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If it ain’t broke…don’t fix it



By Keryn Curtis

Above: CEO of Bupa Care services, Mr Paul Gregersen

While, again, there is a generous chorus of support for the Productivity Commission’s recommendations for reform of the aged care system, the final report, released on Monday, has flushed out some vocal dissenters. 

Among them is Bupa Care Services (BCS), which operates 47 residential aged care facilities in Queensland, NSW, Victoria, SA and the ACT and is part of the global health and care company, Bupa, which operates in 195 countries.

In a statement released on Tuesday, Bupa Care Services congratulated the Productivity Commissioners for undertaking “an incredibly complex project and putting the consumer at the heart of their recommendations” before urging the Government to adopt only incremental reform to guard against adding financial burdens to consumers or destabilising the industry “at a time when sustained growth is needed.”

BCS Managing Director, Paul Gregersen, told Australian Ageing Agenda (AAA) that Bupa’s joint submission [with Regis, Japara, Domain Principal and Primelife]  to the Productivity Commission’s draft report, “talked about modifying the current system, which in our opinion would deliver a sustainable decade.”

“We believe that the current funding system works well, offering consumers a range of choices,” said Mr Gregersen. 

“The system is not fundamentally broken from a structural point of view,” he told AAA.  “But what does need sorting out – and what the Productivity Commission has done a good job of – is putting consumers at the heart of it.”

 “If you think of a family caring for a widowed mother, they will want a flexible amount of care and different types of care at different times. Certainly we need a system that is flexible enough for that.”

“But whenever you talk about greater choice, it leads to significantly increased costs. Already food costs and utility costs are going up and soon there’ll be an additional cost associated with having a green environment; so we need to make sure people are not paying more for the increased choice,” Mr Gregersen said.

Mr Gregersen said he believed the aged care sector was already providing choice.  

“Already people have good choice. There are 53,000 [residents] currently paying a bond – about a third of all people in aged care.  Approximately one third pay a lump sum bond and two thirds, a daily fee for their aged care accommodation.  It is often not realised that a bond is a loan, the bulk of which is returned to the resident’s family,” he said.

The people’s choice

Pointing to the findings of some market research commissioned recently by Bupa, entitled Funding Aged Care – the Voice of Consumers, Mr Gregersen said up to 80 per cent of older Australians would prefer their aged care provider to receive the bond, rather than the Government, if the funds are used to improve aged care facilities.

“We question why the Productivity Commission is advocating home credit schemes and pensioner savings accounts when current arrangements work well,” Mr Gregersen said.

“Why would the PC recommend a scenario that is likely to see the Government take control of the $10 billion held in bonds which the industry currently uses to improve aged care services?

“Such a move would fundamentally destabilise the sector and have adverse effects on the quality of care available to older Australians over the longer term,” Mr Gregersen said.

Mr Gregersen also expressed concern regarding the increased workforce challenges, particularly around delivering community care.

“We have a shrinking workforce. Do you need a smaller or a larger number of workers for care in community?  Of course you need more, which is OK, providing there are enough carers in our community.  

“But based on the system we have at the moment, where we have less community care than we have residential care; that system is already creaking.”

“The rhetoric of the Prime Minister and the Minister for Mental Health & Ageing is good: we have to make it smarter and better for the consumer. Certainly the gateway agency and smartening up the front end; linking packages and breaking down silos between different levels of care is absolutely essential,” said Mr Gregersen.

“But in terms of residential aged care, why is there a burning platform for radical change.  We know what happens with radical change – the focus shifts to new funding tools and systems when we should be focusing on caring for people properly at the end of their lives.  My question is, why do we need to do it?”

“What consumers really need is flexible access to the full range of care services that will satisfy their individual needs in a timely fashion.

“We caution the Government against making any radical changes which will divert the industry’s attention from its core goal of providing high quality care to those who need it most,” Mr Gregersen said.

Bond or no bond?

CEO of Aged Care Association Australia, Rod Young, said that one of the significant unknowns in the proposed new system was how many people would pay a bond or not.  

“I’ve just presented a paper in Perth on this issue.  If bonds levels were run down and we had to fund the capital stream, converted to a daily charge, and we had to do it quickly, you could not and it would cause considerable damage to the industry.  There needs to be far more work done to understand what will be the continuing attraction to the consumer to pay bonds versus a daily charge.”

“It must be approached slowly because if everyone decided not to pay a bond any more it would cause considerable damage,” Mr Young said.

But, says Young, there are other elements of the proposal which potentially mitigate against this outcome.

“Imagine if the government decides to open up high care and low care to bonds? With new entrants to high care paying bonds, then overall you would have an increase.  

“If you pay a daily fee, one assumes you have put your money into the new pensioner savings account and you’d get CPI [consumer price index increases].  Assume your property is worth $300,000; you might be out of pocket by $10,000.

“If I am a consumer, am I happy to lose 10 or $12,000 and accept that it’s gone? Or pay a lump sum and have it all refunded?” he says.

Mr Young says there is another part of the equation he believes people seem to be ignoring.  “At the moment a lot of people are exempted from paying accommodation bonds because the partner is still living in the house.  In this scheme, assuming the government adopts the recommendation, my share of the family house comes into account and I am expected to pay a portion based on that.”

“At the end of the day, we don’t have to sell the property until I pass on or my partner does and then the residue flows back to my estate. It actually releases more equity from the housing stock.”

“I think people haven’t quite understood that that this will release additional equity to contribute towards a person’s accommodation costs, which is currently not available.  At the moment there is only the government supplement of $32, because currently the property is exempt. But it needs to be said, this system, while still protecting the home, releases additional equity that is currently not available,” said Mr Young.

* See also a news item in the Australian newspaper involving the Bupa perspective



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0 Responses to If it ain’t broke…don’t fix it

  1. Graeme Croft August 12, 2011 at 8:28 am #

    BUPA are correct, the system is not fundamentally broke. If Government freed up bonds into high care, and allowed higher user charges for single rooms,many of the capital problems would be resolved.

    BUT the government has got to stop cheating providers by underfunding annual indexation. For a number of years now the indexation has been in range of 1.7% to 1.9% well below wage increases to the sector. Federal government sets health insurance premium increases without regard to COPO so why not develop an aged care index with say a 70% wage component, 10% energy cost index, and 20% CPI.

  2. Norbert Sidney August 12, 2011 at 3:41 pm #

    It is preposterous to suggest the sytem is not broken. It is clearly broken on several fronts, starting with the present sheltering of equity in peoples own homes from meeting the costs of accommodation and care, opaque funding mechanisms where above-market bonds are extracted to cover to some extent the under-funding of supported residents, insitutionalised denial that problem exists by DoHA, and below-market wages paid to the workers who deliver the care (to mention but a few).

    Whilst all people would wish to remain in their own homes for their full lives, it is a reality that absence of family, dependent partners and increasing levels of acuity will lead to a near four-fold increase in residential aged care beds over 40 years.

    The Commission’s projections of residential aged care workers suggest that 600,000 residential aged care beds will be required by 2050. Given the average age of the stock of 170,000 beds of over 20 years now, this represents a need to build and operationalise 15,000 beds per annum every year for the next 40 years (or 150 aged care faciliites a year, or 3 per week – for the next 40 years to meet demand).

    There is little change of attracting the capital or the operational funding needed to meet demand without the transformational change required that is within the brilliantly crafted recommendations of the Commission.

  3. Greg Mundy August 13, 2011 at 2:47 pm #

    You expect to see rentseeking rhetoric in the context of Inquiries such as Caring for Older Australians, many of the submissions contained large slabs of it. I’m getting used to dubious survey data too.
    What’s interesting about this particular episode is the authors – the larger commercial providers of the residential segment of aged care have got together – and their message ‘We’re OK just give us more money’ They are right, this would address many of their problems but would it deliver the aged care system that Australia needs, and should have, going forward? This must be the focus of the Government’s consideration. I understand that it may not be the focus of many providers and not just on the commercial side of the industry. ACSA’s current President for example has often said that issues such as access to services, equity etc. were the Government’s problem, not his. You can see how a merger of associations might be possible on this common ground. Building a system to meet the future needs of increasing numbers of older people will need bigger thinking than this however and that is what the PC have gifted us. We need to make sure that our politicians grasp this opportunity and rise above sectional self-interest. We’ll be sorry if we don’t when it’s our turn to need care.

  4. Norbert Sidney August 14, 2011 at 11:50 am #

    Greg Mundy is spot on. Presently, the charities carry the burden of accommodating under funded concessional residents while the private operators cherry pick the financially better-off. The concerns of the private operators group in the article, in my view, stems from the Productivity Commission recommendation that bonds be limited to the cost of supply. This would see an end to the extortion of older residents with bonds that far exceed the cost/value of the accommodation supplied. The challenge for industry advocates is to support the Commission’s report with its underlying tenants of fair pricing and fair funding and user pays (where they can afford to) to create a sustainable industry to meet the long term need.

  5. Dr Ralph Hampson August 15, 2011 at 3:30 pm #

    Greg Mundy is correct the system has to serve all – in small rural towns all over Australia there are communities that have no access to large bonds – their homes are not worth as much as their city counterparts (usually, by a long, long shot). The Productivity Commission has to make sure that the system works for everyone – while providers of private services are driven by profit (no profit they close), the not for profit sector is driven by values and care for those who are financially stretched. This group of people deserve our attention … a great example is the work of Wintringham in Victoria.

  6. Paul Gregersen August 16, 2011 at 11:15 am #

    Bupa agrees that Australia needs a sustainable industry based on fair pricing/ funding, and the industry needs to work together toward this goal.

    However, we are concerned that based upon the PC recommendations, the cost of aged care for the average pensioner is set to substantially increase at a time when Australians are already facing significant increases to the cost of living.

    It is not true to say that all private aged care operators cherry pick high value residents. Bupa cares for 4,000 residents two-thirds of whom choose to pay a daily accommodation fee and not a lump sum bond.

    Bupa is a company limited by guarantee. With no shareholders, we reinvest all our profits to provide more and better healthcare/ services for our residents.

    Bupa has committed over $800,000 to partner Alzheimer’s Australia in the National Quality Dementia Care Initiative which sees the translation of dementia research into practice. It is Bupa’s corporate mission to help people “live longer, healthier, happier lives”.

    Last year Bupa brought on line 190 new residential aged care places and in December the doors of a new 112 bed facility at Wodonga will open. Over the next 3 years Bupa has allocated a further $200 million for new nursing home developments. All activity the PC would no doubt be keen to see continue if we are to meet a four-fold demand for aged care services by 2050.

  7. Slly Evans August 18, 2011 at 6:59 pm #

    I also need to correct the statement that the larger commercial providers got together to ask for more money. Indeed please read the submision which is publically available, as it spoke to the mechanics of providing a sustainabel capital funding system for residential aged care for both the new places that will be required to meet the demand for greater choice and to replace the older properties to satsify changing expectations. I also wish to correct the assertion that Domain Principal Group cherry picks residents when over 65% of their residents are supported. It is time for the industry to come together and build an indsutry we are all proud of being assocaited wiht, and starting wiht what unites us – the resident. Making divisive statements about those that are actively seeking to engage stakeholders in addressing the vision created by the PC is unhelpful at best and damaging at worst.

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