aged care seminar

Aged Care Update

Sabine Phillips, Principal

Anita Courtney, Senior Associate

8 July 2015

Sabine Phillips

Principal

> History

> 3rd Party RADs

> Additional Services

> 3rd Party Guarantees

> Caveats

> 28 Day Rule

> Questions

Objectives

3

> Introduction

> June 2011 - Government response to

the recommendations by the

Productivity Commission.

> 20 April 2012 – the then Federal

Minister for Health and Ageing, Mark

Butler, announced the “Living Longer

Living Better” aged care reform

package.

Summary of relevant reforms

4

> Reforms across the spectrum of aged

care services, from home care

packages, assistance to carers,

reforms to residential aged care

subsidies, accommodation payments,

the aged care workforce and quality

assurance regulation.

Summary of relevant reforms

5

> Home care

> Integration of home and community

care programs

> Implementation of consumer-directed

care

> Means testing for home care package

clients

Summary of relevant reforms

6

> Lifetime cap on care fees across home

care and residential care of $60,000

> $25,000(ish) per annum residential care

> $10,000(ish) per annum home care

> Australian Aged Care Quality Agency

> Monitor quality assurance for providers

of residential aged care and home care

Summary of relevant reforms

7

> Removal of the payroll tax supplement

for many providers

> Elimination of the dementia

supplement

> Proposed changes to the Complaints

Scheme

Summary of relevant reforms

8

9

Source: Living Longer, Living Better Department of Health & Ageing

Third Party RADs

> Pre reforms

> Basic rules about accommodation

bonds

> Section 57(1)(f)

> Another person must not be required to

pay the accommodation bond as a

condition of the CR entering the service

or flexible care service.

Accommodation bonds

11

> Aged Care Act 1997 (Cth)

> 52G Rules about Accommodation

Payments and Contributions.

> A person must not be charged an

accommodation payment unless

RAD/RAC

12

> (i) the person’s means tested amount at

the date of entry is equal to or greater

than the maximum accommodation

supplement for that day; or

> the person has not provided sufficient

information to allow the person’s means

tested amount to be worked out;

RAD/RAC

13

> Molly has $600K available to pay the

RAD of $500K.

> The money is tied up in the family

home which the family are reluctant to

sell.

> Molly’s son lends Molly the $500K to

pay the RAD.

Scenario 1

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> Loan is not automatically a liability for

Molly

> The loan should be secured – or -

> It may have an affect on Molly’s

pension and her assets

Scenario 1

15

> Molly had the $500K to pay the RAD

and again the family do not want to sell

the home.

> The son pays the $500K without

making it a loan to Molly.

> Molly effectively has an additional

$500K worth of assets in the form of

the RAD.

Scenario 2

16

> Will affect Molly’s assets and her

pension amount.

> Issues with repayment if it is a RAD

paid in accordance with Molly’s

Agreement –

> To whom is it refunded?

> Who is entitled to the money when

Molly dies?

Scenario 2

17

> Molly is a full pensioner who has been

living with her family for some time.

> Her son wants her to go to a facility

nearby his home in a leafy exclusive

suburb.

> The facility does not have any places

available to fully supported residents.

> The son offers to pay the RAD for

Molly.

Scenario 3

18

> NO - DON’T DO IT

> Department has identified that where a

person is receiving a supplement for

being a low means resident, the

provider cannot benefit from ‘another’

RAD/DAP

> Deemed to be a $320K RAD by DAP

Scenario 3

19

> Molly is a full pensioner and the son

wants her to be in a specific facility that

requires the $500K RAD/DAP.

> The facility will not accept the $500K

from the son as it is unclear of the

effect of 3rd party RADs.

> As a result they do not disclose Molly’s

income or assets.

Scenario 4

20

> Threshold $60K(ish) – lifetime.

> Threshold $25K(ish) – per annum.

> If no disclosure it would take

approximately 98 days to reach annual

threshold for a HHH resident and 2.4

years for the lifetime threshold.

Scenario 4

21

> Don’t provide financial advice.

> Ensure the prospective resident and

their representatives have access to

advice.

> Document all your discussion.

> Ensure you have a sound third party

agreement.

Risk Management Summary

22

23

Additional Services

> “Other additional care and services

and associated fees are not regulated,

and are agreed between you and your

aged care provider. These vary from

home to home. Your aged care

provider can give you details of these

services, such as hairdressing and

Foxtel, and the fees that apply.” myagedcare website July 2015

Additional services

25

> Quality of Care Principles 2014 –

Schedule of Care and Services.

> Additional services have not been

identified elsewhere.

Risk management

26

> Agreement between the provider and

the resident or their representative.

> Consumer law regarding unfair terms

in consumer contracts.

> Resident agreements may be classed

as consumer contracts.

Risk management

27

A term of a consumer contract is an ‘unfair

term’ if:

- it would ‘cause significant imbalance in the

parties’ rights and obligations under the

contract’;

- ‘it is not reasonably necessary in order to

protect the legitimate interests of the party who

would be advantaged by the term’; and

- ‘it would cause detriment ... to a party if it were

to be applied or relied on’ (s 24 Consumer Law

Act).

Unfair terms: consumer law

28

> Many models.

> Know what you have relied upon for:

> RAD level – myagedcare.

> Resident handbooks.

> Advertising materials.

> Extra services status.

Additional services

29

> “Additional services are optional……”

> “…..you must be given an itemised

account.”

> “…..you cannot be required to enter

into an additional services agreement.”

> “….any such agreement is a

commercial arrangement between you

and the provider….”

Additional services

30

> “…….is not regulated by Government.”

> “Additional services can be offered on

an ad-hoc, opt-in/opt-out basis…..”

> “Any agreement for the provision of

additional care and services on an

ongoing or opt-in/opt-out basis is a

commercial contractual arrangement

between the resident and the provider”

Additional services

31

32

> Be clear about what you are offering.

> Make it known to the prospective CR

or their representatives before they

enter.

> Document these discussions.

> Have strategies in place in the event of

a dispute.

Risk management

33

Anita Courtney

Securities in aged care

> Increased exposure to bad debts

> Security of tenure

Why have securities?

36

> Pre 1997

> Pension and subsidy

> 85% pension

> Subsidy consisted of:

> SAM same amount per resident per day

> CAM dependent on 8 scale RCI/RCS

> Exposure

> Limited to 85% of pension

The way we were: pre 1997

37

> 1997

> Pension and income tested fee and

subsidy

> 85% of pension

> Daily income tested fee (DITF) based

only on income (not assets)

> Exposure

> Increased by the amount of the DITF

> AB/periodic payments and AC

The way we were: 1997

38

> 2014

> Equivalent pension amount

> Means tested amount

> Additional services

> Choice to pay DAP/DAC

> Exposure

> Increased by the additional amounts

and the use of assets to determine

means tested amount

They way we are: 2014

39

Breakdown of payment

source

40

> Based on a 30 day month for one

month.

> Based on $30 = 85% of pension.

> Based on $120K assets and $21K

income:

> Pre 1997: $900

> 1997: $1450.20

> 2014: $2431.80

Possible exposure: example

41

> Greater proportion of user pays with no

guarantee of having the cash

> Greater choice in method of payment

> 25k annual limit

> Consumer expectations with user pays

system

Other risk factors for debts

42

> Why have guarantees?

> Rarely (ever (?) used)

> Leverage against the person

responsible for the debt

> Deterrence?

Third party guarantees

43

> We are seeing some claims that third

party guarantees are unenforceable

> Doctrine of ‘unconscionability’

> 1980s and 1990s High Court cases

> Commercial Bank of Australia v

Amadio (1983)

> Garcia v NAB (1998)

Criticisms of guarantees

44

> The law does not require that third

party guarantors get independent

advice in every case.

Our view

45

> Different relationships

> Lower risk

> Not for business ventures

> Resident can only be asked to pay

what they can afford

> The person giving the guarantee has

control of the $

Our view

46

> Don’t stop asking for guarantees

> Provide opportunity to seek

independent advice

> Get the guarantee from the person

managing the money

> Seek advice before you sue a

guarantor

Risk management

47

> Criticism of use of caveats

Caveats in home care

agreements

48

> Not prohibited by the Aged Care Act

> Not unlawful

> Only intended for use where there is

an issue with fees

Caveats: our view

49

28 Day Rule

- Payment method

- Minimum permissible asset value

> “The approved provider must not

require the person to choose how to

pay an accommodation payment or

accommodation contribution before the

person enters the service”. (s 52F-4)

What is the 28 day rule?

51

> “An accommodation agreement must

state that:

> within 28 days after the date of entry,

the person must choose to pay the

accommodation or accommodation

contribution (if payable) by: (i) daily

payments; or (ii) a refundable deposit;

or (iii) a combination of refundable

deposit and daily payments.” (s 52F-3)

What is the 28 day rule?

52

> “Aged care providers will not be able to

distinguish between care recipients on the

basis of how they elect to pay for their

accommodation because care recipients will

have a 28 day period after entering the aged

care service to decide how to pay their

accommodation costs.”

> Questions and Answers Regarding

Legislative Changes

Purpose

53

> Q: Is a new resident allowed to agree to a

payment option on admission or before

admission, or MUST they wait 28 days?

> A: Residents cannot elect their payment

method before admission. Residents

have up to 28 days to decide on a

payment option and can make a decision

at any time during this period – they do

not have to wait the entire 28 days.

DSS view

54

> DSS view is not what the Act says.

> Section 52F-4 prevents a provider from

requiring the person to choose how to

pay an accommodation payment

before entering the service.

> No mention of not allowing a resident

to choose.

Our view

55

> The Act does not say that a person

cannot choose how they will pay the

accommodation payment prior to entry.

> Difference between requiring and

inviting a prospective resident to make

a choice.

Our view

56

> “An AP must not accept payment of an

amount of refundable deposit if

…

> The person pays, or commits to paying,

the amount within 28 days

> Payment of the amount would leave the

person’s remaining assets at less than

the minimum permissible asset value”

(section 52J-5)

Minimum assets requirement

57

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QUESTIONS

The information contained in this

presentation is intended as general

commentary and should not be regarded as

legal advice. Should you require specific

advice on the topics or areas discussed

please contact the presenter directly.

Disclaimer

59

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Level 8, 28 University Avenue, Canberra, ACT 2601 P: +61 2 6171 9900

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