Residents could be in a bind with aged-care reform bills

Last week five aged-care reform bills were introduced into Federal Parliament. One feature of the reforms is an increased focus on home care rather than aged-care facilities. Unfortunately, the requirement for aged-care bonds payable by new residents, which can result in a resident only being left with $41,500, is going to be widened.

Under the current system a distinction is made between low-care and high-care residents. The residents of high-care facilities require daily help with such activities as feeding, dressing, washing and mobility. Currently residents entering high-care facilities do not pay an accommodation bond; they only pay daily care fees.

In low-care facilities residents look after themselves and, in addition to paying daily fees, they can also be required to pay an accommodation bond. The amount of accommodation bond is negotiated between the resident and low-care provider. The amount of age-care bond payable is based on the Centrelink assets test.

The assets counted by Centrelink include all assets owned by a person or couple, including their home and financial assets such as superannuation. The amount of bond payable depends on the bargaining position of the residents. Where the retirement village is in a strong position, new residents can be forced to sell their home and cash in all their financial investments, including superannuation, and be left with only $41,500.

The new bills introduced contain nothing that would reduce the maximum amount a retirement facility can take. Most of the amendments deal with changing the name of the amount deposited with a facility from that of a "bond" to an "accommodation payment".

The most concerning aspect of the reforms will be the removal of the distinction between low care and high care. If the legislation is passed in its current form high and low-care residents will both pay a means-tested daily care fee. These fees will be indexed and are currently capped at $25,000 a year, with a lifetime limit of $60,000.

With there being no distinction between low and high-care facilities new residents of both will be required to make an accommodation payment. This will be fully refundable, with no amount retained by the aged-care facility. Until the legislation is passed by Parliament, exactly how the new system will work is unclear.

Amounts deposited with aged-care facilities are used to produce income, often in the form of interest, which provides funding for the upkeep and development of the facilities. In most cases the current bond is paid as a lump sum on entering the facility. There will be the ability for the accommodation payment to be paid as a lump sum, periodic interest-only payments or a combination of a smaller lump sum and a series of periodic payments.

Despite what some aged-care providers might say, there is no requirement for a resident of a facility to be left with only the current minimum level of assets of $41,500. The amount of bond or accommodation payment taken by a facility is totally negotiable. The problem is as demand for these facilities increase, the negotiating power of residents could diminish.

The introduction of home care as a new option for people requiring some care and help should provide an alternative. Home-care recipients will be asked to pay a basic daily fee based on the single basic age pension rate. This fee will be capped at $5000 or $10,000 a year, depending on a resident's income, with a lifetime cap of $60,000 that will be indexed.