Providers told to expect greater scrutiny over rising bonds

The increasing pool of bonds in aged care – now at almost $20 billion – has caught the government’s attention.

The increasing pool of bonds in aged care – now at almost $20 billion – has caught the government’s attention

The amount of bonds used to fund residential aged care has increased by $3.3 billion since new payment options came into force on 1 July, meaning providers are now the custodians of a total bond pool of almost $20 billion.

Lynda O'Grady
ACFA chair Lynda O’Grady at LASA National Congress on Monday

On Monday the head of the Aged Care Financing Authority (ACFA), the statutory body that reports on the sector’s finances to government, told aged care providers that they could expect greater scrutiny of their prudential arrangements.

Lynda O’Grady told the Leading Age Services Australia National Congress that an increasing liability of that magnitude would require a “careful focus on prudential compliance of providers in terms of their permitted uses of the funds and also liquidity management systems.”

Since 1 July new residents entering aged care can now pay for their accommodation through a bond, known as a refundable accommodation deposit (RAD), or a daily accommodation payment (DAP), or combination of both. Previously bonds were only payable in low care.

Given the growth in bonds, Ms O’Grady said that during the development of the reform road map, currently being drafted by the Aged Care Sector Committee, it would be appropriate to “revisit the issue of securitisation of the bond and RAD pool.”

Further growth in the amount of bonds was almost certain given only a third of residents had entered the system since 1 July and were therefore affected by the new payment arrangements.

Ms O’Grady said that for these new residents coming into the system, comparisons of their payment options against what they would been under the old regime were “irrelevant and frankly not constructive” yet a number of financial planners, providers and assessors were “tinging their communications with those perspective residents with comparisons which were of no relevance.”

Elsewhere, Ms O’Grady told the Melbourne audience that ACFA was preparing a report to government to feed into the five-year review of the Living Longer Living Better reforms, and was seeking provider input to a number of key areas.

In particular, ACFA sought evidence of any anomalies or unintended consequences resulting from the assets and income thresholds. The authority also sought evidence of where the new user co-contributions were having a negative impact on take-up of home care packages, potentially resulting in premature hospital or residential care admission.

Often consumers impacted by the new co-contributions were focussing on the amount they had to pay, rather than considering the total value of the home care package and what it provided them, she said.

There was little doubt that better materials and training for all staff around the new funding arrangements were required so they could more appropriately communicate the changes to seniors, she said.

In community care, Ms O’Grady said she recognised the change in accounting and reporting had introduced a real issue in terms of client and debtor management.

“There’s a new spectre of possible bad debts and at the very least the need for cash flow management to assure you have the funds to meet the needs of a consumer who isn’t using the total value of their package month by month,” she said.

More broadly, Ms O’Grady argued that the communication with consumers around the changes to aged care, and the rationale behind them, had been poor.

“We missed out on great opportunity to herald the positive changes for the public at large, and to deliver communications that celebrated the improved value to the new consumers with clear content and delivered with the right tone,” she said.

Photo: Peak Multimedia 

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Tags: accommodation-bonds, acfa, LASA-National-congress-2015, lynda-ogrady,

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