The aged care industry is desperate for more of accommodation bonds

The financial crisis in the high care nursing homes is getting worse, and we are no closer to re-establishing the sector on a sustainable basis. Aged care providers have refused to take up over a third of the new bed licences issued by the Commonwealth this year because they cannot afford the cost building and staffing new facilities. This is unsurprising since 40% of high care providers now operate at a loss.

The Senate’s economics committee has announced an inquiry into aged care funding. We don’t need another time-wasting inquiry or summit or review. For years, aged care groups and industry analysts have called on the federal government to implement the recommendations of the 2004 review of aged care policy conducted by Professor Warren Hogan.

The Hogan Report found that a fair, efficient and sustainable solution to the problems facing nursing homes was to extend the accommodation bond system, and allow ‘high care’ nursing homes to charge residents a bond to offset the public cost of their care, as well as fund the construction of additional capacity.

Accommodation bonds are financed by the sale of the homes of residents in aged care facilities, and are returned to their estate upon death, minus an administration charge. Bonds can currently be levied by aged care providers for places in “low-care” facilities. This has led to spectacular growth in that segment of the aged care market.

As the Productivity Commission has just reported, demand for high care beds will skyrocket over the next 40 years as the proportion of the population aged over 85 expands. Hogan found that the uncertainty the inability to levy bonds creates discourages investment and stymies long-term planning and development decisions. The high care sector is already heavily dependent on taxpayer funding. The federal government will not be able to provide the estimated $27 billion capital required over the next decade alone to expand and modernise high care facilities.

Despite these realities,for unwarranted political reasons, neither side of politics supports the introduction of high care bonds. Despite what politicians fear, few people will begrudge temporarily losing control of their inheritance to care for an aged parent.

The bad blood reported this week between the current federal aged care minister and the industry dates back to June. An alliance of Queensland for profit and not for profit high care providers visited Canberra to discuss long-term funding arrangements, including the accommodation bond issue.

The Minister’s response was a scathing press release accusing greedy aged care providers of seeking greater federal funding to boost their huge profits. The Minister pointed to the ‘record’ $1.2 billion Queensland nursing homes will receive from the Commonwealth, but ignored the fact that over the last decade the increase in government funding has been below the growth in the real cost of providing high care. Also ignored was the fact that the problem in aged care is partly that the minister is always a rookie, keen to make sure their first job isn’t their last. Coalition and Labor ministers alike are therefore keen to prevent embarrassing the government.  Hence spin and media management have become the standard tactic employed to keep the bonds issue off the political agenda.

Dr Jeremy Sammut is a researcher at The Centre for Independent Studies.