‘No flight from bonds’: ACFA

Industry fears of a rapid flight from bonds have not materialised and the overall pool of lump sum payments has grown since the 1 July reforms, according to the latest Aged Care Financing Authority report.

Industry fears of a rapid flight from bonds have not materialised and the overall pool of lump sum payments has grown since the 1 July reforms, according to the latest Aged Care Financing Authority report.

In October 2014, lump sum refundable accommodation deposits (RADs) continued to be the preferred method of making accommodation payments, with a share of 44 per cent (up three per cent on September figures).

According to the data, some 32 per cent of residents opted for a daily accommodation payment (DAP) and 25 per cent chose to pay a combination payment.

RADs have consistently offset the accommodation bonds paid out for departing residents in each month after July 2014 and the overall pool of lump sum accommodation payments held or receivable grew by 2.3 per cent between 30 June and 31 October 2014, ACFA said.

“Prior to 1 July 2014 there were concerns expressed by the sector that there would be a ‘flight from bonds’…at this stage, this concern has not been realised and in fact there has been a continued growth in lump sum payments,” the report said.

While the growth in lump sum bonds is below KPMG estimates of $3 billion in 2014-2015 (actual $442 million at October), ACFA said there was insufficient data to make a reliable projection.

The report said the increase in lump sums is also not uniform across the sector with results showing a continued drop in bonds held by a small number of extra-service and low care providers.

According to the ACFA report:

  • RADs are more favoured in major cities than other areas.
  • Inner regional areas recorded a preference for RADs for the first time in October.
  • RADs continue to be preferred in the for–profit sector, with over half of all new residents choosing this method.
  • Between September and October, RADs gained share in all the ownership sectors.
Impact of means-testing delays
Louise Greene
Louise Greene

ACFA noted that recent delays to processing means-testing assessments have resulted in a markedly higher use of respite care to accommodate residents while they wait to enter permanent care.

“Occupancy in residential care and home care have been nearly constant, with an insignificant decline,” the report said.

Louise Greene, director of business improvement for The Ideal Consultancy, said it made sense that there has been an increase in RADs because, previously, all payments for high care facilities had to be periodical.

“However, now that consumers have a choice in how they pay for their care, they are opting for a refundable lump sum rather than needing an income base for the DAP, which can quickly eat into cash savings.

“Many older Australians have a simple asset base – the family home. It may be that the property is unfit to rent and generate enough income to pay a DAP, so selling the home and paying a lump sum is an easier option,” said Ms Greene.

 

Tags: accommodation-payments, acfa, bonds, July-1-reforms, KPMG-modelling, louise-greene, slider,

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