Reduction in Federal funding of aged care

In the budget of May 2016, the Commonwealth government announced cutbacks in the funding mechanism, the Aged Care Funding Instrument (ACFI), used to fund the care needs of residents in aged care homes from July 2016. The cutbacks were an attempt to claw back some of an expected $3.8 billion increase in ACFI funding by 2020 (currently around $10 billion a year).
UnitingCare Australia undertook a project to estimate the impact of the proposed ACFI changes. The ACFI changes affect only new residents, but as the average stay is less than 3 years, the changes will affect all providers fairly quickly. The changes to ACFI affect the funding of medication for residents by changing the classification of residents with high care needs, which are mainly for pain treatment.
The changes to ACFI from July 2016 to December 2016 means providers will receive $1,741 per year less per resident. This is bad enough, but from January 2017, providers will receive $6,555 per year less per resident, representing an 11% reduction on government funding of residents in homes with high and complex care needs.
Data from the Aged Care Funding Authority indicate that the average profit per resident in aged care facilities in 2015 was $7,680, but 25% of providers were operating at a loss. The proposed changes to ACFI will increase the number of providers operating at a loss unless they can reduce the number of residents with high care needs, reduce their operating costs or charge additional fees.
It appears that some aged care providers are already increasing their fees by introducing supplemental accommodation charges, calling them capital or asset replacement contributions or fees. Such fees can be included in the Daily Accommodation Payment (DAP) or as an unrefundable supplement to the Refundable Accommodation Deposit (RAD). The amounts payable can substantial – from $10 to $20 per day or from $3,650 to $7,300 a year for several years. Only a few providers have levied these charges so far, but watch the rest try to catch up from 2017.
Sources: UnitingCare Australia, ACFI Modelling – Summary Findings, June 2016.
Rachel Lane, Prepare to Pay more for Aged Care,, 13 July, 2016

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