Aged care capital crisis

An aged and community care body has warned that unless a vital amendment to the aged care legislation is made the industry faces critical shortages of capital and a decrease in investment, ultimately leading to closures of aged care facilities.

Leading Age Services Australia (LASA) said proposed changes to the way people pay for their residential aged care accommodation, if implemented, would create substantial losses for providers and create disincentives for capital investment.

Speaking from Canberra  recently, LASA national chief executive, Patrick Reid, explained the situation:

“At the moment, when an older person enters residential aged care they pay a bond; when they leave that bond gets paid back by the new resident. It is simple cash flow of money in and money out.

“The problem with the proposed changes is that new residents won’t pay bonds [or Refundable Accommodation Payments], but take the option of paying a Daily Accommodation Payment (DAP) as it will be financially better for them to do so.

“Therefore, facilities will not have the cash to pay out and might need to increase borrowing.”

Mr Reid said the legislation, which was before the Senate earlier this week, runs the real risk of strangling the industry of means to raise this required capital – exposing government in the process.

“Unless the legislation is amended, the new accommodation payments will favour DAPs over bonds; substantially shifting the bonds system that has successfully formed the financial base for raising capital in aged care for decades” Mr Reid said.

Frances Mirabelli, deputy chief executive of LASA Victoria, said the amendment is critical, as without it every provider – whether large or small, metropolitan or rural – will be seriously affected.

“The change is crucial to the viability of our members here in Victoria. Unless it occurs, it is likely that some of our members may not be able to continue to operate, and in many parts of regional Victoria aged care services will no longer be available.”

LASA appealed to the Senate to make a simple amendment by inserting the word “not” in section 44-26(5) to ensure an individual’s assets, be they bricks and mortar or cash, are treated the same and there is no bias towards daily payments that will reduce the ability to raise capital.

COTA Australia chief executive, Ian Yates, also said the legislation needed to be “dealt with promptly” so reforms could start as planned on 1 July 2013.

“The legislation is critical to improving the lives of older Australians who need aged care and miss out now, and their suffering families,” he said.

The five Aged Care bills are before the Senate and will be considered in the last two weeks of sitting, which started on Monday.