From 27 February 2017, the rules around home care services for older Australians will change. The changes were originally announced as part of the 2015-16 Budget and aim to strengthen the quality of home care services by increasing competition and reducing red tape for providers.
In this article, we explain the upcoming changes and how they can help you address the needs of your retiree clients.
Why do I need to know about home care services?
Home care is an important part of care services for older Australians. The number of home care recipients is growing, and so too the need for home care advice.
At 30 June 20151 there were 72,702 home care packages, which were used by at least 83,838 eligible individuals. The Australian Government has a target1 to increase the number of home care packages available to 140,000 by the 2021-22 financial year, meaning advice opportunities in home care will grow significantly.
By understanding the home care rules including the upcoming changes, advisers are better positioned to maintain current retiree client relationships.
What does home care involve?
The aim of home care is to provide eligible individuals who want to stay at home with a range of services to help them with their daily activities. These include:
- personal services – showering/bathing, dressing and/or mobility
- support services – help with housework, gardening, maintenance, transport etc
- clinical care – nursing, physiotherapy, dietary, hearing and vision services.
From 27 February 2017, changes will be made to improve the way home care services are delivered. The main changes relate to:
- removal of approval ‘bands’
- assignment of home care packages
- portability of home care packages.
Removal of approval ‘bands’
Currently, there are four levels of home care packages that fit into two different approval bands. To obtain a home care package, individuals must be assessed by ACAT2 to determine eligibility in one of these two bands, either Level 1-2 or Level 3-4.
|Level 1 – basic care needs
Level 2 – low care needs
|Level 3 – intermediate care needs
Level 3 – intermediate care needs
From 27 February 2017, these bands will be removed and ACAT assessors will approve individuals for a home care package at one of the specific levels.
The effect of this is, any of your ACAT assessed clients who were approved for a home care package band before 27 February 2017 will automatically be approved for the higher level of care in that band.
For example, individuals who have an ACAT approval for a Level 1 or 2 home care package will be automatically approved for a Level 2 package from 27 February 2017.
In the event the care recipient is not sure of their current level of home care they can find out by contacting their provider, checking their Home Care Agreement or contacting My Aged Care.
Home care package assignment
From 27 February 2017, a national queue will be established to assign home care packages to individuals through the My Aged Care service. An individual will be placed in the national queue when they have been approved for a home care package and have indicated that they want to start receiving home care services.
Currently, packages at each level are allocated to service providers, who then manage their assignment to individuals. This creates waiting lists for some providers.
In the new national queue, ACAT assessors will need to determine whether an individual should be assigned a high priority to gain faster access to a home care package.
These changes will mean the allocation of packages will be more consistent across the country. Packages will be made available based on the relative needs and circumstances of individuals and the length of time they have been waiting, rather than on a regional basis.
When the individual reaches the top of the national queue, a letter will be sent informing them that a home care package has been assigned to them. The letter will include:
- the details of their home care package
- a unique referral code
- the date they need to enter into a Home Care Agreement.
The unique referral code allows service providers to access the individual’s information via the My Aged Care portal and accept them into their service.
The individual will have 56 days from the date of the assignment letter to choose a service provider (they are also able to ask for an extension of 28 days) to avoid their package being withdrawn.
For individuals who have already been ACAT assessed, transitional arrangements will apply to them based on their approval date and whether they are currently receiving a home care package.
If they are not receiving a home care package but were approved for home care:
- since 1 July 2016 – they will automatically be notified that they will be added to the national queue, along with the additional choices they have from 27 February 2017
- prior to 1 July 2016 – they will need to contact My Aged Care to be added to the national queue if they are still seeking a home care package.
Any existing referral codes will no longer be valid if they have not commenced a home care package by 26 February 2017.
Also, if on the 27 February the individual is:
- already receiving a home care package at their approved level, there will be no change and they can continue receiving care with that provider. They will however be notified of the additional choice they have if they wish to change providers.
- receiving a package at a level lower than their approved level, they will continue receiving care at their current level. However they will be notified that they have been added to the national queue, which will give them the option to increase their home care package when one becomes available.
Currently home care packages are held by the service provider. However from 27 February 2017, packages will be allocated to the care recipient (via the newly established national queue).
This means home care packages will become portable, allowing care recipients to change service providers and transfer any unspent funds (less any exit costs) from their package to a new provider.
In cases where the care recipient will be leaving home care for any reason (including moving into residential aged care), any unspent amount (less any exit costs) will need to be paid back.
Generally a large portion will be repaid to the government and a portion repaid to the care recipient or their estate.
The unspent amount is the total of any home care subsidies (and supplements) and home care fees, paid for the period between 1 July 2015 (or the care recipient’s start date, whichever is later) and their cessation date, that has not been spent or committed to their care. A final written notice will then be provided to the care recipient within 56 days of their cessation date confirming their unspent amount.
Exit costs can be charged by a provider, but they must be agreed to in the care recipient’s Home Care Agreement and the maximum cost must be published on myagedcare.gov.au.
If a care recipient would like to change providers they can notify their existing provider and agree on a cessation date. The care recipient must then speak with a new provider to confirm that their needs can be met and agree on a start date (which must be after the cessation date with the existing provider). Care recipients would need to contact My Aged Care to reactivate their referral code so they can give it to the new provider to accept.
No change to home care fees
There will be no change to the calculation of home care fees as a result of the upcoming changes. The following fees will remain:
- Basic Daily Fee (BDF) – equals $9.973 per day (17.5% of the single base Age Pension rate) and indexed in both March and September
- Income-tested fee – based on the care recipient’s assessable income above a respective threshold and up to a maximum of $28.613 per day.
Opportunities for advisers
Opportunities exist for advisers to help home care clients manage their cash flow and maximise their social security benefits. For example, there are strategies that can reduce assessable income for the income-tested fee. These include:
- investing in an investment bond held inside a trust
- asset reducing strategies to reduce deemed income
- reducing drawdowns from grandfathered ABPs
- investing in Challenger’s CarePlus.
Joan is single, 81 years old and lives in her own home worth $800,000. She has $5,000 of personal contents, $250,000 in savings and has just begun receiving a Level 2 home care package. Joan has expenses of $25,000 per year on top of her home care expenses.
If Joan invests $200,000 of her savings in Challenger CarePlus:
Table 1: Cash flow summary for year3
||CarePlus and cash
|Basic daily fee
|Income-tested care fee
|Net cash flow
By investing in Challenger CarePlus, Joan can increase her Age Pension by $1,562 to the full single rate, reduce her income-tested care fee by $783 to nil and increase her net cash flow from negative to positive by $3,519 in the first year.
For more information on home care, or aged care advice, please contact Challenger Technical Services on 1800 176 486.
1Aged Care Financing Authority (ACFA) – Fourth report on the Funding and Financing of the Aged Care Sector, July 2016.
2Aged Care Assessment Team, or ACAS (Aged Care Assessment Services) in Victoria.
3Rates and thresholds as at 1 January 2017.
4Challenger CarePlus quoted 10/01/2017 for an 81 year old female, monthly payments, no adviser service fees.
5Bank account and term deposit interest rates are 2.50%.
The information contained in this update is current as at 3 February 2017 unless otherwise specified and is provided by Challenger Life Company Limited ABN 44 072 486 938, AFSL 234670 (Challenger), the issuer of Challenger CarePlus, and Challenger Retirement and Investment Service Limited ABN 80 115 534 453 AFSL 295642, issuer of the Account Based Pension. It is intended solely for licensed financial advisers and this update must not be passed on to retail clients. The examples shown are for illustrative purposes only and are not a prediction or guarantee of any particular outcome. This information is not intended to be financial product advice and has been prepared without taking into account any person’s objectives, financial situation or needs. Each person should, therefore, consider its appropriateness having regard to these matters and obtain the relevant Product Disclosure Statement (PDS) and consider the information in the PDS before making a decision about investing. A copy of the PDS is available at www.challenger.com.au or by contacting our Adviser Services Team on 1800 621 009. This update may include statements of opinion, forward looking statements, forecasts or predictions based on current expectations about future events and results. Actual results may be materially different from those shown. This is because outcomes reflect the assumptions made and may be affected by known or unknown risks and uncertainties that are not able to be presently identified. Neither Challenger nor its related bodies corporate nor any of their employees receive any specific remuneration for any advice provided in respect of a product. Some or all of Challenger group companies and their directors may benefit from fees and other benefits received by another group company. Any taxation, Centrelink and/or Department of Veterans’ Affairs illustrations are based on current law at the time of writing which may change at a future date. Neither Challenger, nor any of its officers or employees, is a registered tax (financial) adviser under the Tax Agent Service Act and it is not licensed or authorised to provide tax or social security advice. Before acting, we strongly recommend that prospective investors obtain financial product advice, as well as taxation and applicable social security advice from a professional and registered tax agent who can take into account the investor’s individual circumstances.