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Thursday, 26 May 2011
Page: 4779


Mr BUTLER (Port AdelaideMinister for Mental Health and Ageing) (09:49): I move:

That this bill be now read a second time.

The Australian government has a strong commitment to caring for our older Australians. In line with this commitment, the Gillard government will spend around $10.9 billion on aged care in the 2010-11 financial year. Moreover, the government is delivering on a range of significant aged-care reforms to enhance the delivery of recipient centred aged-care services.

In tandem with these reforms, ensuring that appropriate safeguards are in place to adequately protect older Australians living in residential aged care is of paramount importance to this government.

The government takes this responsibility seriously and is committed to working with aged-care residents, and industry to identify areas where improvements can be made.

In the 2010-11 federal budget, the government announced it would increase protection for accommodation bonds and strengthen complaints management in aged care as part of its commitment to providing better health and better care for older Australians through the national health reform agenda. I am pleased to be delivering on these promises today by introducing the Aged Care Amendment Bill 2011.

Essentially, the amendments contained in the bill increase protection for residents in two ways: first, they strengthen protections for accommodation bonds held by providers of residential and flexible aged-care services and, second, they improve complaint management in aged care.

In addition, the bill makes other minor amendments to remove redundant provisions relating to aged care which are no longer operational and can be misleading to aged-care providers.

Protecting aged- care residents' savings

Accommodation bonds were established to give approved providers a source of capital funding for investment in residential aged-care infrastructure.

Accommodation bonds are essentially an interest free loan from the aged-care resident to an approved provider. The provider has the responsibility to repay the bond when the resident leaves the aged-care service. In the event that an approved provider goes into liquidation owing bond refunds, the Australian government makes those refunds through the Accommodation Bond Guarantee Scheme. Since the introduction of the Aged Care Act in 1997, there has been strong growth in the value of accommodation bonds held by the aged-care sector. As at 30 June 2010: approved providers held more than $10.6 billion in bonds on behalf of more than 63,000 aged-care residents; the average total bond holding held by an individual approved provider was $11.2 million; and the average new accommodation bond charged during the financial year was around $232,000.

The total value of accommodation bonds held by approved providers has more than doubled since 2004-05—equating to an average increase of 20 per cent per annum.

This is a significant amount of funds held by aged-care providers on behalf of their residents. And, as the Australian population continues to age and the demand for aged care increases, the funds loaned to approved providers through accommodation bonds will continue to grow.

Given the significant funds loaned by residents to their approved providers, it is important that this money be directed to residential and flexible aged-care infrastructure and that there be robust accountability mechanisms in place to underpin confidence in the safety of residents' funds.

To date, the majority of approved providers have effectively met their obligation to refund bonds to their residents. However, since the introduction of the Accommodation Bond Guarantee Scheme in May 2006, it has been activated on five occasions with around 150 accommodation bonds refunded at a cost of approximately $24.5 million to the taxpayer.

This experience, together with that of the Department of Health and Ageing in undertaking prudential monitoring and compliance activity, has demonstrated that regulation of accommodation bonds could be further enhanced. In particular, there is a need to reinforce the role of bonds in financing capital investment in aged care.

This bill provides greater clarity about the uses of accommodation bonds and strengthens the link to aged care. Specifically, the bill reinforces that bonds taken after 1 October 2011 should be used for capital expenditure at aged-care services, repaying debt associated with capital works and refunding existing bonds. The bill also makes it clear that accommodation bonds can be used for financial investment. For example, a number of approved providers invest bonds in term deposits prior to building a new facility.

Importantly, the reforms are structured to ensure that crucial investment in aged-care infrastructure is maintained. A broad approach is taken to capital expenditure and includes costs for activities directly associated with capital expenditure. The design of the reforms also ensures that regulation does not unduly impact on effective corporate structuring and business arrangements.

For many approved providers, the reforms are not expected to have a significant impact as they will already be using bonds for the permitted purposes. However, a two-year transition period will be implemented to ensure that those approved providers that need to make changes have sufficient time to act to meet the new requirements.

Unfortunately, the risk that some entities may not act appropriately in dealing with accommodation bonds cannot be completely removed by regulation. Therefore, it is important to have strong incentives in place to discourage this type of behaviour. Under the new arrangements, offences will apply when misuse has been identified. New criminal offences will apply where an approved provider has used bonds for a non-permitted purpose, is insolvent and is unable to repay accommodation bonds when they fall due.

In the very worst of cases, criminal offences will also apply to individuals within the organisation. Individual offences will only apply in circumstances where (a) the approved provider has used bonds for a non-permitted purpose, is insolvent and unable to repay accommodation bonds and (b) where an individual was complicit in this. For example, where the individual was a key personnel of the approved provider (that is, in a senior position), knew the bonds were being used for a non-permitted use and was in a position to take, but had not taken, reasonable steps to prevent the misuse.

The introduction of offence provisions for the misuse of bonds demonstrates the government's commitment to addressing the serious moral culpability of those who choose to misuse bonds which are essentially loans to approved providers by people in vulnerable positions. Aged-care residents need to be confident that their funds are being used for the intended purposes, that there is transparency about that use, and that there is sound regulation in place to monitor and protect their savings.

As I have mentioned, the focus of the enhanced protection for accommodation bonds is to reduce the risk that approved providers are unable to make refunds to residents. Given this emphasis, the bill removes the current restrictions on the use of the income derived from bonds and accommodation charges. Currently, these restrictions are more significant than those related to the actual bond itself, but by removing the restrictions this will free up these funds for use by approved providers, reduce regulatory burden and ensure that regulation better targets the area of greater risk.

To support all of the new arrangements, the bill will also introduce information gathering powers in circumstances where, for example, concerns exist regarding the capacity of an approved provider to repay accommodation bonds. This will improve the capacity of the Department of Health and Ageing to actively manage or monitor risks as they emerge.

Improving the handling of aged-care c omplaints

The second key element of the bill relates to the management and resolution of complaints about aged-care services.

The Aged Care Complaints Investigation Scheme (the scheme) provides a means through which concerns relating to the delivery of residential, community and flexible aged-care services subsidised by the government can be investigated.

In July 2009, in response to industry and community concerns about the scheme's operation, an independent review to identify areas of improvement was completed. A key outcome of that review was the recommendation to increase the consumer focus of the scheme and to strengthen the focus on resolution of complaints rather than just investigation of complaints.

While many of the review's recommendations have already been implemented administratively, amendments proposed through this bill will enable the implementation of the reforms to continue.

To this end, the bill proposes to enable the 'investigation principles' to be replaced with new 'complaints principles.

The proposed new complaints principles will describe the improved complaints scheme and will have a stronger focus on resolution of complaints. This will provide consumers with a more flexible scheme where a range of options are available for assisting to resolve a complaint, including: early resolution, conciliation and mediation. Other amendments

Other amendments contained in the bill will make some minor, operational changes to remove redundant provisions relating to aged care, which have the potential currently to confuse the public.

Timing

Subject to the passage of the bill through parliament, it is proposed that the reforms relating to bonds take effect from 1 October 2011. A two-year transition period will be in place until the end of October 2013 to allow the sector time to become familiar with new requirements relating to the permitted uses for bonds. This will assist to ensure a smooth transition.

Changes relating to complaints principles take effect on 1 September 2011.

Minor amendments and removal of redundant provisions will take effect on royal assent.

These changes have been the subject of consultation with the aged-care sector, the banking and finance industry and consumer representative groups. Their views have been instrumental in shaping these reforms. To ensure smooth implementation, the government will continue to work collaboratively with key stakeholders, providers and care recipients and their families, and obviously listen very closely to their views.

Conclusion

I am very pleased to introduce this bill. The amendments it contains ensure, as far as possible, that the financial interests of residents are protected, that effective regulatory safeguards are in place for accommodation bonds and that a regulated source of capital funding is provided for investment in aged-care infrastructure.

This bill provides a regulatory framework that is commensurate to the risks associated with the strong growth of bond holdings in the aged-care sector, which is currently over $10 billion. It also provides for a shift in the way aged-care complaints are dealt with, from one of investigation to one of resolution, facilitating pragmatic, resident centred outcomes for all concerned parties. By doing so, this bill will help promote public confidence in the aged-care system.

Debate adjourned.