Insight,

Federal Budget 2022-23: Aged Care Sector Deep Dive

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On Tuesday night, the Australian Government handed down the 2022/23 Federal budget. In our full Federal Budget Report (if you haven’t seen this, you can access it here), we provided an overview of the significant funding the government is providing for health and aged care.  In this deeper dive, we focus on the measures relating to aged care.

In the 2022-23 budget, the Government is continuing its reform of the aged care sector. In 2021, the Government announced a $17.7 billion package to fund a five-year plan to reform the aged care sector in response to the Final Report of the Royal Commission into Aged Care Quality and Safety (Royal Commission). The reforms aim to deliver improved quality care, increased viability in the aged care sector and the delivery of services that respect the needs and choices of senior Australians.

The plan previously outlined five ‘pillars’ for reform:

  • Home Care
  • Residential aged care services and sustainability
  • Residential aged care quality and safety
  • Workforce
  • Governance 

This year’s budget measures focus on those five ‘pillars’ for reform and build on the budget measures announced last year. In this insight, we discuss the measures that the Government announced as part of the 2022-23 budget in relation to each of the five ‘pillars’ for reform.

Key actions, as foreshadowed in the five-year plan and last year’s budget, include the replacement of the current Aged Care Act, and revised funding mechanisms.  These form part of the “Residential aged care services and sustainability” pillar.

Home Care

In 2021-22, the Government announced funding to address immediate and long-term home care needs of senior Australians. The budget included 80,000 additional Home Care Packages (40,000 in 2021-22 and 40,000 in 2022-23), increased investment in quality and safety checks of Home Care Packages, the development of a new Support at Home program, measures to put downward pressure on home care administrative costs and support for informal carers.

This year’s budget measures largely build on the initiatives announced last year. The 40,000 Home Care Packages announced last year are included in this year’s budget, which will enable a total of around 275,6000 people to access a Home Care Package as at 30 June 2023.

The Government’s foreshadowed re-design of the Aged Care Act, discussed below, will include a new framework to underpin the development of the new Support at Home program. Close attention to the details of this framework, when developed, will be of interest to market participants.

Key takeaways:

  • The design of the new Support at Home program is underway – this program will shift service delivery for home care in the aged care sector.
  • As announced in last year’s budget, 40,000 additional Home Care Packages will become available at 30 June 2023, increasing access to home care support.

Residential aged care services and sustainability

In response to the Royal Commission, the Australian Government committed $7.8 billion to residential aged care services, including funding for a per resident per day Basic Daily Fee supplement, to support delivery of more care minutes to each resident. The 2022–23 Budget invests a further $20.1 million in this area over three years, from 2022-23 to 2024-25.

The Royal Commission was concerned that the provision of high quality and safe aged care would be undermined by not having enough staff with the skills and time to provide care. This concern motivated its recommendation for a ‘casemix-adjusted activity based funding’ model for residential aged care facilities (Recommendation 120), such that providers would be expected to engage additional staff if they have a higher than average proportion of high needs residents.

The new Australian National Care Classification (AN-ACC) funding model was announced as part of the Australian Government’s response to reviewing aged care pricing matters.

The Budget increase is situated in this context and responds directly to Recommendation 120. It aims to assist the transition from the existing Aged Care Funding Instrument (ACFI) to the new, AN-ACC model. This new model is scheduled to commence on 1 October 2022, and aims to align the residential aged care funding to the care needs of each resident. It allows for an increase of allocated funding for regional, rural and remote services to reflect the additional care costs in those locations.

Key takeaways:

  • From 1 October 2022, funding assessments will be undertaken by independent assessors and will no longer be conducted by residential aged care staff.
  • Additional funding will be provided for appropriate care requirements, including dementia-related care.
  • The new funding model aims to be more equitable with focuses on care in rural and remote locations, and Indigenous and homeless specialist services.

The new funding model ensures that providers delivering aged care services will be able to access improved and stable funding. The use of independent assessors are intended to ensure that the assessments and classifications assigned to residents are consistent across the sector, and to free up staff time to provide more direct care.

Aged care providers who are providing services to high needs residents, or in rural and remote locations, should follow the developments in these areas closely to ensure that any changes can be reflected in their operational requirements. For instance, there may be requirements to increase staffing if the independent assessor considers it appropriate to grant additional funding for particular care needs.

The major advantage under the new funding model is that it provides the opportunity for increases in funding to providers of aged care services, and will hopefully improve the provision of aged care services to meet the individual care needs of residents.

Residential aged care quality and safety

Residential aged care quality and safety was a significant focus of the Royal Commission. In its summary of the final report, the Royal Commission emphasised that ‘in the future, residential care must meet the full range of older people’s physical, emotional, mental and spiritual needs’.[1] The measures in this year’s budget are aimed at addressing the recommendations made by the Royal Commission, in particular, recommendations 38, 58 and 64.

In last year’s budget, the Government announced additional investment in the Aged Care Quality and Safety Commission, the aged care sector’s independent regulator. This year, the Government is continuing the focus on oversight in the sector through a $21.6 million investment into auditing to ensure aged care services comply with the Aged Care Quality Standards. This funding will go towards maintaining the Aged Care Quality and Safety Commission’s external auditors and conducting 1,443 residential aged care quality audits in 2022-23.

This year, the Government is also focusing on the delivery of better coordinated care. Accordingly, this budget includes $22.1 million to fund trials of multidisciplinary outreach services and $345.7 million to fund improved medication management for aged care residents. The funding includes a trial of a more comprehensive service delivery model for people in residential aged care through multidisciplinary care teams and hospital-led access to specialists and other health practitioners. The budget will also fund improved medication management at aged care facilities through on-site pharmacists and community pharmacy services.

Key takeaways:

  • As the Government continues to focus on oversight measures in the residential aged care sector, service providers must ensure they comply with applicable regulations and standards, and are prepared for potential audits.
  • Increased funding for multidisciplinary outreach services and appropriate medication management may create opportunities for service providers to expand and improve service delivery in the residential aged care sector.

For stakeholders in the residential aged care industry, the funding in this year’s budget will mean that they continue to experience increased regulatory activity and compliance measures in the sector. Service providers must ensure that they are up to date on regulatory compliance requirements, are complying with the Aged Care Quality Standards and are prepared for potential audits.

Increased funding for trials of multidisciplinary service delivery models and improved medication management in residential aged care may create opportunities for residential aged care providers to grow and improve their service delivery.

Workforce

In response to the Royal Commission, the Australian Government committed $652.1 million to workforce aged care reforms. The 2022–23 Budget invests a further $402.2 million in this area. The sector remains characterised by low wages so has difficulty retaining and attracting aged care workers. The workforce bonus payment will go some way in assisting with the plight of workers but until there is systematic change and adequate funding to reward workers then this difficult feature of the sector will remain a challenge.

The Royal Commission was concerned that many aged care providers do not seem to have the skills and capacity required to care adequately for vulnerable people such as those living with dementia or mental health conditions. In its report, the Royal Commission described the quality of aged care that people living with dementia received at times as ‘abysmal’.

The Budget increase aims to directly respond to Recommendations 75 and 83 of the Royal Commission report, which relate to work force planning (establishing an appropriate distribution of workforce expertise to match the aged care sector’s needs), and funding for teaching specialist aged care programs.

The Budget focuses on growing the workforce of nurses and allied health professionals, upskilling the workforce to improve the quality of care, and strengthening the national workforce, including in rural and remote locations.

Key takeaways:

  • Workforce bonus payments: the aged care workforce will receive up to $800 each, in recognition of their commitment to caring for senior Australians during the COVID-19 pandemic.
  • Care and support regulatory alignment: $10.8 million will be invested in the Cross-Agency Taskforce on Regulatory Alignment to improve the quality and safety of care and support service by aligning regulation across aged care, disability supports and veterans’ care.
  • Clinical placements $14.9 million will be invested to address barriers to clinical placements in the care and support sector, which will, over time, add more skilled workers.
  • RHMIT training expansion: $14.3 million will be invested to expand the Rural Health Multidisciplinary Training (RHMT) Program, which will enhance the quality of aged care services in rural and remote areas, and create opportunities for clinical placements, including for Aboriginal and Torres Strait Islander students.
  • Workforce growth through JobTrainer: $48.5 million will be invested over two years to provide a pipeline of entry-level aged care workers and enable existing aged care workers to upskill.
  • CME Support Program Rollout: $6.9 million will be invested in a staged rollout of the national Cooperative and Mutual Enterprises (CME) Support Program, organisations owned and run by members such as consumers and service providers. The CME Support Program will assist the aged care (and broader care and support sector) to grow their skilled workforce and support the delivery of care services in areas of need.

Aged care providers should, over time, benefit from an increased number of nurses and allied health professionals choosing to work in the sector. Providers may also want to consider contributing to the growth of the sector by providing a greater number of clinical placements.

However, the proposed regulatory alignment may introduce additional requirements that may be highly impactful and difficult to navigate, especially since the proposed reforms have been described as ‘expansive’ and having the potential to affect ‘virtually every aspect of the sector’.

Governance

In this budget, the Government is investing $44.7 million to drive improvements in the aged care regulatory framework and deliver accessible aged care information. This funding aims to implement the governance recommendations made in the Royal Commission report, in particular, recommendations 8, 41 and 54.

To increase community engagement and implement aged care sector reforms, the Government is continuing its funding of the ‘Regional Stewardship of Aged Care’ program. This program was announced as part of the 2021-22 budget to improve senior Australians’ local experience of aged care services and ensure that local issues are reflected in national policy. The funding in this budget will enable Department of Health aged care staff in eight Primary Health Network regions to engage with local providers and stakeholders. The focus of these engagements will be to enhance local community participation, lead the aged care sector reforms on the ground and support planning at a local level.

In this budget, the Government is also committing an additional $5.4 million for the design of a new, modern regulatory framework for aged care. In last year’s budget, the Government announced $26.7 million to develop and introduce a new Aged Care Act. The new Aged Care Act is planned to come into effect on 1 July 2023, subject to parliamentary processes. This year’s budget builds on this announcement by funding a regulatory framework that will underpin the development of a new Support at Home program and the new Aged Care Act. The aim is to create a framework that is rights-based, risk proportionate and puts senior Australians first. The regulatory reform will include consultations with sector stakeholders, including senior Australians and their carers.

Key takeaways:

  • As regulatory reform in the aged care sector continues, stakeholders in the sector must ensure that they stay up to date with any changes in regulatory compliance requirements.
  • Funding of the regional stewardship program may create opportunities for stakeholders in rural and remote areas to engage with Primary Health Networks and the Department of Health to ensure local issues are reflected in national policy.

The process to develop a new Aged Care Act is underway. As the legislative framework in the aged care sector continues to undergo significant reform, service providers and other stakeholders must ensure they understand applicable changes and adapt accordingly. Intense focus will be aimed at the development of the new Aged Care Act to see whether the changes deliver on the ambitious recommendation of the Royal Commission.

References 

[1] https://agedcare.royalcommission.gov.au/sites/default/files/2021-03/final-report-volume-3a_0.pdf pg 176 

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