The $1.2B AFI cuts: Government announces indexation pause and amendments

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The aged care funding cuts that in part triggered the severe write-down in the value of Estia and to a degree Regis and Japara, have partially been put on pause by the government.


This follows strong advocacy by ACSA, LASA and the Aged Care Guild, backed by ACSA commissioned research which showed the cuts would decrease funding per resident by an average of $6,655 or 11 per cent a year.

One of the biggest bones of contention by the government was possible ‘gaming’ by some operators in the area of “complex pain management”, most commonly requiring physiotherapy, massage and TENS treatment, where residents can be classified by the operator as requiring high levels of treatment and therefore higher government payment rates.

The unexpected and blunt cuts not only severely damage the viability of the sector but also don’t talk about the welfare of residents – who need the treatment. (Cut income by 11% and services must suffer).

Assistant Minister for Health and Aged Care, Ken Wyatt has hit the pause button, as follows:
• The planned 120 minutes will be reduced to 80 minutes
• The ‘scoring’ of 12a and 12b – calculating who needs treatment – will now be unchanged
• A 12 month full indexation pause – meaning no funding increase per hour in 2017-18 for Complex Health Care
• A half indexation pause in 2018-19 (residential aged care funding increases by up to 5% pa)
• The rural and remote viability supplement has been increased
The sector is being pragmatic about the modifications.
ACSA President Paul Sadler says: “ACSA has consistently said it does not support any changes to outlays on aged care because of the impact on quality of care for those with complex care needs.”
“However, as the Opposition were supporting the Government’s changes ACSA advocated for the ‘least worst’ outcome for aged care providers and consumers. This was an indexation pause and amended changes to the ACFI tool – as were announced by the Hon Ken Wyatt today”.
“ACSA has met with as many remote, rural and regional Federal MPs as possible due to concerns they had raised with us in relation to the effects of Budget changes on aged care providers and consumers in their electorates”.
“ACSA has long been a vocal advocate for rural and remote service providers and we’re pleased that the Government has increased the rural and remote viability supplement.”
It will be interesting to see what the new modelling of the impact on the bottom line will be for aged care operators. The Government still has a $1.2B cut in funding in its sights.