More good than harm
Mike Woods from the PC shared his views on life after Caring for Older Australians at the ACAA NSW State Congress.
Above: Productivity Commission Dputy Chairman, Mike Woods.
By Stephen Easton
For-profit aged care providers have little to fear and a lot to gain from the deregulated sector proposed by the Productivity Commission (PC), according to one of its architects, Deputy Chairman Mike Woods.
Mr Woods told delegates at last week’s Aged Care Association NSW Congress that the PC had tried to design a system that would be affordable for both consumers and taxpayers, while allowing aged care businesses to remain viable.
“Some providers may have to change business models to remain viable,” he said. “Although we understand the importance of the viability of the industry – because you provide the care – we are not wedded to the viability of the individual provider.”
Later, Mr Woods said he thought many providers’ current business models would be sustainable into the future and that the PC report “provides great opportunities for them to expand their businesses”.
“They’ll be able to construct where they think there’s a market opportunity, they’ll be able to offer a range of accommodation products and they’ll be able to diversify into things like transition care or sub-acute care or respite, and even offer community care based from their accommodation hub.”
“We would envisage that in some cases, where there is a move away from very high bonds to bonds and periodic charges … that some people will have to adjust their business models, but we envisage a significant transition period. They are already on notice; they’ve seen our draft report.”
“The industry players are well informed. They understand which way the market is going and they would already be making plans to maximise their opportunities in the new environment.”
Grandfathering (the continued application of older regulations) will support those providers who are forced to make considerable changes to their operations.
“We’re conscious that there are a limited number of providers that have a model based on extra service only and they’re in a particular situation … we’re conscious of that, and that we need to have reasonable arrangements to reflect that they’ve committed their capital to that particular model.”
Earlier during his speech, Mr Woods made a point of clarifying the PC’s recommendation that the price of accommodation be determined by the market, regardless of whether paid though a bond or a periodic charge.
“Accommodation bonds will not be related to the ability to pay,” he said. “The price will reflect what is relevant to the market. Ultimately, that means the price will reflect more closely the cost of providing residential aged care.”
“We’ve removed the incentive to pay ‘super bonds’ [too], which we think is a good thing,” he added, referrring to accommodation bonds worth far more than the accommodation itself, in some cases reaching almost as high as $1 million.
Residents continue to pay super bonds because the money, which often comes from the sale of the family home, is exempt from means testing for the Age Pension when held as a bond by an aged care provider.
Above: Cam Ansell, national head of aged care services, Grant Thornton.
Following from Mr Woods, Cam Ansell, national head of aged care services at accounting firm Grant Thornton, presented findings from a two-year study of the deregulated residential aged care market in New Zealand, which described a very different situation to Australia.
For-profits outnumber non-profits across the Tasman, in almost the same proportion as the reverse is true here, high care predominates over low care and the majority of places include some extra services.
Integrated service models, combining different accommodation types on the one site, have also become extremely popular in New Zealand, with many offering residential care, serviced apartments and independent living units.
Mr Ansell suggested that the opportunities presented by deregulation would outweigh its challenges, but advised that providers should still be preparing now for a system with less protections for them built into it.
“Most of my clients are rethinking their business models and their asset portfolios now – and it’s a good time to be thinking about it,” Mr Ansell said.
