ACFA supports RC’s changes to Basic Daily Fee

The Aged Care Financing Authority’s recommendations for a $10 boost to the residential basic daily fee and an independent authority to set maximum provider fees is a step in the right direction, but it does not go far enough, an industry expert tells Australian Ageing Agenda.

Minister for Senior Australians and Aged Care Services Richard Colbeck asked ACFA in February 2020 to investigate the current and future role of the Basic Daily Fee (BDF), which is the contribution towards day-to-day living costs in residential aged care such as meals, cleaning and laundry.

In its final report, the Royal Commission into Aged Care Quality and Safety recommended the government boost the BDF by $10 and task an independent pricing authority to determine the maximum amount that providers can charges residents for their daily living contribution.

ACFA analysed three models for reform of the BDF including the status quo, the model proposed by David Tune’s 2017 Legislated Review, and the royal commission’s proposal.

It landed on the latter because it provides “the best overall balance between costs and risks,” ACFA said in the report.

StewartBrown senior partner Grant Corderoy backed ACFA’s decision of the model.

“I think it is the best option. It’s one that we’ve been advocating ourselves for a while,” Mr Corderoy told AAA.

However, there should also be full deregulation of the BDF as recommended in the Tune Review, which in effect removes additional services and provides clarity where providers can set a higher BDF for non-low means residents, he said.

“The provider would need to provide appropriate transparency – what the everyday living services comprise and why it is charged at a higher rate that the minimum BDF.

“This would ensure more clarity, consumer choice, remove much of the current compliance restrictions and allow providers to charge a competitive and commensurate fee,” Mr Corderoy said.

Having the pricing commissioner set a BDF and look at individual circumstances, homes and locations “can be quite a big ordeal,” he said.

“I feel that the Tune Review, which recommended having a maximum cap of $100 and having to get it justified was nearly there. But we would [prefer] the full deregulation of the Basic Daily Fee with all of the regulatory safeguards around it as in not charging people who can’t afford to pay so they’re not disadvantaged,” Mr Corderoy said.

ACFA’s preferred model would only provide some financial relief for aged care providers, he said.

“If we include cost of administration, providers are losing around $22 per bed per day, so this will go part way to replacing what it’s costing them to provide everyday living services,” he said. “Full financial relief would come from a deregulation.”

Other reform options

In its analysis, ACFA weighed up the pros and cons of each model including the current approach, which ensures residents pay no more than a capped amount regardless of preferences or the costs of services.

The key disadvantage of this model is that the revenue received for BDF does not cover the cost of services that are required under the Aged Care Act, ACFA said.

ACFA found an advantage of the model proposed by the 2017 Legislated Review of Aged Care is that individuals are responsible for covering their own costs of everyday living and the BDF.

But it found there is also a risk that providers could start charging a higher fee without a corresponding improvement in services offered.

This model recommends that government:

• require providers to charge the minimum BDF
• retain the cap on the value of the BDF for low-means residents
• allow providers to charge a higher BDF to non-low-means residents with amounts over $100 approved by a pricing commissioner
• require the maximum BDF be published and provided to potential residents.

ACFA’s conclusions

ACFA concluded in the report that funding arrangements for everyday living services should:

• remain separate from care and accommodation
• be predominantly funded by individuals subject to means
• continue to cap contributions for residents with lower means.

In the context of broader funding arrangements, ACFA said the government should also consider:

• including the pension and energy supplements when calculating 85 per cent of the basic pension to increase the BDF capped amount by $5 a day
• supplementing the increase in the BDF cap with a government payment to reduce the gap between everyday living income and costs
• introducing a means test on this government payment to ensure residents with financial resources continue to pay for their everyday living services.

Access ACFA’s report The role of the Basic Daily Fee in Residential Aged Care.

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