Home Care: Our Take on the Government Response to the Taskforce Recommendations

We were pleased to see the Government take up all the key recommendations relating to the Support at Home program in its recently released response to the Taskforce recommendations.

The recommendations represent another step forward in allowing people to live in their own homes longer as their clinical and related needs increase. The progression has involved multiple iterations from a disappointing start in January 2022.

We’d like to share our thoughts on the implications for service providers and consumers on the initiatives announced last week and some insights into the behaviours we anticipate seeing in the marketplace as a consequence of the Government response.

Because there are lower barriers to entry, and providers can scale more quickly, home care providers are more exposed to market pressures than residential aged care providers. Arguably, there is more need for regulatory oversight in such a system to protect consumers against inexperienced operators, however, regulation directly influences behaviour. Ultimately, organisational behaviour, driven by the design of the system, will determine whether the system delivers the outcomes sought by Government and the consumer.

We summarise the themes of the Government response to regulations specifically impacting home care and our observations on the response.

Our observation

The lack of clarity and consistency in approved services was an acknowledged shortcoming in the Living Longer, Living Better reform program, which was only recently rectified. Clear and consistent communication to all participants as to what is included and excluded will facilitate a fully informed market. It will reduce the incentive for consumers to provider shop and the incentive for providers to approve questionable services.

Our observation

There is nuance in the term ‘clinical care’. This can be used to limit the services that the Government will contribute to, even where a service is clinically appropriate. For example, domestic cleaning support may be necessary to maintain a clinically safe environment for consumers and staff. If this is not a designated clinical service, yet is considered necessary by the provider, there may be disputes about who pays. What obligation does the provider have to provide the service to fulfil their obligations?

While not dealt with specifically, it appears from the webinar that a consumer’s contributions will be service-specific with an overall cap (annual and lifetime) based on means testing. How this will work when new services are required is unclear. While the matter can be dealt with through IT systems, the process may create time gaps between service need assessment and funding approval.

Budgets will cover only the government contribution towards services, potentially creating very different economic experiences for consumers with similar economic situations. For example, one consumer may require higher levels of nursing care, while another may require higher levels of daily living support.

Based on the information we now have, it is likely that we will be dealing with a level of pricing regulation that is taking us back to the pre-Productivity Commission Report era. 

IHACPA now appears to have a role in setting price caps for individual services and quarterly budgets. We believe this is a lost opportunity, and an unnecessary level of price regulation. So long as the consumer cost is controlled at the budget level, it is likely to be counter-productive to try to cap hourly service prices where a normal suite of consumer protections should suffice.

As more than 50% of home care recipients transition to residential care, including their co-contribution to care at home in the lifetime cap is welcome and appropriate. It may also promote further integration of home-based services and residential services at the provider level.

Our observation

In the context of an aging population and in an era where most Older Australians are superannuated, it is appropriate that these funds should be used to support people through to end of life, rather than being passed to the next generation.

The co-contribution regime, together with a means-testing framework, should ensure that all Australians receive care in their declining years at a rate that is affordable to the consumer and Government.

It appears that the Care Management component of service charges will continue, however, Package Management will need to be built into hourly rates. Care Management costs, however, will be capped at 10%, which is around the figure that StewartBrown is indicating is the benchmark for these services.

Our observation

The no worse-off principle is to be applauded.  

Grandfathering will create complexity in the short term while organisations manage three different Home Care models: the CHSP, the grandfathered HCP consumers and the new SAHP. 

While there is significant turnover in clients in any year, this transition will occur over an extended period of time but should decline as a material line item as the number of grandfathered care recipients declines.

Our observation

Matching contributions at the individual service level will allow consumers to exercise more choice, relative to the current bucket funding approach. Contributions under the existing system are acknowledged to be complex and confusing, with many providers now no longer administering the Basic Care Fee.

The recommendation to charge specifically for each service will make communication much clearer with consumers as to the reasons they are contributing and the value/benefit they receive from it. 

While the lifetime cap on contributions will protect consumers economically, only a small number of consumers will hit the cap while in home care. 

The different rates of contribution for clinical and non-clinical services will likely impact consumer behaviour, incentivising consumers to direct government funds towards essential clinical services.

We do see a risk that this could result in an improvement in the quality of care without a material positive impact on the quality of life of the care recipient.

Our observation

Block funding is an appropriate way of funding a proportionally small number of regions where there is a significant risk of market failure. Defining the characteristics of these regions and the service providers presents challenges, but with appropriate consultation, this should be achievable.

Our observation

We support and encourage innovation across the industry. We have made the point before that you can’t regulate in what you incentivise out.

Regulating both price (cap on prices) and supply (approved packages) distorts the market and in our opinion, risks reducing innovation. 

The Government can incentivise innovation while controlling its cost by having a minimalist approach to regulation that achieves consumer protection. Excessive price regulation combined with supply limitation is likely to result in commoditised service delivery that will drive organisations to the lowest cost-complying service model. We label this a regulator model. If this occurs, it is likely to reduce consumer choice and negatively impact both quality of life and quality of care.

Where organisations have a degree of price freedom that provides economic capacity for innovation, this is likely to result in more consumer choice, improved quality of life and improved quality of care. This is consistent with Consumer Directed Care.

Our Summary

Following the release of the Government response, the Department of Health and Aged Care held a webinar to provide some further background on the Government response. 

This included the following:

• The introduction of a further six funding levels brings the total to ten with the top level initially set at $78,000 (L4 currently $61,440)

This includes two short-term packages: restorative and palliative. Notably, the latter is to be applauded and has been a significant need for many years.
 

• Continuation of funding limits through quarterly budgets

While a consumer's demand for services has no regulated limit, government funding will continue to be limited to the package funding level. 

This allows providers to continue to offer unfunded services. Just as Additional Services, now Higher Everyday Living fees facilitate consumer choice and allow providers to generate additional revenue and surpluses. The provision of unfunded services will continue to provide home care operators with the opportunity to increase their operating surpluses.

Delivery of unfunded services relies on the skill of care management teams. If care management is defunded or the funding is capped, this may present a challenge to providers in ‘selling’ these services.

We are cautiously optimistic about the design of the new program. After much debate across the industry, we are pleased to see a model that is rational and workable. We do believe there are some lost opportunities, however, on the whole, the system should deliver good results.

The sustainability of the sector will now come down to the work that IHACPA needs to do around pricing individual services. Fortunately, this is an independent body less subject to the political and fiscal pressures impacting funding that we have seen in decisions to date. Provided this work is done fairly and competently, we should expect to see a sustainable sector into the future.

We would note that there is no reference to ‘Choice’ or ‘Control’ in the current set of documents. These principles appear to have been demoted in priority in the current system design.

In light of our initial analysis, we suggest that organisations should consider the following as they prepare to be participants in the Support at Home program:

At Pride Aged Living, we’ve assisted numerous organisations to dramatically improve their service models, operational efficiency and financial results. We believe this approach will benefit service providers, regardless of the final shape of the program.

See our home care services