Problem of aged-care bonds needs to be tackled
Max Newnham
October 13, 2007

ANY doubts about whether Australians have embraced superannuation with a passion were dispelled with the contribution figures for the June quarter.

For the first time, members' contributions exceeded those of employers.

The $22.4 billion that members contributed, three times higher than the previous record, shows how much faith Australians are placing in superannuation.

The problem is that this faith may be misplaced: without an overhaul of the funding of

aged-care places, many baby boomers will have to cash in their super to fund aged-care bonds.

Under existing regulations, a person can be required to pay an aged-care bond when going into low-level aged care.

There is no limit on the amount of bond. This means

a person can be forced to sell all his or her investments, cash in superannuation, sell the house, and be left with only $33,500.

Statistics show that more people go directly to high-level care rather than starting off in low-level care. But with an ageing population, more people will need low-level care.

The Bureau of Statistics estimates that the number of people aged 85 and older will increase from under 1 million to almost 4 million by 2051.

This is a major concern because people aged 85 and older require most of the support with assisted housing, health and disability services.

Not even taking into account the threat to superannuation, the system puts many people through unnecessary heartache and distress when they are most vulnerable.

A few years ago, I had a client who was finding it hard to look after her husband, who had Parkinson's disease. His condition eventually got so bad that he had to be admitted to a low-care aged facility.

The couple survived on a lifetime state government employee pension and a small amount invested. In addition to their family home, they had a holiday house that provided much-needed rest and relaxation.

To fund the aged-care bond, they had to sell the holiday house. Had they also been receiving an allocated pension, they would have been forced to cash in some or all of it as well.

This threat to superannuation is not a big one now. Many people entering aged care tend not to have large amounts in super and rely more on the age pension.

But with the rush of money into super since simple super was introduced, and compulsory employer contributions since 1992, it will become a much larger issue.

The type and quality of accommodation for the aged differ widely.

Accommodation ranges from houses, units and flats in the community and independent units in retirement villages, to low-care and high-care in aged-care facilities.

In low-care facilities, residents live somewhat independently but have access to 24-hour nursing and also receive help with day-to-day living.

High-care facilities provide a much greater level of supervised living.

The Federal Government funds and regulates low-care and high-care aged accommodation.

All residential aged-care providers must abide by a Commonwealth accreditation system that consists of 44 areas of compliance. Recent publicity about some aged-care facilities failing compliance requirements shows the system is working.

The process of someone entering an aged-care facility starts with an assessment team that establishes the level of care required.

This can be low-level care or the high-level care associated with nursing homes.

There are more aged-care homes offering "ageing in place"; that is high-level and low-level care. This makes it possible for a resident to stay in the same home as their needs increase.

The Commonwealth determines almost all types of fees that these facilities can charge.

The two main types of fees are accommodation payments and daily care fees. The daily care fee is the resident's contribution and is determined by income. The higher the income, the higher the fee.

Daily care fees start at $31.52 for full pensioners. The fees then rise on a sliding scale to a maximum daily additional income-tested fee of $55.28. This additional fee is payable by people with an annual income exceeding $83,890 or couples with income exceeding $167,007.

Accommodation payments enable aged-care homes to maintain and upgrade the safety and quality of their buildings. By law, aged-care homes must use all money raised by accommodation bonds and charges to improve accommodation and services.

The cost of building and maintaining aged-care facilities is not cheap. Gerard Mansour, chief executive of Aged and Community Care Victoria, estimates it costs up to $200,000 a bed (plus ensuite) to build a quality aged-care facility, plus fit-out and land, in most metropolitan capitals.

High-level aged-care providers can charge only a daily accommodation fee, which the Commonwealth sets. The maximum daily accommodation charge is $17.55 for any resident with more than $65,029 in assets.

"To be viable, most providers must build a high-care facility of more than 60 beds," Mansour says. "To fund a high-care project of this size requires income to be generated at the rate of at least $50 a day to pay for the set-up costs."

Accommodation payments for low-level care can either take the form of regular payments, equal to the interest that would be earned on a bond plus retentions, or as a lump-sum accommodation bond.

In most cases, an accommodation bond will be charged. The amount of bond depends on the value of an individual's or a couple's assets. These include the home, furniture and equipment, cars, caravans, and all investments, including superannuation.

Where one person has to go into low-level aged care, and their spouse remains living in the home, the value of the home is not included in the assets test. For a couple requiring low-level care, the value of the home is included and in most cases must be sold to pay the bond.

Where a bond is not paid at the time of entering a facility, the aged-care provider charges interest of up to 10.75 per cent.

Depending on when a person leaves a facility, the bond will be returned, less a retention amount. The retention amount is based on length of time in the facility.

It is charged at $280 a month, up to $16,800. This retention amount is calculated by multiplying $280 by the number of months in the facility, up to 60 months.

There is now no limit on the amount of bond that can be charged. When only one person enters low-level care, the total value of the couple's assets is assessed.

Half the value of the couple's assets is attributed to the person entering aged care and they could be left with only $33,500 of their share of the assets.

In this situation, the spouse not requiring aged care can be forced to sell some investments and assets to fund the amount of bond required.

A spouse can also be forced to cash in part of his or her superannuation, in addition to cashing in their husband's or wife's super, to fund the bond.

With no limit on the amount of bond required, a person can be left with almost no superannuation or investments.

The effect of this will be disastrous in two ways.

First, people will suffer a dramatic deterioration in their lifestyle as they will no longer be receiving the super pension on which they had been relying.

Second, the financial demands on the Commonwealth will increase because these people will be forced on to the aged pension.

The Howard Government and the Labor Party appear unconcerned about this problem. In fact, neither party will even comment on whether they recognise there is a problem.

But there is a solution: allowing aged-care facilities to charge bonds for low-level and high-level care.

"If aged-care providers were able to charge bonds for both levels of care, the industry would then be able to look at options such as placing a limit on the amount of bond required, depending on a person's capacity to pay," Mansour says.

With the federal election looming, voters have a perfect opportunity to have both parties tackle the aged-care bond problem.

If people do not take the time to contact their local member about the problem, nothing will change. In this situation, Australians will be putting their superannuation and lifestyle at risk.

egilmore wrote:Is the SMH reading SG ? Otherwise the following article is nothing but a mere coincident ? ...cheers eG

G wrote:Amazing,

We are allowed to build enormous Super Nest Eggs with no tax after 60 only to have them legitimately pilfered by unaccountable aged care facilities.

Do I understand this correctly?

egilmore wrote:We should think beyond the square in this very critical , to so many of us , issue .
The BOND + the exohorbitant monthly fees are beyond the means of most Australians .
The current situation depletes life savings of people .Subtly it is like estate/inheritance tax .

Are there any insurance for such a situation that may arise in future ? I mean like life insurance which is payable on death ? this insurance would cover bonds and part of the aged care ibstitution monthly fees .

Perhaps , the government should be encouraged to allow issuance of temporary work permits , for carers from countries where skilled carers are unable to find proper jobs in their own countries . Such carers would live-in with old frail people or those that suffered from a debilitating sickness ( such as bad strokes , progressive dimentia etc ) . This would allow the frail to stay at home , and assist the carers in establishing a better life . It would be also extremely good for the families of the frail , because the burden of financing the stay of their love ones would be manageable .

A few years ago I met a person in a Singapore Hotel whose job was to arrange carers fron countries in Eastern Europe and Asian Tiger economies into the West European countries . Why couldn't we do the same here ?
cheers eG

Families fear for aged-care cash

Article from: The Courier-Mail

Anthony Marx and Tanya Chilcott

December 26, 2007 11:00pm

DESPERATE relatives of elderly Queensland dementia sufferers are battling to recoup hundreds of thousands of dollars in accommodation bonds held by three men whose companies have already failed to repay about $10 million allegedly owed to property investors.

Families of those who lived in a now-closed aged-care complex at Carrara, on the Gold Coast, say they fear that their bonds of up to $250,000 may have disappeared. For some of the 27 residents, the money amounted to their life savings.

At least four of the relatives complained of not getting satisfactory answers and said Lifecare Services Australia directors Colin Francis, David Stoyakovich and Robert Adcock would not return their calls.

Lifecare lost control of Carrara and another aged-care centre after failing to make repayments to two non-bank lenders that have launched legal action against Mr Francis and Mr Stoyakovich over more than $8.5 million in high-interest loans backed by their personal guarantees. Carrara closed in late September, two months after federal regulators said it posed "an immediate and severe risk to its patients".

Mr Francis and Mr Adcock, a former bankrupt who recently left Lifecare, did not return calls. Mr Stoyakovich declined to comment. But in a November 19 email to Patrick Martin-Vegue – the son of one patient – Mr Francis vowed to return bonds.

"We have been waiting on a settlement to initiate the return of bonds . . . The mortgagee withheld funds that was (sic) meant to be allocated for bonds. Under an agreement reached by our lawyers on Friday, they have up to 14 days to account for the money. As soon as that is finalised, bond payments will be made," Mr Francis wrote.

Those owed money may also receive relief from the Federal Government under the Aged Care (Bond Security) Act if Lifecare or related entity Lifestyle Care Providers is bankrupted. The minister can also authorise payments by making an "insolvency event declaration" if a company administrator is appointed. It is understood that at least one relative has retained law firm Slater & Gordon to make an overture to the Government and consider the merits of a class-action lawsuit. But there are fears that Lifecare and its directors have few, if any, assets worth pursuing.

Mr Martin-Vegue said he had failed to retrieve a $150,000 bond since his 74-year-old mother moved out of the centre in late August. He needs the money – which, under law, should have been returned within 14 days – to pay for another bond in her new nursing home.

"I'm very scared. This is my mum's life savings. I don't have $150,000 to replace that," the Dreamworld employee said.

Kelly Adams said her 82-year-old father sold his home to pay the $240,000 bond for himself and his partner.

She said Mr Francis would not return her calls about Mr Adams's $120,000 share.

"I don't know whether I have lost Dad's whole estate," Ms Adams said.

Dave Hannah – who is chasing $117,000 for his wife's bond – is "worried sick". Three months ago the Department of Health and Ageing assured the family that a "close eye" was being kept on Lifecare.

Now the 83-year-old, who sold his house in New Zealand to pay for the bond, stands to lose his life savings if he cannot retrieve the money.

The three Lifecare business partners have repeatedly clashed with ASIC over six property development schemes – including Carrara – during the past three years and they have allegedly failed to repay dozens of small investors about $10 million.

ASIC secured Supreme Court orders this month permanently banning the trio from dealing in financial products or operating a financial services business. The Australian Taxation Office is also chasing Mr Francis and Mr Stoyakovich in Southport District Court over nearly $90,000 allegedly owed from their firm Lifecare Management.

All three are former employees of the late Brian Maher, the notorious convicted tax cheat and three-time bankrupt who died two years ago.