Reform analysis: what’s in it for the industry

The Gillard government’s aged care reforms could drive demand for ageing-in-place accommodation, according to a prominent lawyer, while the new funding arrangements have been compared to musical chairs by one aged care accountant.

Above: Arthur Koumoukelis.

By Stephen Easton

As those in the business of accommodation and services for older people mull over the government’s aged care reform package, professionals who advise them have also been busy analysing what it all means.

According to Arthur Koumoukelis, a partner at Gadens Lawyers, “the reforms are intended to change the emphasis from ‘aged care’ to ‘aged living”, and by focusing on community care, independence, prevention and reablement, could drive demand for ageing-in-place style accommodation, including retirement villages.

“The reforms look to align the services focusing on prevention and reablement and undertake an extensive review of these programs,” Mr Koumoukelis writes in an online article

“Priority areas of review are meals on wheels, transport services, home modifications and home maintenance. It would appear logical that a review of these areas may lead to a tightening of care criteria which, when coupled with increased care recipient contribution, may make the alternative of living in a retirement village rather than a residential aged care facility more attractive,” he continues.

“That in turn raises the question for a retirement village operator of how to access such funding and what services, if any, are provided as general or optional services.”

Residential care providers will face the most significant changes in their business models when the reforms take effect in July 2014, according to the Gadens article. 

Measures like optional periodic payments, the removal of bond retentions and greater scope to offer various extra services would “tend to make the approved provider’s business more of a ‘cashflow’ business rather than one of a ‘lump sum accommodation bond’ recipient,” the Sydney-based lawyer suggests.

“This will give rise to issues of securing payments, tighter resident contracts, bad debts and other operational matters, which to date some approved providers have never had to deal with.”

On the subject of allocated places, Mr Koumoukelis’ reading of the reform documents indicates that the measures will “essentially increase the allocation from about 113 per 1000 people to about 130 per 1000 people”.

‘Musical chairs’

Above: Bruce Bailey.

Bruce Bailey, director of aged care services with RSM Bird Cameron, has focused on determining approximately how much new money the reforms will deliver to the industry

His macro-level analysis suggests that the Gillard government’s package will have “limited impact” on the budgets of aged care providers, and “appears to be musical chairs with respect to provider funding”.

“What is significant,” he writes, “is that of the nominal increase in available funds, between 20 and 25 per cent is to be provided by consumers of the service through changes to the means test. 

“With a further 70-75 per cent being provided through a redirection of existing funding, this means the government contribution is less than 10 per cent of the funds that will be available to operators.”

Mr Bailey points out that the reforms are in line with the government’s shift away from universal entitlement to taxpayer-funded aged care – which was recommended by the Productivity Commission (PC) – to a preference for “user pays with a safety net”, and he has identified three key policy directions for aged care.

Mr Bailey advises that operators will increasingly need to appeal to potential customers; “find a viable model” as the government steps back from funding operators; and “proactively manage their ACFI entitlements” in the face of an intended $1.6 billion ACFI claw-back.

As options to consider, he suggests a combination of renovations to older facilities and higher resident charges should improve returns; that an engaged workforce will improve operating outcomes; and that innovation is often the key to sustainability.

“…our longer term view is that the aged care sector is going to be singing to a new song,” Mr Bailey concludes. 

“We see the government continuing as the conductor, providers as the musicians and residents as the paying public (and paying more). As in all things the public will vote with their feet; this may mean a shift in demand from residential care to community care or it may mean a shift between providers. Such an environment will favour those who are change-ready and punish those who are change-resistant.”

The firm’s senior aged care advisor, Sue Macri, will shortly publish a review of what the reforms mean for carers and care recipients.

Deloitte has also produced its own early summary of the reforms and their potential impact on providers’ business models and funding arrangements, and another report with a similar aim has been published by Grant Thornton.

Experienced aged care consultant, James Underwood, also has used his website to share answers to ‘frequently asked questions’ on the reforms, as well as his projected aged care subsidies for the coming 2012-13 financial year, in which he estimates that the indexing applied to aged care subsidies from 1 July will be 1.49 per cent.

Tags: finance, living-longer-living-better, reform,

1 thought on “Reform analysis: what’s in it for the industry

  1. Changing names won’t change attitudes of people working in aged care. Staff need adequate education and training and the cost of this should not be the deciding factor between giving what the aged deserve and what they get, which is second rate in a lot of instances. Staff ratios need to change as well.

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