Aged care costs

Recent commentary about payment of bonds in residential aged care facilities has fundamentally missed two key points. First we must have a system that allows aged care providers to build and sustain quality housing stock in order to meet the accommodation expectations of our ageing population. Second, and most importantly, aged care facilities provide homes for people. If our aged care system didn’t exist who would be caring for our elderly?

Before I elaborate, let me first grasp the nettle on the user pays principle.

With our rapidly ageing population the only option is for Australia to have an aged care system based on the principle that those who can afford to will make a contribution to the costs of both their housing and care. Government must then step up to the plate for those less financially capable.

We have allowed a two-tier system to be set up in Australia. Elderly Australians assessed as being “low care” are expected to contribute on this user pays principle via our bond system, but those assessed as “high care” can’t be charged unless they enter an extra services high care facility.

Few people understand that the Commonwealth Government tightly controls all aspects of federally funded residential aged care. They set the fees to be charged for daily care. They determine the number of beds and where they will be located. They regulate quality standards through what is one of the most stringent quality accreditation systems anywhere in the world. But there is a significant shortfall for aged care providers in regards to the construction and maintenance of our building stock. Clearly the money has to come from somewhere.

We don’t think twice about allowing banks to impose a mortgage over the title when we borrow to purchase a home. The concept of paying a “bond” to enter low care facility is a far simpler and reasonable proposition. That is, unlike a home loan, the bond is repaid with only a small administrative deduction capped by government. The bond, less a small administrative withholding, is repaid at the end of their stay.

For example a resident pays a bond of $250,000 and remains in residential aged care for five years, a total of $233,200 would be returned at the end of their stay. Under current legislation a maximum of $280.00 per month can be retained for a maximum of 60 months equating to total deductions from a bond of $16,800 over five years.

The idea of “bonds” in low care facilities is therefore much closer to the concept of a refundable home loan.

Government data shows average bonds across Australia are under $200,000 although it is true there is substantial variation particularly for new facilities.

On the other side of the coin residential aged care beds now costs on average between $150,000 to $200,000.

As bonds are subject to strict income tests, they are only applicable for those in low care who can afford to pay. Pensioners would not be required to pay a bond if they have few assets, currently the limit is $33,000. Such a pensioner with low asset levels would seek out a residential low care facility that offers what is known as a concessional place. In this instance the government pays the provider a small additional amount each day, albeit well below the cost of building, and the provider forgoes the opportunity to hold a bond.

But to the chagrin of aged care providers, the government has simply failed to come to terms with the “user pays” concept for our elderly who enter residential aged care when assessed as “high care”. The opportunity to charge a bond has been senselessly denied.

Both the government and the Labor Party have become echoes of each other by stating they have “ruled out bonds in high care”. So, where is the money to come from if we expect providers to construct high care facilities now that 63 per cent of all new residents are classified as high care on entry?

The pressure valve will shortly explode as we are typically replacing a low care resident who pays a bond with a high care resident who does not. It is time for heads to come out of the sand instead of saying “no bonds in high care”. What solution does the government and Labor see to this looming crisis? What better time for an announcement of a vision for the future than during a closely fought election campaign.

The reason we need this is obvious - no one wants to live in sub standard accommodation. And, providers remain committed to looking after our elderly with respect and dignity. The reality is that bonds in both low and high care are the only really affordable solution.