Santo Santoro (Queensland, Liberal Party, Minister for Ageing) Share this | Hansard source

While good business practices are critical, it is not, however, the government’s intention that the government run the business of each provider for them. Nor will the government bear the risk of or responsibility for market success or failure. It is my philosophy that each provider must understand and manage their business themselves. The government will provide the appropriate support and guidance to assist providers, but providers must at the end of the day be responsible for the market success or failure of their own venture. This point was very effectively championed by my predecessor, the Hon. Julie Bishop MP, and was a recurring theme of the government’s response to Professor Hogan’s review. Ms Bishop, through successive federal budgets, secured over $3 billion additional funding for aged care programs, much of which were designed to improve the sustainability and quality of residential aged care in this country and answers very substantially the interjection that was made very quietly by senators opposite a minute or so ago.

The philosophical approach of financial sustainability is an important context for the new prudential standards that will be set by the measures bill before parliament. The liquidity standard, for example, will require providers to develop their own mechanisms to ensure that they have sufficient liquidity to repay bonds as they fall due. Providers will each be required to develop their own liquidity management strategy, cognisant of their individual business risks and operation. The new standard will not abrogate their responsibilities to the government. The strength of prudential arrangements will also reduce the risk of failure and activation of the guarantee scheme, another central component of the legislation before parliament.

My approach to financial sustainability is also reflected in the levy bill. This enables the government to levy all aged care providers who hold bonds to recover any amount paid out to residents by the government which are not recovered from the defaulting provider. The government will have the flexibility to ensure that the structure of the levy does not impact on the financial sustainability of approved providers nor, more importantly, compromise the quality of care being delivered.

Existing protections under the Aged Care Act 1997 have worked well to date, as shown by the fact that there has not been an incident where a resident’s bond balance has not been repaid because of the bankruptcy or insolvency of a provider. The government believes however that these additional protections are timely. The average new bond has increased in value from $26,000 in 1996-96 to $127,600 in 2004-05. Bonds can represent a significant proportion of a resident’s life savings and understandably residents and their families expect secure arrangements for their bonds and the reassurance that their bond balances will be repaid when the resident leaves home.

This legislation strikes a balance between the added security for residents that is provided by the strengthening of the arrangements and the financial impact of the new arrangements on the sector’s viability and its standing with the capital markets, including its ability to construct and maintain aged care homes. The new arrangements complement the $877.8 million conditional adjustment payment which was implemented in 2004. These government initiatives will assist the aged care industry to become more financially mature and more sustainable. The introduction of these precedents or these protections into the act demonstrates the coalition government’s commitment to a world-class system of aged care that provides high-quality, affordable and accessible services to meet the individual needs and choices of older Australians.

In closing, I want to acknowledge the individual approved providers operating aged care services across the country. I know that they share my commitment to choice, quality and financial sustainability. They have told me that repeatedly during the months I have been minister. I know that many services have made substantial financial commitments to upgrading their existing buildings, a serious investment in the future of the aged care industry in this country. The diversification that many providers are embarking upon, such as branching into community services, is an example of preparedness to provide consumers with greater choice and flexibility in their care options. In terms of quality, I acknowledge the continued high level of compliance across the sector with our accreditation standards.

I believe in the sector’s clear commitment to continuous improvement and its dedication to provide high standards of care now and into the future for the good of the Australian community. I thank all of those who have been involved in the development of this legislation and acknowledge the broad support of senators within this chamber, including the support of the opposition.

Question negatived.

Original question agreed to.

Bills read a second time.