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Heath care reform – the aged care chapter

By Julie McStay25 May 2010

A summary of the progress of the review of the Aged Care Act 1997 (Cth)

Aged Care Association Australia (ACAA), with the help of Julie McStay, director and head of the aged care and retirement living team at Hynes Legal, are well under way with their joint review of the Aged Care Act 1997 (Cth) (Act).

Hynes Legal, on behalf of ACAA prepared a survey tool which was distributed in March 2010. The survey was distributed to approximately 900 approved providers as well as other industry stakeholders. Over 200 approved providers responded to the survey which closed on 16 April 2010.

The results of the survey show that the Australian aged care industry does not believe that the industry can be sustained on the current funding model. The results demonstrate that there is an urgent need for reform of the Act with up to 91% of respondents supporting legislative change.

Key areas

The survey sought industry views on four key areas of the Act which providers had indentified during the consultation phase of the review process, as being in most urgent need of reform.

Those areas are:

  • quality of care – which covers the accreditation process and the complaints investigation scheme;
  • care fees, accommodation bonds and accommodation charges;
  • the allocations process; and
  • certification.


The survey provides the data which will form the basis of a comprehensive report to be submitted jointly by ACAA and Hynes Legal to Government and to the Opposition in July 2010.

The results of the survey on all of the areas listed above will be published when the report is published but a sample of the results is detailed below:

  • 79% of respondents say that the distinction between high and low care places should be removed and approved providers should simply be allocated residential places.
  • 88% of respondents state that approved providers should be able to ask any resident who can afford to pay an accommodation bond to do so.
  • 84% of respondents state that accommodation bonds should not only be payable by low care residents.
  • 84% of respondents state that approved providers can not meet the capital expense of building new high care facilities when they are unable to negotiate the payment of an accommodation bond from all those of residents who can afford to pay a bond.
  • 84% of respondents say accommodation charges provide inadequate capital funding for approved providers to build or maintain existing facilities.
  • 90% of respondents say accommodation charges provide inadequate cash flow for approved providers to build new facilities.
  • 72% of respondents state that financial incentives for approved providers to meet concessional resident occupancy targets are inadequate.
  • 82% of respondents agree aged care providers should be able to offer extra service equivalent hotel and accommodation services in response to market demand.
  • 83% of respondents believe that approved providers should be allowed to offer residents alternative fee and bond payment methods to those currently permitted under the Act.

Next steps

The report which will be published in July 2010 will provide a series of proposed reforms to the Act which are based on industry preferences as identified from the survey results and will aim to extend the scope of the current health care reforms being considered by Government towards broadening the current aged care funding model.

The Commonwealth Government’s recent announcements in relation to proposed reforms to the health and aged care industry provide an excellent starting point for reform and Hynes Legal will also draft a submission to the Productivity Commission on behalf of ACAA, for the consideration by the Commission in its forthcoming inquiry into Caring for Older Australians.

Julie McStay of Hynes Legal who was engaged by ACAA to undertake the review of the Act and is the author of the survey said; ‘The timing of this survey and ACAA’s impending report is fortuitous as it will provide the Productivity Commission with valuable data to assist with their inquiry. The results of the survey provide up-to-date and compelling evidence of the reforms the aged care industry consider are most urgently required to ensure the ongoing viability of the sector.’

‘Without providing more funding flexibility to the sector, aged care providers will continue to struggle to provide services required by their clients. However, with carefully considered reform, revenue could be generated and services increased.’

‘Given the rapidly ageing population, the Government must acknowledge these issues and give due consideration to industry concerns and the series of reforms proposed,’ said Ms McStay.

Rod Young, chief executive officer of ACAA, said ‘The need for reform is imperative, especially given Australia’s rapidly ageing population. In order for the sector to have the ability to construct new aged care facilities, the funding model that exists under current legislation needs to change. If changes are not made, the future viability of the sector will become untenable.’

‘The overwhelming majority of aged care providers agree that the current system is financially unviable. We need to move towards a model that emphasises an additional contribution where there is the capacity for consumers to pay. The trade off for the consumer would be greater choice of hotel and accommodation services and how they could contribute towards this component of their service,’ said Mr Young.

PKF Chartered Accountants and Business Advisers, through their Seniors Living Focus team, will contribute financial analysis to the report to demonstrate that the reforms proposed are viable for providers and affordable for residents.