Judi Moylan (Pearce, Liberal Party) Share this | Hansard source

I begin by complimenting my colleague the member for Aston on a fine speech and for highlighting some of the difficulties and the challenges that we face in this sector. I welcome the opportunity to raise some of the issues and concerns which have been made known to me by people in the aged-care sector in Western Australia and, indeed, in other parts of the country. Over one million older Australians currently receive aged-care services. As life expectancy continues to grow, the proportion of people requiring complex care for conditions that present later in life, such as dementia, will grow as well. The aged-care sector is already under significant strain. Without clear efforts now to address the persistent structural weaknesses in the system, it will buckle under the future pressure.

The suite of reforms contained within these various bills, known as the Living Longer package, is another attempt to bring much-needed reform to the sector. That attempt has been going on for many years and I had some considerable involvement with it in 1996. But if it falls well short of the many positive recommendations that the Productivity Commission outlined in its 2011 report Caring for older Australians then we are not doing the job we need to do in this place. In that report the Productivity Commission noted a number of critical deficiencies with the current system. Among the list is that aged-care services are limited; the quality of care across providers is variable; the coverage of government subsidies is inconsistent or inequitable; there are difficulties in obtaining finance, particularly to build high-care residential facilities; and there are significant staffing constraints in the industry. Each of these is a critical deficiency that must be addressed to ensure that a viable aged-care industry can continue in the future to provide the services that will increasingly need to be provided.

But the suite of reforms currently proposed is just as likely to exacerbate those persistent problems rather than ameliorate them. A glaring example is last year's $1.6 billion cut to the aged-care funding instrument. The ACFI is the principal method of providing financial assistance for the personal and lifestyle costs of residents in Commonwealth subsidised residential care. With Aged and Community Services Australia warning during the 2012 budget that only 40 per cent of aged-care service providers are operating in the black, this blow will further affect the financial viability of a number of aged-care providers, particularly those in rural areas, which have always really been problematical. They have special challenges.

That cut of $1.6 billion is now being used to fund a compact that has been struck between the government and the unions in an effort to increase the notoriously low wages of staff in the aged-care industry. But instead of delivering a uniform rise, as is much needed, the compact will only serve to create a greater gulf in the sector's wages. That is because to access the workforce supplement, which is intended to boost the wages of employees, providers must substantially increase wages before they are eligible for further government funding. Aged and Community Services Western Australia in their submission to the inquiry into these bills by the Senate Standing Committee on Community Affairs noted that 'in one instance, a 31-bed residential care provider has estimated that to receive $17,000 from the supplement, it will cost them an extra $30,000 to meet the government's requirements'. By crafting this so-called assistance in such a manner, the government is really being disingenuous. Those small providers that already rely on government assistance, and I have to say many of those are in regional and rural areas of Australia, have no ability to meet such wage increases, yet it is precisely these workers who require it the most.

Julie Christensen is the CEO of Narrogin Cottage Homes. I have known Julie for many years, Narrogin until quite recently having been part of the Pearce electorate. Julie candidly described the effect in her evidence to the Senate committee, saying:

I am very happy to let the committee know right now that we will be one of those who will not be signing up for the workforce supplement. We cannot afford it. I know Ray was saying it was two for one, but in my particular case, if you look at our on costs, I think you will find that it is 3.25 for one. I am running at a loss now. I am hoping we will balance the books next year. I cannot afford anything else. I cannot afford to expose my community organisation, and the assets that belong to the community, to risk, and the decision to sign on to the supplement would put my facility and my organisation at risk.

I know the facility, I know Ms Christensen. It is being well run. She is a very experienced operator, and this again is a facility in a country town. These are people who really do know what they are talking about.

With a significant number of aged-care providers being not-for-profit organisations, as this one is, any additional costs must be passed on to those that they are caring for, or those extra costs result in loss of staff, or lower standards in the facilities. This was confirmed in the handwritten submission by LHI Retirement Services, a South Australian aged-care provider that cares for over 1,000 residents and is also a not-for-profit organisation. LHI noted that these bills 'clearly add significant costs, in some cases over 200 per cent'. It went on to say:

LHI will receive $140,000 from Government in the first year under these changes, but will be required to contribute a further $240,000 from its own resources. This will result in staff reductions and poorer services to residents.

So rather than increasing staffing levels or providing more assistance to aged care, as the Productivity Commission has identified as being necessary, these changes will do exactly the opposite. It must be stressed that this is not, and should not be, a choice between higher wages for carers and the ability of the sector to accommodate that. These pressures are the direct result of a deliberate policy choice by the government. The model chosen by the government forces providers to choose between paying the higher wages that carers deserve and the standard of the facilities that the aged-care residents enjoy. That is a reprehensible step.

Despite claims that the government is investing more in aged care, it should be noted that Commonwealth own payment outlays, that is, payments for areas such as aged care, have had zero indexation for the 2012-13 period and are estimated to be only increased by 1.5 per cent in 2013-14. Yet operating costs for aged-care providers have increased, on average, between 3.5 per cent and 10 per cent per annum. The cost of providing aged-care services is clearly outstripping the piecemeal funding that the government is putting in, but there is no clear commitment from the government to remedy this situation.

Another example of the government's desperate bid to shore up its books can be found in the changes relating to accommodation bonds. Currently, where a person has financial capacity to help pay the cost of their care, they are required to pay an amount relative to the standard of care they are receiving. Payment can be made one of two ways. The most common is for a person to pay a large upfront amount, usually through the sale of their home, which is drawn down over time. Any amount unused after care is no longer required is refunded. These are called RAD bonds. The other method is to pay a daily rate through a person's pension or own funds. This is called a DAP bond. Under the asset and income tests changes in these bills, it may be more beneficial for a person to pay a daily rate rather than to pay a RAD bond. The policy rationale for this move was outlined by the ANZ Bank in its submission to the Senate inquiry. It noted:

… the RAD bond pool is currently circa $12 billion. DAP bonds are less than 10% or circa $1 billion in notional value. The government guarantees the providers' RAD liability to repay residents upon leaving a residential facility. Treasury apparently sees this $12 billion RAD liability as an unacceptable contingent liability of Government.

As a result, the ANZ concluded

… the proposed changes would seem to be an implied policy change that over time RADs are replaced by DAPs.

It warned:

A significant shift from RAD to DAP would potentially have adverse consequences for the financial viability of many providers as well as curtailing investment appetite.

That would be a disaster for the aged-care sector.

The change is significant as the large upfront payments are used by providers to fund construction, renovation or expansion of their facilities. That is why the government then guarantees the RAD liability: the person's funds are in the bricks and mortar of the building. Without the upfront pool of money, providers will either be unable to meet new demand or will have to borrow more money to provide facilities. Clearly, the bank is warning that this could become very difficult.

The submission to the Senate inquiry by the Aged Care Guild sets out the potential consequences of this policy shift. It gives the example of a 100-bed facility that would cost $20 million to build. On all its metrics, such a facility would be comfortably within the loan-to-value ratios that banks use as a ceiling for the amount of money that will be loaned for construction and operational costs. The guild went on to explain that if 60 per cent of new residents chose to pay via the daily rate then in only two years the net debt of that facility would go from $5 million to over $12 million, breaching all the covenants that the bank would set. It means that the facility would be completely unviable and would have to be shut down.

With the number of people requiring aged-care facilities set to more than triple by the year 2050, getting these policy settings is absolutely imperative. It is not an optional extra; it is absolutely necessary, and we need to recognise in this place the growing pressures on the sector. I support the amendment that has been brought forward by the member for Dickson to delay these bills until the Senate inquiry has had the opportunity to report on the bills, at the very least because passing the legislation as it is in this place could certainly have major ramifications for those providing for the aged-care sector now and in the future.

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