On 11 February 2016 the Government introduced the Aged Care Legislation Amendment (Increasing Consumer Choice) Bill 2016 (Bill) which when passed, will fundamentally change how home care services are delivered and how providers run their business. 

The Bill contains many of the key reforms proposed in the Discussion Paper issued by the Department of Social Services on 25 September 2015.

The Bill is substantially directed at:

  • reducing the regulatory burden on providers to become approved home care providers and to deliver home care services through allocated places;
  • improving flexibility for consumers of home care services; and
  • dealing with funding of home care recipients.

These reforms, if passed, will begin from February 2017.

What does the Bill propose?

The Bill proposes four key changes:

  • no more Aged Care Approvals Round (ACAR);
  • access to home care packages will be administered through the My Aged Care internet service; 
  • "unspent” funds in home care will move with the consumer and not be allowed to be kept and used by the approved provider (other than for an administrative charge); and
  • simplification of the process for becoming an approved provider for both home care and residential.

No more ACAR

Approved providers will no longer be allocated home care places. 

The home care package will be allocated to the consumer directly from a national pool giving them flexibility in choosing their approved provider. 

Funding of home care packages will no longer be allocated based on a particular location or region.  

Instead, funding will be given to care recipients assessed as ‘prioritised home care recipients’.  The assessment process may (and is likely to) be based on a computer program that will allocate funding based on the time the consumer has been waiting for care and their assessed care needs.  

This means funding could shift from place to place and as a result disturb the total amount of Government funded services within areas as opposed to the defined allocation within regions we have now.  

For many current providers of pure home care services, it may lead to the loss of business certainty and may make it more difficult to manage and plan their workforce. 

The Bill does not address whether the Government intends to increase the total number of packages but makes it clear in the explanatory memorandum that there will be a cap on the amount of funding available. 

Providers of home care services will no longer be limited by the number of places they have and can now expand their business in response to competitive market forces.  

These changes will, in our view: 

  • have a fundamental impact on the way home care providers operate their business;
  • drive a review of home care delivery models;
  • alter the culture of the existing home care industry; and
  • require larger investments.

This is a significant change as it will put the onus of funding home care directly on the care recipient and not the provider.  It will push the mindset of people seeking home care services from:

  • Home care packages are a Government subsidy available in my area to pay for my care; to
  • Home care is a bundle of services I need to pay for myself and a Government subsidy might be available to me if I am assessed as a prioritised home care recipient.

No more left overs 

As part of the move to Consumer Directed Care (CDC) the Government will link unspent subsidies to the consumer rather than allow unspent funds to remain with the existing provider, other than in relation to an agreed administration charge.  The goals of this reform are to reduce barriers to consumers changing providers and further drive competitive market forces between both existing providers and new entrants to the market. 

Though potentially damaging to providers it is in fact consistent with the overriding Government principle that home care subsidies are tax payer funded payments and should be accounted for in that manner.  The change will also assist overall Government expenditure in this area.

While providers will be permitted to retain some of the unspent funds, by way of administrative deductions, these deductions will need to be clearly disclosed to the consumer in the Home Care Agreement and be published on the My Aged Care Website. 

This change represents multiple challenges for providers and in spite of recent considerable energy being spent by providers in preparing home care agreements to meet CDC, these changes will require a further review of those agreements and a rethink of their business strategies.

The changes will mean:

  • at a basic level, providers will no longer be able to retain unspent funds, which may impact some providers’ bottom line;
  • providers will need to more carefully manage their cash-flow to ensure that sufficient funds are available to satisfy “calls” on unspent funds by new providers; and
  • any replacement “administrative” deductions will need to survive the scrutiny of the My Aged Care Website and consumer laws alongside alternative offerings;
  • a review of a provider’s ability to meet a changing Government funded customer base.

Less red tape to become an approved provider

The Government has proposed to simplify the process of becoming an approved provider and simplify the process for current approved providers to become home care providers.

This presents a real opportunity for current residential care providers to enter the home care services market.

Whilst this is good for competition, if the Government does not also increase the total number of packages offered to consumers, it may lead to excessive supply of potential providers.