Julia Irwin (Fowler, Australian Labor Party) Share this | Hansard source

The Aged Care (Bond Security) Bill 2005 and related bills comes as a welcome assurance to many older Australians. You could say that we have been fortunate not to have seen any reported cases where bonds held on behalf of aged care residents have been lost due to an aged care facility going broke. But there has always been a risk that it could happen, with dire consequences for residents who have paid a bond. With most low-care residents being required to pay a bond, the failure of a provider could leave those residents without the means to seek alternative accommodation.

As we have seen with the collapse of firms such as HIH Insurance, it is left to the government of the day to compensate those who have lost out as a result of the commercial failure of a firm. I would think that, had a low-care provider become insolvent before this time, the government would have come to the aid of residents who had lost their bond—but not before those residents had suffered considerable anguish at the prospect of having lost the greater part of their life savings

This legislation must come as a welcome relief to all aged care residents who have paid a bond. I think most members would be well aware of the anxiety of older people when it comes to money. When their hard-earned life savings are seen to be at risk, it can be a very worrying experience. For many residents, meeting the bond payment has meant the sale of the family home or, in other cases, other family members have made sacrifices to meet the bond payment. So it is not surprising that the security of the bond is one of the major concerns of low-care residents.

Can I say from the start that I support the concept of bonds for people in need of a low level of care. I know that some would expect that care should be provided without the payment of a bond. But, as we are all aware, with an ageing population and an increasing demand for all levels of care, the contribution to the capital cost of providing care by way of a bond is not unreasonable in cases where the resident has assets over a set amount. In many cases, the former family home is no longer occupied and, depending on the circumstances of a person and their need to enter a low-care facility, it is unlikely that the resident will be returning to the family home. So it is fair that a resident contribute part of the capital cost of a low-care facility by way of a bond.

What also concerns me is that some low-care facilities provide less than the required number of beds for people below the asset threshold at which they would be required to pay a bond. I know that for some new low-care facilities in my electorate of Fowler, bonds provide a significant amount of the capital cost. For not-for-profit community based organisations, access to bond money enables the completion of facilities earlier than would otherwise be the case. There is a temptation to maximise bond funds at the expense of residents not required to pay a bond.

For many families of European and Asian origin, caring for elderly relatives is a serious obligation. In some cases, families have insisted on caring for their relatives in the home rather than placing them in a care facility. Increasingly, these families see their obligation as securing a place for their relative and supporting the facility that provides their care. These arrangements represent an important cultural change, but one that is seen as being in the best interests of an ageing relative.

In and around my electorate of Fowler are a number of low- to high-care facilities sponsored by ethnic communities. Most notable are the Italian, Chinese, Russian and Croatian communities. The facilities they have built are among the best examples of low-care residences for frail, aged people in our area. In every case, the community contributed generously to buy the land and construct the facility. With bonds, government subsidies and residents’ contributions, these communities have developed high-standard facilities, catering to the special needs of people of their own origin, as well as a number of people from other communities.

Within the Fowler electorate we have the Cardinal Stepinac Village, a Croatian low-care facility. The manager, Matt Smolcic, and his fantastic staff have built more than an aged care home. They have built a community and should be congratulated. The residents celebrate events in a distinctly Croatian way and for some it is like being back in their childhood home. But the residents are also very much part of the Australian community. Each year the village raises funds for charity. In past years, the village has given tens of thousands of dollars to causes such as the Canberra bushfires and the South Asian tsunami.

Facilities run by the Australian Chinese and Descendants Mutual Association and the Australian Chinese Buddhist Society provide similar links so important for older people. Just outside the Fowler electorate, we have the new Sydney West Italian Associations Hostel. We also have the longstanding Scalabrini Village facilities at Austral and Moorebank. All of these facilities provide high standards of care and all have been sponsored by community groups. They have relied heavily on the generous support of those communities. But I would not want to give the impression that these facilities are highly profitable. It is quite the opposite. Rising costs such as workers compensation premiums have led to thin margins. The facilities need the capital funding provided through bonds to expand and offer places to others in the community.

There are also privately funded facilities, such as the Blue Hills Village in the neighbouring electorate of Werriwa. In every case, as we look to expand the number of aged care places, we can expect community based facilities, as well as private facilities, to depend on bonds to fund this expansion. As bonds are turned over, their value has increased from an average of $26,000 in 1996-97 to $127,000 in 2004-05. We now have in excess of $4.3 billion held across the industry. As I said earlier, we can think ourselves lucky that so far we have not had an insolvency which has led to residents losing their bond. The consequences of such an event, when today residents are paying as much as $250,000 or more, would be disastrous. The Commonwealth, as the authority responsible for regulating aged care bonds, would have no alternative but to make good those losses. As we have heard, the Hogan review concluded:

There is an obligation on the government to ensure these funds are not exposed to any risk of loss.

Essentially, this legislation reduces—if not totally removes—the risk of loss in the event of an insolvency. The method chosen in this legislation is a post-payment model where the Commonwealth guarantees the bond balances and has the option to levy the sector to recoup any default payments paid. The government will also meet the cost of the first three years of operation of the new framework. This arrangement offers the greatest security to residents paying a bond and, at the same time, is the most economical scheme for providers holding resident accommodation bonds. It remains to be seen if any part of the sector represents a greater risk.

For prudent providers, some parts of the aged care sector may appear to be a greater risk. However, the history of the industry so far suggests that any defaults would be rare and that the amount of levy imposed on the whole sector would reduce the amount of the levy to a point which would be manageable by all providers. But it must be said that the risk and the amount of any potential levy has not been spelt out and this uncertainty is a cause of concern to all involved in the industry. At any rate, the government would still provide a fallback to guarantee the funds of those people paying bonds.

Of course, even an ironclad guarantee is worthless without strict rules applying to the repayment of bonds in all circumstances. This legislation clearly spells out the obligations of providers to repay bonds within certain time limits. I would expect this aspect of the legislation to be strictly enforced. People in aged care are one of the most vulnerable groups in our community. They deserve the full protection of the law when it comes to what for many is their most precious asset: their aged care bond. Aged care bonds are an important consideration in the capital planning for low-level aged care ventures. What presents the greatest risk, as we have seen, is that the value of bonds rises dramatically, and they have risen dramatically in recent years. The increase from $26,000 in 1996 to $127,600 last year represents a 500 per cent increase. Clearly, the sector is becoming more reliant on bonds for capital funding. That in itself definitely represents a risk. Strong prudential standards will also be a necessary part of the administration of the sector.

My concern also is that the industry will become dependent on bonds and, as we have seen with a 500 per cent increase over the past 10 years, further increases can be expected. With increased demand for aged care, for those fortunate enough to own their own home in one of the major cities, we might expect the value of bonds to continue to rise. This can only exclude more and more people from much needed care. It will definitely exclude people within my electorate.

While I agree that low-care bonds are essential, we should be looking at the upper limits of what is demanded by the sector. Where the family home cannot be sold to meet the cost of the bond, many families will need to share the high cost of meeting any debt incurred to pay a bond. In one case I came across recently, the bond asked for in a new facility just outside my electorate in the seat of Prospect was $240,000. That is a lot of money for a family to find and often they have no choice but to pay.

The situation in the aged care sector is changing rapidly, and we will continue to face pressures in the years ahead. This legislation sets a firm foundation for the security of aged care bonds. We now face getting the right balance between the bond, the government subsidy and the resident’s contribution. As the sector grows, these pressures will definitely need to be monitored, and we will need to constantly review the funding for all parts of the aged care sector.

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