PC provides future funding model

The highly anticipated draft report contains new arrangements for accommodation charges and care contributions.

By Tim Dixon

Aged care residents should be responsible for their accommodation and everyday living expenses regardless of their care needs, says the Productivity Commission in its draft report on the care of older Australians.

Under the proposals, aged care providers would be required to set periodic accommodation charges and lump sum amounts based on the cost of construction.

The cap on accommodation payments would be lifted but bond payments would not be able to exceed the value of equivalent periodic charges.

As a further trade off, providers would no longer be able to charge retention amounts on accommodation bonds.

Residential providers would also be required to set aside a portion of their beds for residents with limited finances.

The commission suggests that the Commonwealth should set regional targets for ‘supported’ residents which would be reviewed after five years. 

The new accommodation arrangements are part of a bold new aged care system that no longer distinguishes between high and low care.

They are designed to redress what the commission describes as a number of “distortions” in the existing funding model for residential aged care.

“There is evidence that the high care charge does not provide an adequate return on the cost of new supply,” the draft report said.

“For example, some allocated beds have not been made operational, new rounds of allocations have not been fully subscribed, and some bed licences are being handed back.

“In low care and extra service high care, escalating bond values are a consequence of their attraction to providers (as a zero interest offset to dent and a way to compensate for insufficient accommodation charges in high care) and to pensioners (to protect their pension and produce care co-contributions).”

The commission has called for the introduction of a new scheme that would allow pensioners to invest the proceeds from the sale of their home in a bond that could be used to cover accommodation costs.

The funds invested in the Australian Pensioners Bond would be excluded from the age pension assets tests.

It also suggested the introduction of a government backed equity release scheme that would enable residents to contribute to their capital costs while maintaining ownership of the family home.

Under the commission’s proposals, aged care service users with sufficient funds would also be asked to provide up to a quarter of their care costs through a new co-contributions scheme.

As a safeguard, the government would put a cap on the amount of co-contributions that a person would pay over their lifetime.

A new body called the Australian Aged Care Regulation Commission (AARC) would make suggestions to the government about care prices and indexation.

“The price paid to providers for care services…should be set by the Australian Government at a level which meets the cost of efficiently delivered approved care in each of the different care settings,” it said.

The report also noted that the scheduled care prices would need to be based on “competitive” wages for nurses and other care staff.

“It should be updated annually based on a transparent recommendation from an independent regulatory commission.”

The commission believes that voluntary personal insurance would play a limited role in broadening the funding base for aged care because of “problems on both the supply and demand side of the insurance market”.

It also warned that a compulsory insurance scheme run by the government would provide little benefit, although it is still seeking comments on this option.

“To the extent that government ultimately bears the risk of any unfunded care, the notion of strict risk-pooling within a defined benefit fund loses much of its meaning,” the draft report said.

“Government-owned insurance schemes have, in the past, returned surpluses to, and requested funding (to offset shortfalls) from, general revenue.”

“There are also uncertainties relating to the actual premiums that should be set for future care, as well as the administrative and funds management costs.”

The commission recommends that the new accommodation charges should be implemented within two years.

It would also like to see a benchmarking study on the cost of care conducted in the same time frame.

Click here to see the full draft report.

Tags: bonds, caring-for-older-australians, cost-of-care, draft-report, funding, insurance, productivity-commission,

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