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Department’s guidance on aged care fees prompts criticism from providers, investors


Providers question the department’s provision of new advice on the charging of additional fees in residential care, but consumers welcome the clarification.

The government has taken a backwards step on its reform agenda to shift aged care to a market-based system by issuing new rules around the charging of additional services in residential care, providers say.

Recent advice issued by the Department of Health on the charging of additional service fees has been criticised by many providers and was perceived by investors as further evidence the sector’s funding streams were unreliable.

The department said it was issuing the advice as it had become aware that “an increasing number of providers” had been charging or were proposing to charge additional services fees, including so-called capital refurbishment fees and asset replacement contributions (read the department’s guidance here).

On Monday financial services firm Patersons issued a research note saying it believed the department had misapplied its own legislation and was confused about the policy outcomes it was attempting to achieve.

“On top of the payroll and dementia supplement cuts and the proposed ACFI changes, why is this happening now? Although there have been consumer complaints about fees, these should be investigated on a case-by-case basis armed with a correct understanding and application of the legislation. This does not appear to be the case,” wrote analyst Martyn Jacobs.

Julie McStay, leader of the aged care and retirement living team at Hynes Legal, said the department’s advice was very broad in nature, which was far from helpful, and went beyond what was contained in the legislation.

“The department’s guidance seems to have caused more confusion rather than clarify the situation,” she told Australian Ageing Agenda.

Where providers were supplying services that were over and above those being funded by government, those fees should be a matter between aged care providers and residents and/or their families, Ms McStay said.

“As the legislation stands, providers have flexibility to supply additional services to their residents on mutually agreeable terms. As long as the service is over and above that which has been funded by government, the resident receives some benefit, and the resident agrees to pay for the service, providers have scope to offer a menu of additional options,” she said.

‘Mixed signals’ from government

Aged care peak bodies told AAA they were concerned the government was sending mixed signals to the industry.

“On one hand, the government is encouraging a shift to a consumer-led and market-based system, but on the other hand its ongoing regulatory intervention when providers try to move in this direction is stifling investment and eroding business confidence,” said Sean Rooney, CEO of Leading Age Services Australia.

“Government is applying a broad-brush legislative approach, which is inconsistent with market-based principles,” Mr Rooney said.

Pat Sparrow, CEO of Aged & Community Services Australia, said the department appeared to be attempting to restrict how providers and consumers negotiate payment arrangements for additional services.

“ACSA does not believe the department has any legislative basis for this and argues that this area should be left to providers and consumers to negotiate in good faith,” Ms Sparrow said.

“Overall, we believe aged care reform is heading towards reduced involvement from government in dictating what choices consumers have for who provides their care and accommodation, and when and how they receive their care. We are concerned that the department’s statement overall seems contradictory to this direction,” she said.

Consumers support the clarification

However, Council on the Ageing (COTA) Australia said it supported the department’s advice, which was simply clarifying what the law provided for.

“It is not some new decision,” COTA chief executive Ian Yates told AAA.

“The matter has been raised by bodies such as COTA, and indeed by some provider representatives who believe some of the fees are not legal but are seeing them being applied. There have also been complaints to the Aged Care Complaints Commissioner and there will be lots more if the practice continues.”

Mr Yates said that COTA was of the view that “charging people for things for which they do not derive any benefit will also fall foul of the ACCC in terms of consumer law provisions.”

Government told a year ago: adviser

Paul Dwyer, an aged care financial adviser, said the government was advised 12 months ago about the first additional fees being charged to residents but that it failed to foresee the decisions taken by other providers this year to follow suit.

Mr Dwyer said the government’s role was to provide consumer protections which were vital as the decision to enter to aged care was often taken within days of a sudden event and the older person and their family often had difficulty in understanding aged care rules the fundamentals of funding future needs.

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5 Responses to Department’s guidance on aged care fees prompts criticism from providers, investors

  1. Jayne September 17, 2016 at 7:29 am #

    I find the Department’s guidance helpful given some providers are charging an additional 50% of basic daily care rate for additional services and that the only matter to be discussed between provider and resident and their family is, ‘do you wish to accept the placement (which requires you pay additional fees) or not?’ Advocating that our relative did not wish to access any of the additional services was irrelevant – our option was to pay the additional services or not accept the bed.
    Whilst the sector may have accepted we are moving toward a consumer driven market; the impact of that on individuals is difficult to accept. When consumers have to move out of area, away from spouse and community as their only choice is to pay fees + $20/day additional services or move elsewhere it feels as though the ‘choice’ we are now offering aged care consumers is unethical.
    Mr Dwyer’s acknowledgement of government role in providing consumer protection is important to this discussion, the Department’s guidance provides further detail on being charged additional services only when you access or benefit them is welcomed.

  2. Sue De Vries September 17, 2016 at 10:50 am #

    What the government could more wisely and efficiently do is let the market dictate what consumers want and can buy. Then they could use the money they save from the current inefficient and costly regulation system to a simplified licensing system – and put the rest back into services for our elders in general. A simple licensing fee would take out the complexity of the current system that the government itself cannot manage or seem to understand.

  3. Paul Versteege September 19, 2016 at 4:41 pm #

    It is crystal clear that the Capital Refurbishment Fee required when a resident opts for payment by a RAD provides no additional benefit to the resident, when a Capital Refurbishment Fee is not required where a resident opts for a DAP. It is crystal clear that the only benefit is to the provider, who prefers a DAP in the current investment climate. Price regulation and consumer protection regulation support a free market, rather than do it down.

    Paul Versteege
    Policy Coordinator
    Combined Pensioners & Superannuants Association

  4. Carmen Verne September 20, 2016 at 11:51 am #

    The government providing a consumer led direction in aged care means that consumers have more choice about their aged care. It does not mean that providers have any right to dictate which services a consumer can access. It does not give providers the right to dictate to the government that the industry should not be regulated. There is ample evidence that there is the greatest need for the frail aged to have government representation in the form of remaining the regulator of this “industry”. For profit Providers forget that aged care is a social welfare program initiated by the government for the people. Taking advantage of the vulnerability of the aged for profit is creating more and more anger in the general community. Doing the wrong thing by consumers in this area could lead to a provider’s licence to operate being terminated. So far the government has been very lenient with providers in this area.

  5. Windsor Gardener September 22, 2016 at 5:30 pm #

    I am for disclosure of fees and charges and person centred planning in aged care facilities. Proprietors of such homes have not been accountable for the funding for too long.
    It seems to me there needs to be some similarity to the National Disability Insurance Scheme (NDIS). Funding for both aged care and disability is transitioning wholly to the Federal Government from1 July 2018.

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