Residential Aged Care: Our Take on the Government Response to the Taskforce Recommendations
We’ve been asking for a response to the Taskforce recommendations for a long time, and now we have it; well, we have some inkling as to what the future looks like.
As you will be bombarded with opinions as to what the changes will mean at both an operational and strategic level, we’ve confined our comments to looking at what we can learn from the Government responses as contained in the 6-page Department publication and our reading of the relevant sections of the Bill.
At this time, the ‘rules’ relevant to the Higher Everyday Living Fee (HELF) and the recommendations of the Independent Accommodation Pricing Review that will impact the future of RAD and DAP are unknown.
Let’s try to break down some key issues in relation to the HELF and the proposed changes to accommodation charges.
Farewell Additional Services and Extra Services. Welcome Higher Everyday Living Fee
| Theme | Pride Aged Living Observation |
|---|---|
| Subject to grandfathering existing residents, the Government will bring an end to both Extra Services (ES) and Additional Services (AS) charges with effect from 1 July 2025. | The place of an additional consumer fee for services over and above what we know as Specified Care and Services (SCAS) is to be embedded in the New Act. |
| The ES and AS will be replaced with a Higher Everyday Living Fee (HELF) which can be offered by a provider. | Similar to the current system, the fee for non-SCAS services will be separate from the basic daily fee. |
| Unlike the ES and AS fees, the HELF is agreed upon after entry. | Whether a resident will pay a HELF will be unknown to the provider at the date of entry. |
| Per section 284(5)(b) The registered provider must not, before the individual’s start day: offer to enter a higher everyday living agreement with the individual. | This may create confusion with a change to the admissions process for the incoming resident. The resident agreement can be signed before admission, however the HELF fee agreement cannot, though is usually included within the agreement. |
| The HELF will be indexed. | The basis of indexation is unknown, expect this to be in the rules. This codifies a position that has been variable in AS programs and is not relevant to ES programs. The rules will clarify how the indexation provisions will work. |
| The Act is silent on bundled vs individual service-based fees. | We expect that this issue will be dealt with in the rules. |
| Fees are to be negotiated between the approved provider and the resident. | In the original recommendations, there was talk about caps on fees. Section 284(2) suggests that this may not be part of the system. |
| The announcement talks about cooling off and opt-out provisions. | The Bill is silent on these matters, and so we will have to wait until the rules are published to get further clarity on how this will work. |
| Currently, there are no regulations (provisions in the Act or the Principles) on how providers set their prices. | While the Aged Care Quality and Safety Commission (ACQSC) has issued guidelines, these do not have the force of law. We anticipate that now that HELFs are embedded within the Bill, there will be more formal and defined regulations on these matters. |
Our recent White Paper on Recommendation 11 dealt with what we and the respondents to our survey considered to be issues associated with this model. If you’ve not had a chance to read the White Paper, this will give you significant details on the challenges.
The key challenge challenges we see include:
- How do providers deal with in-room services if a resident chooses to opt out of them – will we see a re-emergence of tiered service offerings by wings in facilities?
- How will staff, and agency personnel distinguish and deal with residents who are not paying the HELF?
- If the rules settle on an episodic charge model, how will providers develop and maintain systems to ensure they charge for all instances of services?
- Will the charges result in confusion to for the care recipient or their advocate/support person?
- The complexity/confusion of operating a grandfather system and a new system.
Our Day 1 Summary
From 1 July 2025, Additional Services and Extra Services will be formally embedded in the New Aged Care Act under the banner of the Higher Everyday Living Fee.
We expect this HELF will:
- create greater clarity around how providers operate these service models.
- increase regulatory compliance obligations.
- become ubiquitous within the sector as a key pillar of consumer choice.
- like AS and ES, be core revenue streams for providers underpinning their financial sustainability.
It will be a busy eight months as the sector gets ready for the new rules to come into effect. Providers will need to address issues such as:
- the design of new or refurbished homes
- the use of technology to track bespoke service offerings
- whether to offer both package and individual services
- how to address the higher administrative complexity
- disabling in-room services where the resident opts out
- the use of unique passwords for Wi-Fi system access
- the use of technology to manage service provision e.g. residents being offered meal options in an app based on the HELF package they have selected.
In the eight months ahead, Pride Aged Living will continue to support our clients and lead the sector in the design, development, implementation and compliance monitoring of HELF programs!
Accommodation Payments - this is where the real action is
Recommendations 12, 13, and 15 deal with accommodation payments. We’ve been very vocal about the need for providers to develop more robust approaches to their accommodation charges. Only last month, we held a webinar with Inside Ageing on accommodation payments.
In the December 2023 Quarterly Financial Snapshot, the Department has also expressed its view that the sector needs to be more commercial in setting its accommodation charges.
"To maintain profitability, while increasing care minutes, it will be vital for providers to ensure they are appropriately charging for accommodation rather than cross subsidising from funding provided for care."
The key themes on accommodation in the Government response to the Taskforce recommendations as we see them are:
| Theme | Pride Aged Living Observation |
|---|---|
| Reduced reliance on RAD – Recommendation 12 | The Government knows this system is not sustainable, and they want to shift the focus to DAP, or as we say, a rental model, to boost the EBITDA and financial sustainability of the sector. |
| Shifting from RAD to DAP is a long-term play – 2030 at the earliest | The Pride Aged Living Single Payment Plan (SPP) is a unique model that lets providers start on this journey. |
| Retention of 2% on RAD – Recommendation 13 | This is a subtle way to shift the balance from RAD to DAP and to increase the EBITDA of providers. It works within our SPP. |
| Making DAP the default payment model –Recommendation 15 | The sector is awash with excess RAD, which robs providers of EBITDA, increases the Government’s risk and creates a headache for residents because there is a veneer that this is cheaper than a DAP. As we’ve said many times, if you want less RAD, then ask for a DAP. Some providers are already doing this and the SPP is another tool that helps providers boost the level of DAP they generate and reduce the RAD they take in. |
| Lifting the higher RAD to $750,000 –Recommendation 15 | An absolutely sane outcome. However, the real issue is what is the right price for your accommodation. At present, many providers have capped their RADs at $550,000, so now they have to decide where between $550,000 and $750,000 they should set their accommodation price. |
Our Day 1 Summary
We are on record saying that the sector needs to develop a more robust approach to pricing accommodation. While the response to the recommendations on accommodation lacks specificity, the message is clear— the Government will only pay for accommodation for supported residents and wants to reduce its exposure under the Bond Guarantee Scheme. This is good news; if you eliminate RAD from the system, then you have a rental model for accommodation.
If you have a rental model for accommodation, you can separate the ownership of the asset from the operation of the service. This happens in every other sector of the economy. This will mobilise capital and make the sector more capital-efficient. In turn, this will create a vibrancy that will see the development of new facilities and the refurbishment of existing facilities to meet the future demand for places.
At Pride Aged Living, we’re proud of the work we're doing with providers to help them develop robust accommodation policies based on our three-factor model.
Our Single Payment Plan in our Accommodation Revenue and Occupancy service is 100% compatible with the provisions of the New Aged Care Bill and the Government's response to the Taskforce recommendations.
The table below provides an example of how the Single Payment Plan works in practice:
| I rent my room (DAP) | I pay a lump sum for accommodation (RAD) | I make a single payment for all costs and a monthly contribution set by me | |
|---|---|---|---|
| My initial payment | $650,000.00 | $109,000.00 | |
| My ongoing monthly payment | $6,747.96 | $2,850.45 | $608.33 |
| As a special offer, we will waive the following Additional Service fees | $99.50 |
So, as with our involvement in HELF in the eight months ahead, we will continue to support our clients and lead the sector in the design, development, and implementation of innovative, evidence-based accommodation pricing programs!
To find out how we can assist your organisation with residential aged care, contact Bruce.
Bruce Bailey
0407 211 108
bruce.bailey@prideagedliving.com.au
