Aged care bonds to face more scrutiny
Patricia Karvelas, Political correspondent | April 27, 2009
Article from: The Australian
A CRACKDOWN is being planned on aged care providers using lucrative accommodation bonds to cover operating losses or divert money to non-aged care uses.
Currently the income from accommodation bonds, paid by people entering aged care, may be used for capital works, retiring debt and improving aged care services.
Options being prepared by the Department of Health and Ageing for Minister for Ageing, Justine Elliot, say in recent cases aged care providers in financial distress have been using bonds to cover operating losses or possibly diverting them to non-aged care uses.
The department advises that, as of June last year, approved providers held about 58,000 accommodation bonds worth $7.7 billion.
The requirements in the Aged Care Act 1997 "are very general" in relation to using these bonds.
In the options prepared by the department, providers would be held accountable for the subsidies they received through greater levels of reporting to the Government, and providers could be given more obligations under prudential arrangements if they misused money.
The move comes after the department used a Senate committee last week to allege aged care providers may be setting up operations on Norfolk Island, and possibly in other countries, to avoid tax obligations.
In evidence to a Senate inquiry into residential and community aged care, first assistant secretary of ageing, Andrew Stuart, said: "There are particular advantages, there are some structures in the industry ... you can imagine a structure where the domestically taxpaying entities make a loss and the foreign-based body makes substantial profits because of the fees paid to them by the domestic entity.
"Under those circumstances headquarters can make a decent living and less tax can be paid."
Assistant secretary David Cullen said one of Queensland's larger aged care providers, TriCare, was registered on Norfolk Island, an Australian territory.
"It's certainly the case that ... there are six TriCare companies that are approved providers. They are all Australian registered companies but they are all subsidiaries of the TriCare group Pty Ltd which is registered in Norfolk Island."
TriCare chief executive Jim Toohey told The Australian there "are no TriCare operations managed and no TriCare personnel located or employed anywhere other than" at locations in Australia.
"TriCare pays the applicable tax on all income made from its Australian entities. Any inferences or assertions to the contrary are deliberately false and cowardly given the privilege attached to Senate committee testimony.
"This appears to be yet another attempt to silence an aged care provider who, in good faith and at the invitation of the Senate, has presented along with many other providers clear evidence about the crisis in aged care, which incidentally as we have said all along, is not of this Government's making."

[2 and a half years ago]..........What is not stated, but is implied in previous posts on this subject, is that the accommodation bond is uncapped. Essentially all your hard earned can be handed over to the provider lot as an interest free loan.

[3 years ago].........In my simplistic view accommodation bonds should NOT be held by the provider but by an independent trustee similar to the rental bond boards. The total money involved is probably quite large.....

Up to $2.6m demanded for nursing home places

AGED-CARE residents are paying bonds of more than $2 million to ensure places in sought-after nursing homes - relinquishing tens of thousands of dollars a year more than the amount needed to cover the cost of their care.

The widespread practice of nursing homes extracting bonds from residents well in excess of reasonable charges is officially sanctioned but is raising concerns among public trustees about the surge in the unregulated demands made on vulnerable families seeking beds for frail parents.

In Sydney and Melbourne elderly people are frequently paying more than $1 million for bonds for nursing homes in good suburbs. One Sydney home demands bonds as high as $2.6 million while a Melbourne home sought $750,000 each from an applicant couple, the Productivity Commission has been told.
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The commission's report into aged care has called for an end to the present system, saying the bonds often are much higher than actual costs. Bonds held by nursing homes now total $9.1 billion, a figure rising 20 per cent a year in the past five years.

A national body representing public trustees has expressed concern about the ''rapid acceleration'' in the cost of accommodation bonds, which can be demanded from residents seeking low-care accommodation or extra services.

Residents requiring high-level care do not have to pay bonds, a measure that operators say is driving companies to ''cross-subsidise'' by charging the high bonds when they can.

''In NSW one approved provider has set its bond levels at between $500,000 and $2.6 million depending on the floor level and the particular rooms,'' the Australian Guardianship and Administration Council said in a submission to the commission's aged care inquiry.

The council said there appeared to be no independent controls or vetting for reasonableness of bond requests.

''The ability of a consumer to 'negotiate' a bond amount is clearly often questionable at best given the often emotionally charged nature of a consumer's move from home to aged care,'' the council told the inquiry.

The Aged Care Rights Service says it receives six to 10 complaints a week from consumers, and bonds were the ''No.1 issue''.

The service's chief executive, Russell Westacott, said elderly applicants and their families were at a time of crisis, but were often pressured by nursing homes to decide within 24 hours.

Operators would often find out the value of the applicant's home and set the bond accordingly, as the federal rules mean all but $38,500 of the individual's assets can be paid out in bonds.

If the home was valued at $450,000, ''the aged-care home will say, 'Oh yes, the bond will be $400,000.''

Gerard Mansour, the chief executive of the industry group, Aged and Community Care Victoria, said the average bond was ''only $250,000, but as bonds are exempt from the assets test, there are isolated larger bonds''.

Mr Mansour responded on behalf of the RSL's Vasey nursing home in Hawthorn which is believed to have demanded $750,000 each from a couple whose home had been valued at $2.3 million