The objective of the audit was to assess the effectiveness of DoHA's management of the planning and allocation of aged care places and capital grants, in accordance with the Aged Care Act 1997.
1. The Australian government has a primary role in the funding and regulation of Australia's aged care services. The provision of aged care is a high profile area of government activity, involving large amounts of government expenditure and the delivery of services to vulnerable populations.
2. Rather than directly providing aged care services, the Australian government supports the provision of aged care to those people who are assessed as requiring care, via subsidies and grants to aged care providers. The Department of Health and Ageing (DoHA) manages the planning and allocation of Australian government-funded aged care, under the Aged Care Act 1997 (the Act).
3. The Australian government budget for aged care subsidies for residential, community and flexible care in 2008–09 is $6.7 billion.1 Up to $44.5 million in capital grants for residential aged care will also be made available in 2008–09. The government's expenditure on aged care is expected to rise in coming years, in line with Australia's ageing population.
4. The providers of aged care services include commercial companies and the not-for-profit sector. Indicative of the composition of the industry in terms of residential care services, in 2006–07 providers accounted for the following shares: religious organisations (28.8 per cent); private providers (26.9 per cent); community-based providers (17.5 per cent); charitable organisations (15.0 per cent); state government (9.1 per cent); and local government (2.6 per cent).
5. The government controls the supply of subsidised aged care places through its role in setting the aged care planning ratio target. In accordance with this target, DoHA allocates and funds aged care places supplied by approved aged care providers, for a set number of operational aged care places for every 1000 Australians aged 70 years and over. The current planning ratio target is 113 operational aged care places per 1000 people aged 70 years and over, to be achieved by June 2011. The target mix of care type within this target total is 44 high-care residential places, 44 low-care residential places and 25 community care places.
6. Owing to the time lag that necessarily occurs between DoHA allocating places and those places becoming operational (usually due to the need to construct a residential facility), DoHA has adopted an approach that ‘over-allocates' places in order to meet the target ratio by the target date. At 30 June 2008, DoHA had allocated a total of 247 371 aged care places (resulting in the allocated ratio being 123.6 per 1000 people aged 70 and over). At the same point in time 223 107 aged care places were operational, that is, in a position to provide care (resulting in an operational ratio of 111.5 places per 1000 people aged 70 and over).
7. DoHA, as a matter of broad principle, seeks to achieve the national aged care planning ratio (currently 113 operational places per 1000 people aged 70 years and over) uniformly in all states and territories, as a way to provide equitable access to aged care for all older Australians.
8. DoHA provides advice to the Minister for Ageing on the number of new aged care places required to reach the planning ratio target. The decision on how many places to release each year is made by the Minister, taking into account the DoHA advice. Following this decision, DoHA allocates aged care places via a competitive, tender-like process—the Aged Care Approvals Round (ACAR). In recent years over 10 000 new places have been allocated each year. The ACAR is highly contested by current and prospective aged care providers because ‘gaining a place' is a necessary step in participating in the provision of aged care, with access to ongoing government subsidies.
9. The provision of aged care places and capital grants fits within a broader context of government and non-government activity in aged care and associated fields at the national, state and local levels.
Audit objective and scope
10. The objective of the audit was to assess the effectiveness of DoHA's management of the planning and allocation of aged care places and capital grants, in accordance with the Aged Care Act 1997.
11. Australian government-funded aged care relevant to this audit comprises:
- residential aged care;
- community aged care packages which provide care services in a care recipient's home;
- several flexible care programs including high care services in the care recipient's home and services for people with dementia living at home; and
- support for aged care infrastructure via capital grants.
12. The Department of Health and Ageing (DoHA) manages the planning and allocation of aged care places under the Aged Care Act 1997 (the Act). The Act prescribes in detail much of the planning and allocation processes to be undertaken by DoHA. The planning and allocation of aged care places is a mature process and, overall, DoHA has adopted an appropriate approach to its planning, implementation and reporting against government targets. It has effectively managed the planning and allocation of aged care places and capital grants, in accordance with the Act. DoHA has sound administrative processes that: take into account the objectives of the Act when providing advice to Minister for Health and Ageing on the planning ratio target; allow staff to follow established legislative and internal guidelines to implement each step of the the Aged Care Approvals Round (ACAR); and provide adequate information for the department to report on outcomes against government targets.
13. DoHA achieved the government's 2004 and 2007 targets for the provision of aged care places. The national targets were designed to strike a balance between costs and the community's aged care needs. As at 30 June 2008 there were 111.5 operational places per 1000 people aged 70 years and over. Given the government's target is to achieve 113 operational places per 1000 people aged 70 and over by June 2011, DoHA is well placed to achieve the current target.
14. Although DoHA has an effective approach to managing and allocating aged care places, there are two high-level processes that could be augmented to strengthen aged care planning and the transparency of DoHA's provision of places to Indigenous Australians, and more generally, improve the equity of access to aged care for older Australians:
- DoHA providing advice to the Minister for Ageing on options for incorporating the Indigenous aged 50-69 population numbers into the planning ratio target; and
- DoHA assessing alternatives to how the department applies the government's national aged care planning ratio across state and territories, so as to better take account of state demographic differences.
15. The government's ratio target determines the number of places to be released each year, based on the number of people aged 70 and over. DoHA also allocates places for the Aboriginal and Torres Strait Islander population aged 50-69, recognising that the conditions associated with ageing generally affect Indigenous people earlier than the wider Australian population. In doing so, however, DoHA uses places that were determined based on the Australian population aged 70 years and over.
16. Changing the aged care planning ratio is a matter for government. DoHA could provide advice to the Minister for Ageing on options for incorporating the Indigenous population aged 50-69 into the national planning ratio target. Taking account of the Indigenous population aged 50-69 in the ratio would enhance DoHA's ability to plan for the aged care needs of that population and plan the distribution of places accordingly, without the need for DoHA to reallocate places initially determined on the basis of the Australian population aged 70 and over.
17. In directing places to the Indigenous population aged 50-69, DoHA uses its administrative discretion to better facilitate Indigenous access to aged care services. In taking this approach, the department is recognising the demographic situation of a particular population. There is an opportunity to extend this approach to deal with other demographic differences between states and territories.
18. DoHA seeks to achieve the national aged care ratio uniformly in all states and territories. This approach is seen by DoHA as enhancing equitable access to aged care for all older Australians. However, the uniform application of the aged care planning ratio target does not recognise state and territory demographic differences. In order to better address state and territory differences, DoHA should, in consultation with its Minister and other stakeholders, assess the merits of alternative methods of planning the distribution of places across the states and territories.
19. DoHA advised the ANAO that it agrees that these matters should be considered in the context of the Government's planned review of the aged care planning ratios and allocation process. 2
20. The ACAR has been conducted for over ten years and, during this time its scale and complexity has continued to grow. In order to manage in this environment, decision makers need to be supported by appropriate management information relating to ACAR costs, particularly costing information on the key components of the process including at the state level.
Key findings by chapter
Chapter Two – The aged care planning ratio
21. The national aged care planning ratio, set by government, has a number of positive features, such as being a transparent and measurable planning tool that can be applied by DoHA to control supply and expenditure, by matching provision levels to population growth.
22. DoHA recognises that the conditions associated with ageing generally affect Aboriginal and Torres Strait Islander people substantially earlier than other Australians, and takes account of the Indigenous population aged 50-69 in determining the distribution of places to regions, directing places to this population. In effect, DoHA uses places planned and determined based on the Australian aged 70 and over population, as required by government, to meet the particular needs of the Indigenous population aged 50-69.
23. Although DoHA is working appropriately within its parameters to attempt to address the needs of Indigenous people aged 50-69 years, it would be preferable if DoHA did not have to reallocate places to this population that would otherwise be allocated to the entire Australian population aged 70 and over.
24. DoHA could provide advice to the Minister for Ageing on options for incorporating the Indigenous population aged 50-69 into the national planning ratio target. Taking account of the Indigenous population aged 50-69 in the ratio would improve DoHA's ability to plan for the aged care needs of that population and plan the distribution of places accordingly.
25. In terms of the wider population, data from the Australian Bureau of Statistics and DoHA indicate that there are demographic differences across states and territories, as demonstrated in this report in Tables 1.2, 2.2 and 2.3.
26. DoHA's approach to seek equal aged care planning ratios across all states and territories could lead to inequality of access to aged care places in the particular states and territories where demographic patterns differ markedly from the others. The result of having equal aged care planning ratios is that consumers living in different states and territories may face varied levels of competition for access to aged care. This means that a state with an ‘older' population (or more complex health needs) would have a higher demand for high care residential aged care, compared with a state with a ‘younger' population (or less complex health needs).
27. There are opportunities for DoHA, in consultation with its Minister and other stakeholders, to assess the merits of alternative methods for planning the distribution of aged care places across states and territories in order to better address states and territory differences and thereby seek to improve the equity of access to aged care places across states and territories.
Chapter Three – Planning for the ACAR
28. DoHA allocates the majority of aged care places via the ACAR. DoHA begins the ACAR processes by estimating the total number of places to be made available each year and how these are to be distributed amongst the states and territories. With advice from DoHA, the Minister for Ageing determines the numbers of places to be made available, for each care type, for each state and territory.
29. The Level One process, which determines the number of places to be released each year, appropriately takes account of the objectives of the planning process under the Act, and correctly calculates the number of places required to achieve the target ratio.
30. In the Level Two process, DoHA effectively uses its Aged Care Planning Advisory Committees to assist the Secretary in distributing places amongst regions according to government and legislative specifications. Some improvements could be made by DoHA in its provision of data, particularly with respect to special needs groups, to the committees.
31. DoHA performs the underpinning tasks that are required to plan for, and design the ACAR. ACAR is a considerable administrative undertaking involving staff in DoHA's central and state offices. As an indicator of the large scale of the ACAR process, in the 2007 ACAR, aged care providers submitted: 444 applications seeking 21 456 residential places (with DoHA offering 6525 residential places); and 1871 applications seeking 40 210 community and flexible care places (with DoHA offering 4013 community care places). In line with the growing number of Australians requiring aged care, the number of places to be made available will increase.
32. In this environment, sound financial information on the costs associated with the ACAR process is an important tool for management and accountability purposes. It should provide alongside non-financial data, a picture of how the program is operating including the efficiency of operations and cost effectiveness. During the audit, DoHA was not able to provide specific data or estimates on the costs and funding approach related to the planning and allocation of aged care places and capital grants. Information on costs is important to inform management decisions about opportunities to improve operations within agencies, and satisfy internal and external accountability requirements. The level of cost information maintained should be sufficient for this purpose.
Chapter Four – Running the ACAR
33. After the number and location of aged care places are determined, DoHA conducts a tender-like process to allocate aged care places to aged care providers. For this step of the ACAR, DoHA advertises the type and location of the aged care places available, and invites applications from approved aged care providers. DoHA assesses the applications and the Secretary of DoHA allocates aged care places.
34. The ANAO reviewed key steps in the ACAR allocation process including the promotion of the call for applications; staff training and probity controls; the assessment and decision processes; and DoHA's debriefs for unsuccessful applicants. For each step of the process the ANAO found that DoHA's controls and review mechanisms were appropriate. The process has matured over more than ten years in operation, with DoHA electing to put in place a number of layers of review prior to the allocation decision by the Secretary's delegate.
35. The conduct of an ACAR is a large, annual undertaking for DoHA, both in terms of the scale and complexity of the assessment process, and the staff resourcing and time required to complete the process. While some industry parties have suggested that DoHA could streamline the ACAR process, the ANAO recognises that DoHA must balance any perceived efficiency advantages for it and industry against the risks attaching to not managing the process as well as it assesses is required.
36. DoHA has indicated to the ANAO that it intends to continue to improve its communication with the aged care industry about how and why decisions are made. For instance, DoHA could be more open about its internal processes for ACAR, in order to provide a greater measure of assurance to the aged care industry (and the public) regarding the integrity of the process.
Chapter Five – Monitoring and reporting
37. DoHA has a number of information technology systems to assist its planning and decision making. These systems effectively assist staff in their planning and allocation roles, by providing timely and user-friendly access to comprehensive and consistent information.
38. Performance monitoring is included in corporate planning documents, from the Portfolio Budget Statements through to Branch Operational Plans. The performance targets in these plans are realistic and measurable. There are appropriate internal reporting mechanisms such as exception reports for instances where targets have not been met. DoHA has acted upon previous internal and external reviews (including performance audits by the ANAO).
39. DoHA effectively reports on its achievement of the planning ratio target, the main performance indicator related to its planning and allocation activities. DoHA also reports on a broad range of other planning and allocation-related information in releasing the results of each ACAR and its annual reports to parliament on the operation of the Act. While DoHA intends to provide more information about the extent of unmet demand for places by providers, there could be benefit in DoHA improving its monitoring and reporting on the extent of unmet demand for places by consumers. DoHA could also improve its reporting on provision of aged care to special needs groups, with increased detail about its actions to address these needs.
40. The ANAO made two recommendations designed to improve DoHA's management of the planning and allocation of aged care places and capital grants.
Summary of agency response
41. DoHA is supportive of the audit report as a constructive and generally extremely positive appraisal of the aged care places planning and allocations process. This program has been the subject of a number of audit and review processes in recent years and DoHA has been able to institute a program of continuous improvement to ensure the planning and allocation of new aged care places is supported by a sound, well-conducted process with an emphasis on high probity and ethics standards.
1 While the Australian government provides the majority of the funding for aged care, care recipients may also make a means-tested contribution towards the cost of their care.
2 DoHA advice to the ANAO, 19 March 2009.