Ms JULIE BISHOP (Minister for Ageing) —I move:

On 15 September 2005 I announced the coalition government’s decision to strengthen the existing protection surrounding aged care residents’ accommodation bonds by establishing a scheme to guarantee the repayment of bond balances if a provider defaults and by introducing new prudential regulatory arrangements. The Aged Care (Bond Security) Bill 2005, together with two other bills that I will be introducing today, the Aged Care (Bond Security) Levy Bill 2005 and the Aged Care Amendment (2005 Measures No. 1) Bill 2005, form the legislative framework to strengthen the protection of bonds. An accommodation bond is an initial payment that in certain circumstances an approved provider may charge a resident of an aged care service. Some aged care residents in multi-purpose services may also be charged accommodation bonds. The bond balance is refunded to the resident when he or she leaves the service.

Before the Aged Care Act of 1997 was introduced, some residents of aged care services were charged entry contributions. These entry contributions are akin to bonds and are covered by the new arrangements. Around 74 per cent of aged care services levy bonds on residents. Based on 2004-05 data, around $4.3 billion in bonds is held across the industry, a significant increase from the $500 million of bonds in 1996. The average new bond has also increased from $26,000 in 1996-97 to $127,600 in 2004-05. Bonds can represent a significant proportion of residents’ life savings and, understandably, residents and their families expect secure arrangements for their bonds and the reassurance that their bond balances will be repaid or be paid when the resident leaves the home.

To date, the existing arrangements have worked well, as shown by the fact that there has not been an instance where a resident’s bond balance has not been repaid. However, under existing arrangements, if a provider becomes bankrupt or insolvent, the resident is not guaranteed the return of their bond balance, because the resident ranks as an unsecured creditor under corporations and bankruptcy law. So while to date there have been no cases where a resident’s bond balance has not been repaid, the risk is increasing because of the increasing value of the bonds and the number of approved providers and multi-purpose services charging bonds.

In developing this new legislation, the government’s key objectives are: to improve the efficiency and sustainability of the aged care sector and to strengthen the management of bond moneys to reduce the likelihood of providers becoming insolvent or bankrupt and being unable to repay bond balances; to strike a balance between the added security for residents that is provided by this strengthening and the financial impact of the new arrangements on the sector’s viability and its standing with the capital markets, including its ability to construct and maintain aged care homes and pressures that might flow on to subsidies, user charges and the quality and continuity of care; and last, but certainly not least, to ensure that all residents who pay bonds receive their full entitlement to the balance of the bonds that they have paid in the event that a provider becomes insolvent or bankrupt.

The legislative framework provided by this bill and the Bond Security Levy Bill will establish a guarantee scheme whereby the Australian government will pay 100 per cent of the bond balance owed to residents with interest in the event that a provider becomes insolvent or bankrupt and is unable to meet its financial obligations to residents. The government will then become a creditor of the insolvent provider and will recover the debt and associated costs from the insolvent provider. The government will also have the ability to levy all other providers holding bonds to recover from industry the debts left by the defaulting provider.

New prudential regulatory arrangements, established under the Aged Care Amendment (2005 Measures No. 1) Bill 2005, will complement the guarantee scheme.

These new arrangements to strengthen protection of residents’ accommodation bonds were foreshadowed in the government’s 2004-05 budget, which committed record funding of $2.2 billion for the Investing in Australia’s Aged Care: More Places, Better Care package, building on the coalition government’s earlier reforms in the aged care sector.

In particular, these new arrangements, which will improve both the security of bonds and the management of bonds by the sector, will complement the $877.8 million conditional adjustment payment, also a part of the 2004-05 budget package. In particular, the conditional adjustment payment—an additional 1.75 per cent of the annually indexed recurrent subsidy, cumulative over four years—requires approved providers to prepare general purpose financial reports. These and other measures will, over time, assist in making the residential aged care industry more financially mature and more sustainable.

The introduction of these protections underlines the coalition government’s commitment to a world-class system of aged care that provides high-quality, affordable and accessible services to meet the individual needs and choices of older Australians.

Our thinking and actions are not confined to the present. We have developed a system that will see us into the future and that can be adapted as the sector matures into a more sophisticated, self-reliant industry that embraces a culture of continuous improvement.

Our population is ageing. Over the next two decades, our population over the age of 65 will increase both numerically and structurally. By 2040, 25 per cent of the population will be over the age of 65, with over one million people over the age of 85.

While the ageing of the Australian population is not expected to have a major impact on the Australian government’s budget for at least another 15 years, the coalition government’s Intergenerational report of 2002-03 clearly identified that forward planning for demographic change is important to ensure that governments will be well placed to meet emerging policy challenges in a timely and effective manner.

Recognising that innovative planning and substantive policy reforms are needed to meet the impact of our changing demographics, the coalition government has implemented, and will continue to implement, necessary, wide-ranging and effective reforms. The transformation in aged care began with the new Aged Care Act in 1997.

In residential aged care, we have introduced and enforced national quality standards through accreditation; reformed financing arrangements; made special provision for dementia sufferers; greatly improved training for aged care workers; and subsidised a massive expansion in aged care places. More than 95,000 new aged care places have been allocated since 1996 and, with a current 193,753 operational aged care places, we are on the way to reaching our target, set in 2001, of 200,000 operational aged care places by 30 June 2006. We have also greatly expanded the consumer rights of residents.

Responding to our older Australians’ call for more choice, and based on the philosophy that most people value being able to live in their own home and a recognition that some older people and people with a disability may find this difficult without assistance, we have increased funding for home and community care and community aged care packages.

In addition to increased funding, the government initiated a review of community care programs in 2002 to identify strategies that would simplify and streamline current arrangements for the administration and delivery of community care services.

The coalition government’s ‘Way Forward’, arising from the review, will ensure that programs operate in a more consistent and coordinated way. Agreed assessment processes, eligibility criteria, consistent accountability, quality arrangements and targeting strategies are among reforms required to achieve these aims.

The ‘Way Forward’ will build on the strengths of existing community care programs while delivering a less complex, stronger system capable of responding to the challenges that lie ahead.

Overall funding to aged care has increased by 140 per cent in nine years, from $3 billion in 1996 to $7.3 billion this year. The coalition government is meeting the challenges head on, and there is still more to achieve.

As foreshadowed in the government’s response to the pricing review undertaken by Professor Hogan, consultation on longer term reform of the aged care sector will soon be under way.

Our commitment to meeting the challenges of an ageing population extends beyond aged care. The Howard government have adopted a whole-of-government approach, encompassing policies, strategies and initiatives, including in relation to retirement incomes and the adequacy of retirement savings; enhancing work force participation across all age cohorts, particularly the mature aged; healthy and productive ageing; the built environment and its impact on the health and wellbeing of Australians as they age; and community attitudes to, and legislative barriers that discriminate against, ageing.

As the Intergenerational report signalled, this government is planning for the next generation of older Australians and building for the future. I commend this bill to the House and present the explanatory memorandum.

Debate (on motion by Mr Murphy) adjourned.