Government reveals AN-ACC changes to fund higher staff wages 

The Government has announced it will invest an additional $3.8 billion over four years to fund the next round of aged care pay rises, making the statement just days after the generation-defining new Aged Care Act was presented to Parliament.

It caps off a busy week for the Anthony Albanese Government.

Key points

• The Fair Work Commission finalised its decision for the Aged Care Work Value Case Stage 3 in March, determining that eligible aged care workers would receive pay rises across two stages (although some will only receive it in one stage)
• The Government has committed to fully funding all aged care pay rises, starting with the previous 15% award rage increase which cost $11.3 billion
• This $3.8 billion sum is in addition to the $5.6 billion dedicated to aged care reforms associated with the new Aged Care Act

“Through this additional funding, we are supporting a sustainable sector delivering high-quality care that older people can access when and where they need it,” the Minister for Aged Care, Anika Wells, said.

“These award wage increases apply to workers who provide more direct support and care to older people – personal care workers, assistants in nursing, recreational activities officers and home care workers.  

“They also apply to those workers whose roles support the running and functioning of residential care services – administration staff, drivers, maintenance staff and gardeners, laundry hands, cleaners and food services assistants.”

The Government also revealed changes to the Australian National Aged Care Classification (AN-ACC) price and the hotelling supplement, which will both help fund direct care costs such as staff wages. 

Under the Government’s proposed co-contribution requirements, some aged care residents will pay for their hotelling supplement. This will be means-tested for residents with more than $238,000 in assets, $95,400 in income or a combination of the two.

However, after the Government declared it would fully fund direct care costs, it’s unclear whether co-contributions for the hotelling supplement will go towards direct care staff wages or be available to providers for other expenses.

The changes to AN-ACC and the hotelling supplement are as follows:

1. From 1 October 2024, the Australian National Aged Care Classification (AN-ACC) price will be increased to $280.01, which funds the FWC stage 3 increase as well as other cost increases. 

This represents a 13% increase in average daily funding and will also enable providers to meet the increase to 215 care minutes that also comes into effect on 1 October 2024. Overall care funding has now increased 58% since we came to Government in 2022.

Changes to AN-ACC fixed and variable funding categories will also be implemented on 1 October to better align funding with costs, informed by 2024-25 pricing advice from the Independent Health and Aged Care Pricing Authority (IHACPA).

2. From 20 September 2024, the hotelling supplement will also increase from $11.24 to $12.55 per resident per day. This includes $1.09 to fund the FWC stage 3 increase. There will be a further increase of $1.89 on 1 July 2025 to fund higher hotelling costs as announced on Thursday 12 September 2024. 

These two increases will ensure providers are funded to deliver the cost of everyday living services, consistent with the recommendation of the Final Report of the Aged Care Taskforce that funding for daily living needs to cover the full cost of providing these services.

Included in the changes mentioned above is the revised AN-ACC Base Care Tariff (BCT) structure and funding for providers in Modified Monash 1 to 5 locations through the National Weighted Activity Unit (NWAU) weightings. 

Under the current structure, MM 1 – 4 services are grouped despite the vast differences in costs and financial outcomes for metropolitan, regional and rural providers. 

All providers in MM 1 – 4 receive $124.37 per occupied place, with MM 5 receiving $139.60. However, from October 1 2024: 

• MM 1 (metropolitan areas) will receive $140.01 per occupied place
• MM 2 – 3 (regional centres/large rural towns) will receive $154.01
• MM 4 – 5 (medium and small rural towns) will receive $159.61

These changes better reflect the higher staffing costs regional and rural providers manage, including dramatically higher agency expenses.

Meanwhile, an additional $400 million over four years will support Home Care Package providers under the Commonwealth portion of the home care subsidy. The subsidy increase allows them to pass on the wage increase to eligible staff. Commonwealth Home Support Programme (CHSP) providers can apply for a Grant Opportunity for additional funds.

A full breakdown of changes to funding can be found on the Department of Health and Aged Care’s website.