By Dave Riley
Elderly people entering my local nursing home from this month could pay accommodation bonds ranging from $2000 to $90,000, depending on their assets. Since the home is only a 40-bed facility, placement may not be possible if no suitable beds are available, and applicants will have to shop elsewhere.
The chronic shortage of nursing home beds has been the bane of many families and health professionals. Most admissions come about due to a health crisis, not necessarily a housing problem.
The demand for an accommodation bond under the federal government's new legislation is sure to blur that real distinction, so that admission is determined by ability to pay rather than on a need for care basis.
Even to be placed on a waiting list for entry to a nursing home will require an outline of the older person's financial position. Pensioners will be expected to hand over all but $22,500 for admission.
One retirement consultant estimated that nine out of ten pensioners will have to sell their home before they can enter an aged care facility. For most it is their only asset.
Under the new legislation, placement must be negotiated with the nursing home or hostel management and a bond agreement signed. Residents have six months to pay the bond after moving in. Since 51% of nursing home residents leave or die within four months of admission, it's not difficult to guess whose interests come first.
Presently there are around 135,000 people in nursing homes and hostels throughout Australia. These places are in dire need of capital funding. While the ALP has accused the Coalition of cutting $500 million from aged care in the last two budgets, the neglect began earlier. Democrat Senator John Woodley — whose party supported the legislation — estimates the capital shortfall at $800 million.
Even the government recognises the pitiful state of these facilities: 13% of nursing homes have fire hazard problems, 11% fail to meet health criteria, 40% sleep four to a room, and 75% fail to meet Australian design standards.
Under the guise of restructuring, the introduction of the universal bond is likely to yield a huge cash reserve which can be invested at the discretion of a central trust fund.
While the money on deposit in the trust will be available to be lent to nursing home and hostel owners to spend on upgrading and rebuilding, each facility also draws interest from the fund in line with the total of its bond placement.
While much media attention has focused on the $2600 the nursing home owner can withdraw from each bond for the first five years, the return on interest will also be significant. Of course, the larger the amount deposited in the trust, the greater the investment return for the home.
This is why the changes favour the wealthy. The larger the bond you can pay, the broader your choice of accommodation as homes compete for your custom.
Now likely minus a home, perhaps chronically ill and maybe senile, each resident of a nursing home is converted into a passive source of working capital for the enterprise. If the older person dies or leaves the home, they or their estate are paid only the principal minus the initial withdrawals over the first five years.
Tied to the introduction of the bond has been a general hike in payments for nursing home and hostel accommodation. A full pensioner will now pay 85% of their pension to the home or hostel.
Whereas the family home is not assessed as assets when a person receives an aged pension, as soon as the property is sold, the pension rate is reassessed in line with the sudden liquidation of assets.
All financial assets, including those held as bond by the nursing home or hostel, can now form part of accessible income, and the pension reduced accordingly. The Australian Pensioners and Superannuants' Federation estimates that pensioners with no other income will have only $3.69 per day to live on after paying their weekly fees. This represents a drop of $5.73 per week in residents' disposable income.
Despite the rhetoric that has accompanied the launch of the new approach to aged care, the changes are a "win-win" situation for industry and government.
Pleading a crisis, the government has executed a classic "user pays" manoeuvre while ensuring that the industry receives a continued subsidy, albeit from the current generation of retirees rather than the federal treasury. The forced liquidation of personal assets releases funds for investment in any sphere of the economy and enables the aged care providers to access a larger share of superannuation funds.
Just as the long-term plan is to supplant the aged pension with a system of obligatory superannuation, demographic changes ensure that the business of aged care is sure to be a lucrative one. As the states and the federal government abrogate their responsibilities to the aged and divest themselves of geriatric hospitals and nursing homes, a sector that was always been overwhelmingly private is sure to become even more so.
As the APSF says: "We are facing the day when getting nursing home care is not a matter of what your health needs are, but how much money you have".