Background

IHACPA was established to promote improved efficiency in, and access to, public hospital services through the provision of independent advice to Australian governments. IHACPA achieves this by developing and implementing robust systems to support activity based funding (ABF) for those services.

Since its establishment in 2011, IHACPA's primary function has been to determine an annual national efficient price (NEP) for public hospital services. The NEP is a major determinant of the level of Commonwealth funding for public hospital services and provides a price signal or benchmark for the efficient cost of providing public hospital services.

On 27 July 2022, the Commonwealth Minister for Aged Care, the Hon Anika Wells MP, introduced the Aged Care and Other Legislation Amendment (Royal Commission Response) Bill 2022 (the Bill). This Bill was passed by the Australian Parliament on 2 August 2022.

The Bill included amendments that expanded the remit of the existing IHPA and renamed it to become IHACPA. Schedule 8 to the Bill amended the Act, the Aged Care Act 1997 and the Quality and Safety Commission Act 2018 to expand the functions of a renamed IHACPA to include the:

• provision of advice on healthcare pricing and costing matters
• provision of advice on aged care pricing and costing matters
• performance of certain functions conferred by the Aged Care Act.

The passage of the Bill also saw the transfer of functions from the former Aged Care Pricing Commissioner to IHACPA. IHACPA therefore has the power to approve prices for residential aged care accommodation and extra services.

IHACPA’s expanded role in providing independent aged care pricing advice will aim to ensure that aged care funding, including through the new classification system for residential aged care and respite care, the Australian National Aged Care Classification (AN-ACC), is directly informed by the actual costs of delivering care.

IHACPA will provide advice to inform Commonwealth Government (Government) decisions on the costing and pricing of aged care services from 1 July 2023.

In particular IHACPA will:

• Provide annual aged care pricing advice about methods for calculating amounts of subsidies and supplements to be paid for residential aged care, residential respite care and home care. This will involve advice on the costs of care and how changes in the costs of care should be considered in Government funding decisions.
• Review data, conduct studies and undertake consultation for the purpose of providing aged care pricing and costing advice and/or healthcare pricing and costing advice
• Perform such functions as are conferred by the Aged Care Act or the Aged Care (Transitional Provisions) Act 1997
• Perform other functions relating to aged care (if any) specified in regulations
• Do anything incidental or conducive to the performance of the above functions.

The Commonwealth Minister for Health and Aged Care will in turn determine the price for aged care services. The Government and Department of Health and Aged Care will continue to be the system operators and responsible for the funding of aged care and aged care policy.

IHACPA received correspondence regarding IHACPA’s aged care pricing functions, including an Expectations Setting Paper, from The Hon Mark Butler MP, Minister for Health and Aged Care, on 22 August 2022. 

In response, IHACPA provided a Statement of Intent regarding its aged care pricing functions to the Minister on 19 October 2022.