys.

2.2 Administrative data

The data for monitoring admissions, occupancy and access to care have been obtained from the DoH administrative data. Some aged care services may not yet have lodged all potential claims, and hence there is a possibility of some under coverage for the most recent periods.

3 Accommodation payments

This section monitors the impact of the new accommodation payment arrangements. ACFA has identified two primary areas of focus for monitoring the impacts of the accommodation payment arrangements.

The first is the overall change in lump sum payments held or receivable by providers. Care recipients who would have previously entered care with an agreement to pay a lump sum accommodation bond now have the flexibility to choose how they pay for their accommodation (RAD, DAP or combination) after moving into care when they have security of tenure. If incoming residents have a preference for DAPs, this could potentially leave providers who have thin equity, where the capital infrastructure is largely funded by bonds, potentially exposed to liquidity problems if there is an outflow of lump sum accommodation payments. On the other hand, residents who would have formerly been limited to paying by periodic payment, now have the option to pay by lump sum. This is likely to see an increase in the overall amount of lump sum payments held by the sector.

The second is the overall change in the price that providers can now receive for providing accommodation. The pricing regime has been significantly deregulated. For many providers there is potential uplift in accommodation prices, particularly for those services that previously provided non–extra service high care. The new arrangements give residents entering care more transparency in what is on offer and they can use this information to better choose accommodation that suits their needs. Further, the higher accommodation supplement for new and significantly refurbished homes will provide a better return for eligible providers choosing to take supported residents.

Prior to 1 July 2014 there were concerns expressed by the sector that there would be a ‘flight from bonds’. ACFA has monitored this situation through the accommodation payment survey and by seeking feedback from the sector. Both aspects of this monitoring indicate that, at this stage, this concern has not been realised and in fact there has been a continued growth in lump sum payments.

This chapter reports the trend of consumer choice on accommodation post July 2014. Total lump sum payments; both held and receivable at the end of each quarter, and growth of the overall pool of lump sum payments, are also examined.

3.1 Choice of accommodation payment

Over the period from 1 July 2014 to 30 September 2015, lump sum Refundable Accommodation Deposits/Contributions (RADs) remained the preferred method of making accommodation payments, with more than two in five residents (42%) opting for this choice of payment. At the national level, the choices have remained fairly stable over the period between 1 July 2014 and 30 September 2015.

Figure 1 Consumer choice of accommodation payment, July 2014 to September2015, Australia

3.2 Changes to the lump sum pool post July 2014

The estimated overall pool of lump sum accommodation payments held or receivable as at September 2015 was $ 21.1 billion. Of this overall pool, 59% or$12.4billion was bonds held or receivable, and the remaining 41% or $ 8.7billion was RADs held or receivable (Figure 2).

Viewed as a trend from July 2014 to September 2015, the lump sum pool increased at an annual rate of 19%. The high rate of growth can in part be attributed to the openings of lump sum accommodation payments to non-extra service high care residents. The quarter to quarter increase from June 2015 to September 2015 was estimated at 5.3%. The total lump sum pool had risen from an estimated amount of $17 billion in June 2014 to $ 21.1 billion in September 2015, resulting in an increase in lump sums held and receivable of $4.1 billion.