By Keryn Curtis
New prudential regulations for aged care have received only modest attention in this busy year for debate on aged care reform. But as the new laws hove into view, their implications need careful attention and consideration, says aged care lawyer, Arthur Koumoukelis. [click here to see the full summary and assessment by Arthur Koumoukelis and Jessica Smythe of Gadens Lawyers]
The new prudential regulations around acceptable use of accommodation bonds were introduced to Parliament last Friday 27 May in the form of the Aged Care Amendment Bill 2011. The Bill had its second reading this morning in the House of Representatives, amid the expected grandstanding and debate (click here to see Hansard) and, assuming the Bill is passed by both the House of Representatives and the Senate, the reforms will take effect from 1 October this year.
According to Mr Koumoukelis, the new laws will have serious implications for many aged care providers.
“I think it’s much more important than people realise. Effectively, it is saying that accommodation bonds can only be used for bricks and mortar related activity, for capital works and not for any operational purposes.”
“This is likely to be challenging for some organisations that have traditionally looked to accommodation bonds as a tool to fund the ‘aged care operations’ in total; which is what they were perfectly entitled to do prior to these amendments.”
Mr Koumoukelis said the news laws would affect both not-for-profit and private aged care providers.
“It will affect any operators or providers who have relied upon the receipt of bonds to fund their service operations,” he said.
“It’s probably more common that people imagine. It’s not uncommon to charge increased accommodation bonds in order to offset and reduce the daily care costs paid by residents, for example.
“In this new environment, any bond holdings used to reduce or ameliorate the contribution made by the resident to their care or support costs, however it may be characterised, will be affected.”
Mr Koumoukelis said the changes would particularly affect extra services providers.
“Providers can no longer use the income from bonds to fund the cost of meals and drinks and other features that are part of extra services. They can put the bonds into an investment and use the interest to pay for those things. But that’s all.
“Also if you use your bonds to pay your leasehold rent – and in some states, operating aged care premises under leasehold is more common than in others – that is no longer allowed.”
An additional tightening of the regulations sees criminal penalities attached to breaches for the first time.
“The provider would still have to go through the processes before it becomes a criminal law matter. They would have to fall over and call on the Government’s guarantee to pay repay the bonds but then it would become a criminal law issue. It’s pretty serious,” he said.
Good news for consumers
Consumer representative body, COTA Australia said it welcomed the Bill because it delivered on an area of significant concern to residents of aged care and their families by protecting their savings which are held in accommodation bonds.
Above: Ian Yates
COTA’s CEO, Ian Yates, said it was clear from the queries COTA receives that people do have concerns around accommodation bonds.
“They are concerned about two things: The first, and probably most important, is about the security of the bond and that it will be refunded promptly when they leave the service.
The second concern is that residents want to be assured that the money they have loaned to the aged care provider is being used to improve the quality of aged care services.”
Mr Yates said the provisions in the Bill address both these concerns.
“They put stricter requirements on providers to account for where the funds are held and how they are being used and make it clearer that the funds are for aged care.
“There is a good balance between safeguarding residents’ savings and giving the industry greater flexibility to encourage them to invest further in residential aged care.
“We believe the tightening of the prudential arrangements is a key consumer protection. Aged care providers now hold over $10 billion in accommodation bonds. If these amendments were not accepted it places the savings of many older Australians at greater risk and places taxpayers, who guarantee these funds, in greater jeopardy,” he said.