Unspent Funds – An Avoidable Problem

The recent release of the Federal Government’s Consultation Paper – improving home payment arrangements has determined that unspent funds will need to be returned to the government, which has caused the industry to question how it let itself get into a situation where the outcome of this decision will surely be a financial win for the government and a significant loss for the provider and consumers.

Home care has traditionally been funded by the Government based on an independent ACAT assessment for each approved consumer. This consumer-based subsidy plus additional supplements to meet other targeted areas, when combined with a co-contribution from the consumer, has been deemed sufficient to meet the cost of the care provision. Where financially able, consumers have been charged an additional income-tested fee (ITF), which reduced the government subsidy allocated.

In addition, like most government funded programs, the subsidy arrangement has always erred on the side of underfunding rather than overfunding, obviously meant to ensure providers are obliged to operate effectively and efficiently while minimising costs, thus allowing recovery of overheads and an operating surplus to be achieved.

What is being proposed is a fundamental and extremely significant change in the funding model.

To date, the government has provided this funding “in advance”, which reduced the need for working capital, thus reducing the need for providers to generate working capital from other sources.

The following industry drivers have resulted in the prospect of an infinitely worse arrangement, financially:

• Provider misunderstanding of government policy and treasury thinking, which led to the belief that government will allow providers to retain and use unspent funds that had been allocated for the provision of care.
• Providers misleading themselves that they are in control of their business and therefore in charge of the business model that delivers services to their respective clients. The truth is that providers are in place to provide an alternative to the more costly and inefficient system of government delivering those services. The government has retained absolute control over how the arrangement will work and how providers will comply.
• Providers negotiating and determining service models with their clients, irrespective of whether it meets departmental and/or government expectations on how programs are to be delivered.
• Providers delegating broad decision-making powers to junior employees and/or lower level management personnel without appropriate checks and balances. Poor business decisions made in the name of compassion can have far reaching consequences, often at the lethal expense of the business they represent.

Where to from here?

Continue to read David’s full article here on Australian Ageing Agenda, and have a say!  
[The above is an excerpt of David’s article on Australian Ageing Agenda.]

Learn about the Discharge management feature in eHCP here,  designed to help you manage unspent funds and exit amounts efficiently.