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An aged-care debacle quietly looms

Watch out — poorly understood reforms to aged care are about to commence, and this anonymous aged-care worker warns it will end in disaster.

It’s been touted as a major reform allowing “choice” in aged care — but it will probably end in people of modest means being forced into substandard care, or locked out of residential care altogether.

I’m talking about the so-called “Living Longer, Living Better” reforms to residential aged care, which start tomorrow. I don’t know anyone directly involved with residential care admissions who has the slightest confidence this system will last until Christmas. And the government is wilfully asleep at the wheel.

The package is touted as the great enabler of individual “choice” in aged-care options; a response to the Caring For Older Australians Productivity Commission inquiry in 2011. Nothing could be further from the truth. What we are about to witness is a wholesale disembowelling of aged-care providers’ viability.

Residential aged care is an expensive business, yet everyone feels it should be provided for free, while assuming it’s some cash cow for providers. The bland truth is that providers already work on very tight margins. Most facilities are staffed by good, ethical people trying to do their best. If you want to milk seniors, you get into retirement villages or financial planning instead.

Every bed now has a fixed price to it. Today you hear of the wealthiest people in Melbourne and Sydney paying $1-2 million bonds. Tomorrow they’ll be capped at a $550,000 Refundable Accommodation Deposit (RAD) or a sliding scale of RAD v Daily Accommodation Payments (DAP) at a set interest rate.

Sounds good? Not really. Now the provider has to make up the shortfall from everyone else in the middle. That pushes up the median bond amount that providers will need, which widens the range of people with awkwardly middle-ish assets.

This is a wholesale skewing of residential aged care away from actual care needs towards a person’s financial station in life.”

If you have assets under $45,000 have absolutely nothing to worry about. You will be fully government supported and residential care facilities are all waiting to hear from you right now. And if you’ve got anything north of $500,000, then you similarly have choices in residential care.

If however, you’re “lucky” enough to have your assets fall between $45,000 and a solid $300,000+ (ie. most people), then prepare for indefinite limbo. Why? Because under the new regime, every liability for every single arrangement you enter into with the aged-care facility is worn by the provider. In short, you look like bad debt.

And consider that from tomorrow, facilities require a combined income and assets assessment to even begin considering someone for placement, and the essential government documentation doesn’t even exist yet. So no one will be going anywhere fast.

Meanwhile, care needs have gone missing. This is a wholesale skewing of residential aged care away from actual care needs towards a person’s financial station in life.

In addition, almost no hospital discharge planner has the slightest idea of what’s coming tomorrow. With more people becoming harder and longer to place, admissions will decrease and what do you think will be the consequences for our already overcrowded hospitals?

Concerned? Confused? So am I. Who’s our minister? That would be the Minister for Desk Toys and Paper Cuts, Mr Kevin Andrews. Nothing from him about the aged care system yet, old or new.

Rest assured though, he will happily let this reform package hit the fan — he has the default excuse that this is a Labor policy, locked and loaded, as we speak. He might think of flagging a review into the unfolding mess before immediately returning to his Candy Crush Saga, or whatever his favoured distraction.

Only admissions officers, placement consultants, and a lucky dip of financial planners of varying knowledge and ethics have any real grasp of all this. No one has the slightest bit of confidence this will be anything short of a national disaster. I’m predicting resi care providers will start going to the wall before too long, meaning fewer beds, fewer choices, more elderly people at risk and ultimately people are going to start dying unnecessarily.

And thus ends another episode where aged care once again finds itself in the too-hard basket — right where it has languished for decades, having slipped through the fingers of successive governments.

19
  • 1
    klewso
    Posted Monday, 30 June 2014 at 1:50 pm | Permalink

    Responsibility”? Falling to “Ghoulie” Andrews - the same Howard “Minister for WorkChoices and Haneef’s Detention”? Oh, joy.
    On the bright side, the use of kerosene baths has been discredited?

  • 2
    Doug Clark
    Posted Monday, 30 June 2014 at 1:56 pm | Permalink

    And that’s just for those Homes under the Federal scheme. State schemes are about 2-3 years behind in regulation, and all over the place, but importantly in most States Bonds now have to be held in a trust account, not the owner’s back pocket, which is a huge improvement

  • 3
    Dan Hilvert
    Posted Monday, 30 June 2014 at 2:32 pm | Permalink

    I admire the writer’s bold calls here. Especially given they’ll be very easy to debunk 6 months from now. Good on you for making big calls, not enough of that these days. I also agree that few commentators understand the nuances that are in place and changing here.

    But I disagree with the general thrust of the article.

    Firstly, RAC providers should still be able to charge large bonds its just that they’ll need reg permission and the Liberal appointed regulator would surely waive through most applications for bonds greater then the threshold level.

    Secondly, on the comment “care needs have gone missing” well it might or might not be the case that care is sub-par depending on the facility but that shouldn’t have anything to do with the LLLB reforms in res care because those reforms are predominantly about the accommodation side of res care.

    Thirdly, there is opportunity for many providers to have a stronger business model given that they can now charge a bond or periodic payment on beds formerly known as high care.

    Whilst there are a niche group of Providers who stand to lose from this (financially leveraged Providers who chiefly do low care) because they might be forced to accept periodic payments instead of bonds and therefore have a problem repaying bank finance …. but those Providers are in a small minority and the banks have nothing to gain by playing hard-ball with them.

  • 4
    paddy
    Posted Monday, 30 June 2014 at 2:44 pm | Permalink

    Interesting article and interesting comment from Dan H.
    Let’s hope the “interesting times” ahead are better than Anon suggests.

    Kevin “Bloody” Andrews in the role of “Minister responsible” is not exactly a cheering thought.

  • 5
    leon knight
    Posted Monday, 30 June 2014 at 3:41 pm | Permalink

    Anon’s predictions may or may not come true, but his general thrust of the type of careful planning, and diligent adult government we have come to expect of the LNP team now in charge in general, and Andrews in particular, is hard to argue against….

  • 6
    Yclept
    Posted Monday, 30 June 2014 at 4:10 pm | Permalink

    more elderly people at risk and ultimately people are going to start dying unnecessarily” which will mean less of the “fully government supported”, so a big win for Tony and Co!

  • 7
    Alan
    Posted Monday, 30 June 2014 at 4:13 pm | Permalink

    Does anyone know what these changes will be and exactly what that means for the carers and nurses?
    Most carers, who do the actual work of bathing, cleaning, feeding, dressing, grooming, brushing teeth, changing incontinence pads, cleaning rooms, mopping floors, cleaning up spills, making morning and afternoon tea, distributing residents clothing, emptying the bins, etc. have to also deal with dementia in many residents, and, from personal experience, dementia isn’t just someone being a bit forgetful, it can present in many very challenging ways.
    Carers are mostly employed on a casual or permanent part time basis and earn just slightly above the minimum wage (depending on the hours worked), burnout is common and high staff turnover is the norm.
    If the profit is the only motivator for providing care and services to the elderly, god help us.
    I would rather die than be placed in living hell that is ‘aged care’.
    Legalising euthanasia can’t come soon enough.

  • 8
    Bill Hilliger
    Posted Monday, 30 June 2014 at 6:00 pm | Permalink

    The elderly Australian sheeples that voted for the coalition are now being shorn.

  • 9
    AR
    Posted Monday, 30 June 2014 at 7:55 pm | Permalink

    Like carers at the other end of the age range,aka mothers, what odds that a return to keeping ones seniors in the family bosom attracts no government largesse?

  • 10
    bluepoppy
    Posted Monday, 30 June 2014 at 9:24 pm | Permalink

    I don’t know enough about the work on these aged care reforms to make comment but as a big picture observation, when aged care is outsourced to the vulture capitalists and where profit overrides service and care, there will be heartache.

  • 11
    Andrew McIntosh
    Posted Tuesday, 1 July 2014 at 12:24 am | Permalink

    This “anonymous aged care worker” seems to have access to a hell of a lot more information than I and probably every single one of my workmates in the industry. I appreciate the positive sentiments, but whoever this is doesn’t strike me as someone I’d meet on the floor (refer to Alan’s post, a good description of what we actually do - especially the bit about dementia).

  • 12
    Paul Dwyer
    Posted Tuesday, 1 July 2014 at 7:00 am | Permalink

    I would like to clarify one important point. The Aged Care Reforms were designed and legislated by the previous Labour Government under Minister Mark Butler. And it was that Labour Government which initiated the means testing of the family home incorporated in this legislation.

  • 13
    Aged Care Anonymous
    Posted Tuesday, 1 July 2014 at 2:55 pm | Permalink

    I wrote this article. I am a service provider involved in residential care in Adelaide(“Aged Care Worker” is a tad misleading, but the Editor has since apologised. No dramas.)

    Dan Hilvert raises some interesting points that I would have already addressed, were it not for the tyranny of word limits. There’s a lot more to this story than can be squeezed into 600-700 words.

    The Liberal appointed regulator would surely waive through most applications for bonds greater then the threshold level.

    Why? Just because they’re a Liberal appointee? Not that it matters anyway — everyone’s already listed their prices on the My Aged Care website, as mandated by law. See for yourselves — in Adelaide at least people charging more than $550,000 are almost non-existent. That’s because providers have to demonstrate “substantial refurbishment”, like say an additional private lounge/sitting room, in order to qualify. They don’t just get “waived through”.

    It might or might not be the case that care is sub-par depending on the facility but that shouldn’t have anything to do with the LLLB reforms in res care because those reforms are predominantly about the accommodation side of res care.

    … Except if the quality of care you need is in the $400,000 room and you can only afford a $250,000 room where that level of care either isn’t available and the facility has wear the loss (again) by placing you in the more expensive bed … or you’re forced to deal with another facility with a dodgy reputation and three to a room. So as you can see, care needs have indeed been left behind in these reforms.

    There is opportunity for many providers to have a stronger business model given that they can now charge a bond or periodic payment on beds formerly known as high care.

    Yeah, but nah. Previously, all those people occupying high care beds (excluding Extra Services) were having their accommodation paid for by the government. It was fixed with each facility and it was guaranteed.

    From now on they’re allowed to set a maximum RAD for each bed, which they may or may not ever receive. There’s absolutely no surety how much of that price they’ll receive as an upfront lump sum to put into trust. Even then the total cost can be negotiated down by the family. And even if the family accept an offer on the basis their relative’s estate will pay $X upfront and the rest on DAP, they still have 28 days to change their minds and say they’ll just pay the DAP instead.

    DAP is always the less viable option for providers unless the person manages to stay alive for over 15 years, after which the provider will finally have recouped the value of the bed. So let’s be perfectly clear about this — if you can’t afford much or anything in a lump sum, you WILL be paying for your accommodation until you are dead-flat broke, or just dead.

    Follow the money. This new system is all about capping the government’s liability towards the cost of residential care accommodation. That’s been handballed onto providers and made it harder to confidently place those of average means.

  • 14
    Aged Care Anonymous
    Posted Wednesday, 2 July 2014 at 11:16 am | Permalink

    Alright, so after telling me yesterday they were still frantically trying to get the Combined Assets & Income Assessment Form finished, the Dept of Human Services has finally uploaded it to their website.

    Thank heavens for small mercies.

  • 15
    Dan Hilvert
    Posted Wednesday, 2 July 2014 at 2:06 pm | Permalink

    Dear Aged Care Anonymous,

    Thanks so much for taking the time to respond to my points. Your thoughts are helping to refine my thinking on the positives & negatives of the reforms.

    On point 1 (pricing regulator): I generally concede to you given the point you made that “substantial refurbishment” is required. This obviously will be a for Providers charging north of $550k. But are you sure major refurb is required? Can’t Providers argue that their cost of accommodation justifies a higher bond value based on the building’s existing fit-out (which might be quite new) and location? I noticed the ‘Assessor’s manual’ says consideration should be given to the price of houses in the area so if that the case then it would grossly assist the applications of most of the Providers charging north of $550k as they’d generally be in affluent areas.

    On point 2 (care needs) – now I see where you are coming from. But I can’t see why someone would need to downgrade from a $400k room to $250k room as a result of these reforms …. Are you suggesting it is due to some residents having a lower income because of the new means testing provisions?

    On point 3 (better business model on high care) – can u pls explain what you mean by “all those people occupying high care … were having accommodation paid for by the Government”? I’ll assume you are referring to ‘supported residents’ whom I understood occupy between 20% and 40% of beds depending on region, refer link (http://www.health.gov.au/internet/main/publishing.nsf/Content/ageing-resident-ratios). So if, say, 60% of beds are currently unsupported and then if 50% of those residents (or future residents) could afford to pay more in 1, 2 or 5 years from now then that’s a massive kicker to the business model of Providers with a lot of high care beds who reside in relatively affluent areas. Of course, this won’t happen overnight but it should happen gradually to some extent. I understand that this is the reason for so much Private Equity interest in the sector which has boomed since the reforms.

    Thoughts?

  • 16
    Rahul Singh
    Posted Thursday, 3 July 2014 at 6:47 pm | Permalink

    Interesting article. I believe “Caring for Older Australians” Productivity Commission and KPMG / Thornton have done some research on profitability of facilities.

    There seems to be no doubt that most work under tight margins, which then provides an indicator to the participants. I stand to be corrected, but profit doesn’t seem to be the dominant motivator for most facilities, given they are run by not for profit organisations, including religious organisations.

    It remains to be seen how these aged care reforms will pan out. Coming from a government funding perspective, I think the reform have developed an interesting way of capturing one’s assets and income to determine their co-contribution towards cost of care. Some of the practitioners would know the hard facts, but it turns out that an average cost of care to the government may be in the vicinity of $40-$60K. Given the resident pays maximum $25K cost of care, the government ends up paying a significant proportion of total care costs - and this is for people who pays the highest fees (the affluent residents. The Government pays all care costs, bar basic daily care fee for low means residents. So clearly, there is burning need for reform.

    Are some pressures of residential viability being alleviated with the higher accommodation supplement of $52.49 per day? Besides the changes to how and when consumer pays their fees, I am not sure whether the reforms adversely affect a facility’s funding model?

    In detail:

    Low means resident - the facility is not worse off. In fact, the funding seems to be higher as long as the facility has significantly refurbished

    High means resident - (anyone that has assets or home valued at more than $154,179 - For facilities wishing to charge more than $550,000, they need to justify their higher price. So it’s a question of how stringent Aged Care Pricing Commissioner is on applications. I imagine on face value, as long as the price can be justified, it is no different to the previous rules regarding how much they can charge as a RAD. Cost of care is going to be made up from resident / government so should be no difference and the accommodation supplement might deliver higher funding.

    Moderate means - Is the funding model any different to the previous rules? Facilities benefit from higher funding through accommodation supplement / resident’s accommodation contribution. Cost of care is on parity with previous rules.

    It seems the main issue is whether resident’s will pay accommodation payment via DAP and the pressure that places on a facility’s viability. In my experience, from a resident’s perspective, single people who have homes, will mostly sell the home. The home is usually not in a rentable condition, therefore why pay DAP. Most will pay RAD.

  • 17
    Aged Care Anonymous
    Posted Wednesday, 9 July 2014 at 12:18 pm | Permalink

    @Dan Hilvert:

    Thank you for taking a genuine interest in this issue.

    Are you sure major refurb is required? Can’t Providers argue that their cost of accommodation justifies a higher bond value based on the building’s existing fit-out?

    Considerations for property values in the neighbourhood appears to fall within the $550,000 RAD cap. If you want to charge more than the cap, you really need to be offering something head & shoulders above the norm, namely an extra room/living area as I mentioned earlier. We know this because in Adelaide at least, I’m only aware of three facilities to have applied for $550,000+ for a set of their rooms (and only one of them has been granted so far). The point being that if there was any wriggle room for providers to argue for bonds above the cap, they would have done so. And they have not.

    I can’t see why someone would need to downgrade from a $400k room to $250k room as a result of these reforms. Are you suggesting it is due to some residents having a lower income because of the new means testing provisions?

    Firstly, anyone admitted before July 1 will remain under their original arrangements with their facility.

    Second, people’s care needs usually rise with the passage of time. What I’m noticing is that a lot of providers, where they can, are charging higher prices for what used to be their low care beds and lower prices for high care.

    This makes sense - get the higher bond when someone enters the facility before their care needs rise and they have to be transferred to another (cheaper) part of the building and they come under new financial arrangements for that bed. Otherwise, if the low care beds are cheaper than high care, then residents are entitled to port their existing arrangements to a more expensive bed when their care needs rise and the facility has to wear the loss. That was my point.

    Residents have to be transferred all the time; different rooms have different amenities for different levels of care and incidents like falls and strokes tend to result in higher care needs. Or you might be ambulant but your worsening dementia makes you a wandering risk and you need to move into the secure unit (the flowery term these days is “memory support”) for the provider to fulfill their duty of care to you. In the old days (last month) the business of running a facility was aided by the freedom (with the family’s consent) to transfer residents according to their needs and the availability of another bed. Now with every bed locked under a specific price tag, it’s added an extremely cumbersome and unwelcome layer of red tape to the provision of care.

    I cannot stress this enough - these new arrangements are an enemy of the entire concept of person-centred care they teach us in Cert III. Rather, our Brave New World is one of wallet-centred care. And every one of the many ethical people I know in the industry, who understand what’s going on, is disgusted and horrified by it.

    Can u pls explain what you mean by “all those people occupying high care … were having accommodation paid for by the Government”? I’ll assume you are referring to ‘supported residents’.

    No. I should clarify - under the old rules there were no bonds in high care, but financial residents still paid a capped, means-tested, daily contribution to their accommodation. Fully supported folks did not. The reforms mean all high care beds are now adrift on the high seas of the open market. So every facility has their fingers crossed that all their admissions from now on are going to return what they need for each bed, because that’s all they can do. Does that help?

  • 18
    Dan Hilvert
    Posted Monday, 14 July 2014 at 11:24 am | Permalink

    @ Aged Care Anonymous,

    Thanks a lot for taking the time to engage with me in depth with these issues.

    Very interesting observations you make regarding pricing & the difficulty in getting approval for the Tier 1 threshold, I can see how that is a major problem for some Providers and could hurt their business models.

    I continue to think that there are significant positives as well as negatives in the reforms for Providers (esp those heavily weighted towards high care) and I think that explains the heightened investor interest in the sector. But i’m very open to the possibility of being wrong here …. time will tell i guess.

    It’s great that your article has put the reform issues on agenda of Crikey readers, especially given how material they are. And if your prediction - that things are likely to go awry - plays out then it would be quite difficult for the Coalition to reverse the pain given their low political capital ….. it sure will be interesting to watch !!

    Cheers, Dan

  • 19
    Aged Care Anonymous
    Posted Monday, 14 July 2014 at 12:08 pm | Permalink

    Thanks.
    I do hope I’m wrong, though.

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