Big change to home care payments may see providers go bust, industry warns

Jan 10, 2020
Leading Age Services Australia says the government's new payment plan proposal could cause more financial distress among providers. Source: Getty

The government says its new payment plan for home care providers will relieve financial pressures, but experts aren’t convinced, claiming the proposal poses serious risks.

Last year the Federal Government announced its plan to change the way providers are paid for their services. Currently, providers are paid the full amount of a consumer’s subsidy from the government for each month of care in advance, regardless of what services they receive.

At the end of the month, any amount that hasn’t been spent is held by the provider as unspent funds that can be drawn upon by the consumer in the future. However, the government has since proposed changing this to payment in arrears, meaning providers will be paid at the end of the month after the care has been provided.

This means people will only be using their government subsidy to pay for the services they have actually received. And if there’s money left over, the government says they’ll hold this, and if required, release it to the consumer, through the provider. It will not change the overall amount that’s available from the government for care.

However, Leading Age Services Australia (LASA) has warned it could cause more distress for providers and impact the care Australians are currently receiving. Acting Chief Advocate Tim Hicks described the current wait list as appalling and said the report raises serious risks for providers who have reported cash flow concerns ranging from somewhat challenging to unachievable.

He said the new payment plan could deliver a one-off government saving of hundreds of millions of dollars and help to reduce the nation’s unacceptable home care queue. However, if not handled correctly, may not make any difference to the 112,000 older people still awaiting their approved home care packages (HCP).

“We’re worried some providers may not be able to afford to transition to the changes to HCP payment arrangements without adequate safeguards, leaving care recipients in limbo,” Hicks said. “It’s also imperative the government provide timely advice to both older Australians and their care providers about details of the planned changes and any impacts to care delivery.”

Although the Aged Care Financing Authority (ACFA), a statutory committee whose role is to provide independent, transparent advice to the Australian Government on financing and funding issues in the aged care industry, has taken on board LASA’s recommendations to reduce the potential impact of the payment changes, such as enforcing a trial period of the new system to minimise disruption, Hicks said there are still red flags when it comes to finances.

ACFA analysed the financial impact the proposed changes could have and, worryingly, they found 30 per cent of providers surveyed reported a financial loss before tax in the 2018-19 financial year. And while Hicks is pleased numbers are being shared with the public, he said it doesn’t erase the risks involved.

“LASA supports the increase in transparency around HCP spending but it’s vital the cash flow and administrative costs that will come with the changes are taken into account,” he said. “It’s critical impacts are minimised for clients and the many already fragile businesses providing vital care.”

The release of the proposal comes after Prime Minister Scott Morrison announced the delivery of an additional 10,000 home care packages as part of the government’s response to the Aged Care Royal Commission’s Interim Report. A total of $496.3 million has been allocated to the delivery of the packages, with the first rolled out on December 1. The funding is going specifically towards level 3 and level 4 packages, which provide a high level of care to the elderly.

This is in addition to the record funding of $21.6 billion allocated by the Morrison government in the May budget, towards improving the country’s aged care system. This included a promise of $282 million to be spent over five years from 2018 on an extra 10,000 home care packages.

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