Financing Authority framework announced

The final ‘interim operating framework’ for the newly formed Aged Care Financing Authority has been released but the jury is still out on whether it will help or hinder many of the objectives of the Living Longer Living better reforms.

Above: Minister for Mental Health and Ageing, Mark Butler

By Keryn Curtis

The Interim Operating Framework for the newly formed Aged Care Financing Authority (ACFA) was released on Monday evening by Minister for Mental Health and Ageing, Mark Butler.  

The Aged Care Financing Authority is a key plank of the Government’s $3.7 billion Living Longer Living Better aged care reform package announced by the Prime Minister and Mr Butler on 20 April.

Minister Butler said in a statement that the interim framework, developed in consultation with the aged care sector, will provide some much needed certainty for aged care providers and financiers and would “allow the new Financing Authority to hit the ground running.”

“One of the very clear messages from aged care providers and financiers has been the need for certainty.  They need to know that their investment decisions rest on solid foundations to ensure we get the investment we need in residential aged care into the future.” 

 “The Aged Care Financing Authority will provide independent advice to the government on pricing and financing issues, informed by consultation with consumers, and the aged care and finance sectors,” he said.

However, aged care providers and some members of the finance sector are viewing the interim framework with more caution

National head of aged care services for the business consultancy, Grant Thornton, Cam Ansell said that the ACFA has potential for positive change if the real agenda is to transition to a more viable and sustainable industry. 

However he said the risk was that it could increase the regulatory burden on the sector.

“I accept that there is a need for transitionary arrangements in an imbalanced market to protect the disadvantaged, but this needs to be a short term pathway towards less regulation through the Financing Authority, not more,” he said.

Mr Ansell said greater price regulation and the continued inhibition of free market forces, would limit choice for consumers, investment from providers, and affordability for the Australian taxpayer, working against many of the stated objectives of the Authority. 

“A heavy hand on accommodation and service pricing would prolong the capital strike and limit access to services for the aged,” he said.

CEO of Aged and Community Services Australia, Adjunct Professor John Kelly, said there remained concerns that price regulation by ACFA for accommodation payments for all aged care residents has the potential to discourage future investment in aged care homes. 

“Some aged care providers have already put new developments on hold given the uncertainty this raises,” he said.

Professor Kelly said it was also essential that the operations and recommendations of ACFA are genuinely independent and transparent if decision-making is to be informed by credible analysis of aged care service costs.

The Aged Care Financing Authority comprises and independent chair, Lynda O’Grady, and deputy chair, Graeme Hugo, and representatives from consumer, union, provider and investment groups. AAA reported on the membership make-up of ACFA last week, with the news story, Two steps forward in aged care reform.  AAA has previously reported on the consultation process for the draft interim operating framework, with the 1 June story entitled, In good faith.

The inaugural meeting of the Authority is on Thursday 9 August. The Interim Operating Framework can be found here on the Department of Health and Ageing website.
Tags: acfa, aged-care-financing-authority, cam-ansell, grant-thornton, interim-operating-framework,

6 thoughts on “Financing Authority framework announced

  1. Whilst not wanting to pre-empt the work that will be completed by a well qualified group making up the ACFA it would seem that the “framework” does tend to push their thinking in a particular direction. The verbage talks about “efficient providers” (undefined) and makes reference to making recommendations on cost-neutral decisions with respect to the 40% rule. I understood this group was to be independent and transparent – at least that is what the media hype suggests. This will be a true test of whether the rhetoric meets reality. In the context of the LLLB package I guess we all have to remember that what was labelled as a $ 3.7bn initiative falls down to $ 0.5bn of new government spending (paying for new bureacracies and not for care) and lots of additional risk to providers, one can only hope that the ACFA does actually deliver against its stated objectives. The Minister is absolutely right in one respect – this will be a watershed in providers deciding if they have had enough of having their heads held below water and vote with their metaphorical fiscal feet.I wonder how many state governments are factoring in picking up the tab for the shortfall? Perhaps a question for the next COAG meeting.

  2. This is a qualitative breakthrough for the Commonwealth-funded aged care sector and one that has been argued for (at least) since Bronwyn Bishop was the Minister.

    Like anything, this can be done well or badly and it remains to be seen what the financial outcomes will be – for consumers as well as providers – but at least it doesn’t look like another Andrews/Bishop/Santoro/ Pyne/Elliot patch.

  3. The Minister, Mr Mark Butler, must be congratulated for standing up to the current crop of “real estate developers” of aged care.

    As a future consumer of residential aged care – I am more concerned about the quality of care being provided than the “major building works” that the developers seem fixated upon.
    Is it because the only way the provider makes serious profit and capital gain – is from building development – but always funded by hard working Australian’s accommodation bonds. If they want to be property developers – they should go the banks – borrow money themselves (and pay it back) – take some risk – like every other developer.

    It would be better for the Australian community to discuss the quality of care, and paying reasonable rates to quality staff? Than this senseless talk about “building development”

  4. Every aspect of aged care is price regulated except for accommodation bonds. Providers have used this flexibility to fund the post-1997 development of new aged care services.

    What happens if the bureaucrats in ACFA get it wrong? One body gets it wrong, the whole industry is in a lot of trouble. If any single provider gets their sums wrong, they only have themselves to blame.

    Bond prices must be market driven otherwise distortions will occur and then services will not get built.

  5. I have just returned from atttending The National Aged Care Conference 2012 in Adelaide. The purpose of this conference was to “bring together the aged care sector to share ideas on the Gillard Government’s $3.7 billion LLLB aged care reform package”. I have been working in the aged care sector for over 32 years now and never before have I been invited to a conference (for free) where on announcement there was no conference program and most of the speakers to be announced, and to top that off we had just one day in which to apply. I applied because I thought that Minister Butler was finally going to tell us something about these reforms that was more than we could read on the government website….I was wrong. The only new material to come out of those two days was the Interim Operating Framework for the new Aged Care Financing Authority which I have read and I suggest that everyone should read. So complicated and so unnecessary and so costly to set up and to fund forever, when all that is needed is for the government to agree to undertake a study of the ACTUAL COST of delivering residential aged care services in a modern facility, and then work out how much the taxpayer can afford to contribute which would then leave an amount for the user of the service to fund. How can aged care services ever be financially sustainable unless a proper costing of what we provide is undertaken and we are able to charge appropriately for that service? As a provider of aged care for the last 32 years for a not-for-profit organisation I am sick and tired of the government and groups such as COTA putting across that we providers are trying to take advantage of all older vulnerable people and therefore extreme measures of ‘protection’ have to be put in place….which by the way is the exact opposite of what the Productivity Commission recommended. My advice to Minister Butler is to go out around Australian and take a good look at new products of aged care that have been appearing in the marketplace for the past few years offering aged care with accommodation under the Retirement Village Act, and it is called Service Integrated Housing. No extreme protection measures here Minister…just people making decisions about their care and housing preferences and how they want to pay for it. Stop treating older Australians with such paternalistic attitudes!

  6. Much of this argy bargy commentry is reflective of the philosophy that older australians want to be cared for and die at home. This is a great idea but unfortunatly not the reality. The Ageing population is increasing at a stagering rate and the affect on the community is only beginning to show. With the expected increase in age related illness, the fact is strong and evidence based, that many of our older australians will find themselves living the final stage of there lives in a hospital or sub acute setting, and one hopes that it will be a residential care facility.Today model of residential care in Australia is one of the best that is available in the world. The governemnt needs to place a focus on the balance and educate the general public that our residential care is a valued option and will be there for those that need it. service providers may have their own issues that relate to the commercial aspect of the industry, but we need to remember that they all have a mission to provide care. That care has a cost and the true cost must be identified, put up transparently and well understood by all. Educating older australians and their families that healthcare is not free and the value of it is reflective of the value we have for the older person and the value they have for themselves is important for the transition into gerontic life.
    At the end of the day this government will not be in power next year and this debate and platform will all change again. One thing for sure is that the elderly are not going away and neither is the volume of care that is needed across all parts of the system.

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