Review recommends new funding model for residential care

The Aged Care Funding Instrument should be dumped and a “blended payment” model with activity-based funding implemented in residential care, the government-commissioned report into ACFI has found.

The report also backs long-standing sector calls for an independent cost of care study in residential aged care.

In a robust critique of the ACFI, the University of Wollongong report found that the funding tool was “no longer fit for purpose” while its structure was “not clinically plausible”.

The review found residents were now “older and frailer” than when ACFI was implemented almost a decade ago and the tool “does not adequately focus on what drives the need for care” and “no longer satisfactorily discriminates between residents based on their care needs.”

While the review details five possible funding models – including a revamped ACFI – the experts recommend the sector adopts a “blended payment model”, which would utilise activity-based funding, within two years.

In the interim, the experts also propose a “refinement of ACFI” to address its key failings – a process that is underway, as Australian Ageing Agenda reports today (read story here).

‘Structural problems’ with ACFI

The experts found a “structural problem” in ACFI in that its three measurement scales effectively worked in isolation – with the scores from each being added to give a total score that determined a resident’s subsidy. Instead, they advocated a “branching classification” approach in which a resident’s needs in each domain would be considered in combination.

Their proposed “blended payment” model would also fund care based on two elements:

• fixed costs, as determined by factors such as the number of residents, and
• variable costs, as determined by resident complexity and acuity.

An activity-based funding model, akin to that which operates in the hospital sector, would be used to fund the variable care costs.

Cost of care study

Significantly, the experts said there was a need for a “costing and classification study” to inform the proposed new model and to “determine the proportion of costs that are fixed and variable.”

Fixed costs may differ between facilities depending on size, location and role and a costing study would help to determine this, they said.

In fact, the experts argued that irrespective of which funding model the government chose, there was a “good case for better understanding costs.”

“Costs do need to be understood to be contained in sensible ways,” they said, pointing to the national price set in the hospital model, which is based on an annual costing study.

Recommended model

The experts said that their recommended model was assessed as best meeting the criteria that addressed issues identified for the sector.

Of the five options, the blended payment model was “the most robust model and achieves greater equity,” they said.

“Although this option will likely result in more significant impacts on workforce and aged care system infrastructure, it will deliver benefits that far outweigh these short term resourcing concerns.”

Included in their report, the experts provide a detailed two-year implementation plan for moving to the new model, including timelines for sector consultation, development and trialling of the system.

READ NEXT: Wyatt to start consultations with sector 

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