Aged Care Legislation Amendment (Improved Home Care Payment Administration No. 2) Bill 2020

Revised Explanatory Memorandum

(Circulated by authority of the Minister for Aged Care and Senior Australians, Senator the Hon Richard Colbeck)
This memorandum takes account of amendments made by the House of Representatives to the bill as introduced.
This revised explanatory memorandum responds to concerns raised by the Senate Standing Committee for the Scrutiny of Bills in Scrutiny Digest No. 15 dated 11 November 2020 and in Scrutiny Digest No. 17 dated 2 December 2020

Assessment of issues raised

Phase 2

The main concern with Phase 2 raised in the consultation meetings and in written submissions was the capacity for DHS to implement the required changes to their systems to deal with the new payment arrangements, along with the costs to providers of having to change their payment systems. Providers were particularly concerned that if the new arrangements are not introduced smoothly, there will be significant reconciliation issues in dealing with discrepancies in data and this will have a significant financial impact on providers.

In order to gain an insight into the system adjustments that providers may need to introduce to accommodate the change in payment arrangements, ACFA consulted with software providers to assess their views on the feasibility of the changes within the proposed timeframes.

Software providers noted that the most important pre-condition to managing a smooth transition process is getting the systems development phase in place and agreed to by key stakeholders as early as possible. It was further noted that the ability for software developers to implement timely and accurate changes for their clients (home care providers) was conditional on DHS being able to manage system requirements effectively from their end.

Software providers observed that a fully integrated system (business to Government) would not be achievable within the timeframe.

ACFA notes that it is important that the new arrangements whereby Government subsidies are paid for actual services provided maintains the flexibility of the current system which enables a consumer's package to go into negative balance if needed and to be recouped from subsequent monthly subsidy payments.

Conclusions and Recommendations

With some exceptions, there is general acceptance and support amongst providers and peak bodies that there is merit in the Government's decision to pay home care subsidies in arrears and for DHS to retain unspent funds.

Notwithstanding this general acceptance and support, ACFA's consultation raised a range of concerns around the implications of the new funding arrangements. A few providers advocated for the maintenance of current funding arrangements. While some providers supported the intent of the changes in payment arrangements, they argued that no changes should be made until the Royal Commission into Aged Care Quality and Safety has delivered its final report.

Acknowledging the range of themes raised during the consultation, ACFA makes the following conclusions and recommendations. The recommendations are framed within the three proposed implementation phases.

Phase 2

Phase 2 presents a potential risk for providers and the Government. This is primarily due to the extent of new system requirements to deal with the changes in payment arrangements and how smoothly these systems operate. Providers' concerns relate to a number of factors that can be broadly categorised into the following groups:

System costs and increased staffing costs associated with increased administration (particularly if manual data entry is required).
Significant increase in reconciliation requirements which will add to administrative expenses and impact on providers' financial position if there is a sizeable delay in resolving discrepancies and receiving payments.
Previous negative experiences with significant systems changes and concerns that short lead times will not allow time to trial the changes.
A high degree of uncertainty as to how Phase 2 will operate given numerous substantive matters are not yet resolved.

Risks are heightened for providers operating in thin markets and delivering niche services.

ACFA notes the complexity of the changes required to the DHS payment system. For this Phase to be implemented with minimal disruption to providers and consumers, system implementation requirements need to be well considered and articulated to the sector as soon as possible. The focus should also be on minimising the administrative costs for providers under Phase 2. In this regard, consideration should be given to the suggestion raised in StewartBrown's report that rather than requiring providers to submit a claim for services actually provided at the individual level, providers submit an aggregate amount of the services provided.

It is also important that the details of the operation of the payment arrangements under Phase 2 do not have an adverse impact on consumers. In particular, the new system should retain the flexibility of the current system whereby providers allow a consumer's balance to go into arrears if needed and recoup the amount from subsidy payments in subsequent months. Flexibility may also be needed to allow providers early access to a consumer's unspent balances held by DHS in order to finance large capital items. ACFA recognises the significant costs providers may incur in changing their systems and the smoothness of moving to the payment arrangements under Phase 2 is very dependent on how effectively DHS can manage their systems changes.

The prudent course to minimise the risks associated with Phase 2 is for Health to finalise the details of how this phase will operate in consultation with providers and to discuss with DHS and software providers what realistic time frame is required to trial and implement system changes.

Phase 2 recommendations

Recommendation 4: All aspects of how the new payment arrangements will operate need to be settled as quickly as possible to determine the system changes required by both DHS and providers. In settling this detail, the focus should be on minimising the costs to providers and avoiding any reduction in the flexibility of the current system in providing goods and services to consumers as they need them.
Recommendation 5: Once the details of the new arrangements are settled, there need to be consultations between DHS, providers and software developers to determine an appropriate time frame to ensure a smooth change to the new funding scheme, and also what can be done to minimise the administrative burden on providers. There should be a reasonable trial period of the new systems before full implementation. The current time frame for the introduction of Phase 2 (April 2021) should be reviewed following these consultations between DHS, providers and software developers.
Recommendation 6: Consideration should be given to providing financial support to providers operating in thin and difficult markets who may find it particularly challenging to adjust their systems to deal with the requirements of the new payment arrangements.

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