Indexation delay hits the bottom line
With the annual increase of residential aged care subsidies on hold until October, questions remain over how long providers must fund shortfalls.
Questions remain over when and how residential aged care providers will receive back payments for the July-September quarter with subsidy indexation on hold until October.
While home care subsidies increased on 1 July like usual, the Residential Care Basic Subsidy – Australian National Aged Care Classification funding – and the 24/7 RN supplement won’t be updated until 1 October 2024.
The Independent Health and Aged Care Pricing Authority – which will advise the government on funding changes based on actual care costs – recommended the new timing.
The change was announced in the May federal budget and means the AN-ACC starting price of $253.82 per person per day remains, despite 1 July wage increases.
StewartBrown senior partner Grant Corderoy told Australian Ageing Agenda the new AN-ACC subsidy from 1 October should include an element to provide back payment for the next three months but it is unlikely to be in one go.
“Providers will have to fund the shortfall for the July-September period, and whilst it is likely that the new AN-ACC subsidy will include a component for the back payment, this will not be in one lump sum but paid with the AN-ACC subsidy over a period of time.”
In response to a question from AAA about when and how residential aged care providers would receive back payments for the July-September 2024 period, a spokesperson for the Department of Health and Aged Care said:
“The government will be considering proposals to continue to support the residential aged care sector as part of the 2024-25 Mid-Year Economic and Fiscal Outlook, this includes deciding on price changes that will come into effect on 1 October 2024 and their sequencing.
“Any price and associated funding changes will be informed by advice from the Independent Health and Aged Care Pricing Authority. IHACPA’s pricing advice will be based on the actual cost of care and cost increases from 1 July 2024 including the impact of Fair Work Commission decisions,” the spokesperson told AAA.
Provider peak body Aged & Community Care Providers Association supports the new timing, said general manager of policy and advocacy Roald Versteeg.
“We welcome this change as providers were experiencing challenges due to the Annual Wage Review decision being released mid-year, well after IHACPA’s pricing recommendation had been submitted to government and considered as part of the May budget process,” Mr Versteeg told AAA.
He said ACCPA worked with IHACPA and the government to identify an appropriate indexation process for workforce wages that could also account for the timing differences of IHACPA’s annual pricing recommendation and the annual wage increase.
“This way providers are not left wondering whether the Annual Wage Review will be fully funded if the wage increase included in the May budget is incorrect,” Mr Versteeg said.
However, Mark Sheldon-Stemm – chief executive officer of West Australian regional aged care provider ValleyView Residence – said it was unfair that providers had to make up the shortfall in funding.
“Once again aged care providers have to carry cost increases without government funding to match these increases,” Mr Sheldon-Stemm told AAA.
“After having around 60 per cent of real funding stripped from aged care over the past 20 years you would have thought the government would have learnt its lesson on how it should fund aged care,” he didn’t.
While still a shortfall, the period should be half as many months as last year, said Mr Versteeg, who expects pay rises will be back paid for the three-month period from 1 July, just as they were paid for last year’s annual wage review.
“At this stage, we do not expect there to be a separate payment purely to account for the 2024-25 Annual Wage Review increase,” Mr Versteeg told AAA. “What we wanted to avoid was providers having to make up the shortfall for six months, so this is an improvement from last year.”
ACCPA will observe and review the outcome, he said.
“Given the financial viability challenges in residential care, we will be monitoring our membership closely on this year’s approach to seeing full funding of wage increases, while also navigating timing issues.”
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