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Wednesday, 1 June 2011
Page: 5529


Mr CRAIG THOMSON (Dobell) (13:21): It appears that the opposition does not have a lot of interest in aged care and could not make it down to the chamber. I welcome the opportunity to speak to the Aged Care Amendment Bill 2011—a very important bill in a very important area of government policy. It is a shame that when the opposition was in government it did not have the same attention to detail on this bill as this government has taken. This bill is part of the reforms to aged care that this government is looking to put in place. The purpose of the bill is to amend the Aged Care Act 1997 to strengthen protections for accommodation bonds paid by care recipients to providers of residential and flexible aged-care services. In particular, the proposed amendments will limit the permitted uses for accommodation bonds taken after 1 October 2011 such that providers of aged care may still use bonds for capital improvements to aged-care services and prudent financial investments but may not use bonds for operational purposes. However, it will provide a two-year transition period to allow time for the sector to adjust to the new arrangements.

The amendments to this bill will: introduce new criminal offences where significant misuse of bonds has been identified; introduce new information-gathering powers to enable the Secretary of the Department of Health and Ageing to better monitor approved providers that may be experiencing financial difficulties or using bonds for non-permitted uses; and remove restrictions on the use of income derived from bonds, retention amounts and accommodation charges. This gives aged-care providers an unrestricted source of income, offsetting the proposed restrictions on the use of accommodation bonds.

The bill will also introduce complaints principles, replacing the existing investigation principles, which will improve the process of handling aged-care complaints. The legislation will also make other minor amendments to remove redundant provisions.

Since the introduction of the Aged Care Act 1997, there has been strong growth in the value of accommodation bonds. During the four years since 30 June 2006, the total value of bonds held has doubled. 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 accommodation bond held was $167,000. The total value of bonds held by providers has increased by around 20 per cent per annum. This constitutes significant amounts held by approved providers.

Currently, a care recipient may be asked to pay an accommodation bond when entering a low-care or extra service high-care aged-care facility, and approved providers have a responsibility to refund the bond when a care recipient exits the facility. The original policy intent was that accommodation bonds be used for capital funding for investment in building stock and retirement of associated debt. However, this is not clearly articulated in the legislation with respect to the principal amount of the accommodation bond.

Bonds are, in effect, an interest-free loan to the provider and care recipients are unsecured creditors, with the Accommodation Bond Guarantee Scheme as the only protection currently available to ensure they receive their bond refund. Given the significant and increasing amount of funds that approved providers are holding, it is appropriate that residents have some reassurance that their funds are being used for the intended purpose, that there is transparency about the use and that there is sound regulation in place to monitor and protect their savings.

On 12 April 2010, the government announced it would increase protection for aged-care residents' savings. The announcement was made as part of More Support for Older Australians in the National Health and Hospitals Network. Since then, the Department of Health and Ageing has undertaken extensive consultation with industry, community and government stakeholders on the options for enhancing prudential regulation of accommodation bonds to: identify the best means by which to ensure, as far as possible, that the financial interests of residents are protected; maintain effective regulatory safeguards for accommodation bonds; provide a regulated source of capital funding for investment in aged-care infrastructure; provide a regulatory framework that is commensurate to the risk associated with the exponential growth of accommodation bond holdings, which is currently over $10 billion; and promote public confidence in the aged-care system.

As a result of the consultation process, it is proposed that the following changes be made to the act to strengthen consumer protection for accommodation bonds. The bill proposes to make amendments to address the lack of clarity in the act to ensure investment in aged-care infrastructure by clearly articulating that accommodation bonds should be used only for capital works, investment in financial products, loans associated with capital works, investment in financial products and refunding bonds. The bill proposes to make amendments to also introduce new criminal offences where a misuse of bonds has been identified. The bill proposes that an approved provider would commit an offence when there has been a misuse of bond funds and, within two years of that misuse, the provider becomes insolvent and fails to refund bonds. In the very worst cases, offences will also apply to individuals within the organisation, such as when the individual knew bonds were being used for a non-permitted use and was in a position to take reasonable steps to prevent the misuse but had not done so.

The bill proposes to introduce new information-gathering powers for government in circumstances where concerns exist regarding the capacity of an approved provider to repay accommodation bonds and, finally, to remove restrictions on the use of income derived from bonds, retention amounts and accommodation charges. This will focus the regulation more on the associated risks of the bond principle rather than on the income derived from the bond, retention amounts and accommodation charges. It is proposed that the changes take effect from 1 October 2011, with provision for a two-year transitional period to allow the sector time to become more familiar with the new requirements. Initially in the transition period, approved providers would continue to be able to use bonds in line with the current regulatory requirements and prepare for the start of the new requirements. Later in the transition period, approved providers not ready to meet the new requirements could continue to use bonds for existing purposes but would report to the department on this use and on actions being taken to become compliant.

In relation to the impact of the proposed reforms on the Productivity Commission's current inquiry into aged-care there is movement here as well. The proposed prudential reforms are consistent with the direction of the Productivity Commission's draft report. The proposed prudential reforms reinforce the requirements that accommodation bonds should primarily be directed to investment in aged-care infrastructure. The Productivity Commission acknowledged the ongoing need for prudential regulation and that these prudential reforms were currently under consideration.

A second part of the legislation relates to the complaints scheme. The bill proposes amendments to the act which would enable the investigation principles, which currently describe the investigation process in relation to complaints, to be replaced with complaints principles. The Aged Care Complaints Investigation 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, the then Minister for Ageing commissioned an independent review to identify areas of improvement to ensure the scheme achieves best practice aged-care complaints management arrangements. The review recommended a number of changes to improve the operation of the scheme in terms of timeliness, transparency and consumer focus.

Following consideration of the review and further consultation regarding proposed amendments to the act, proposed new complaints principles will describe the improved new complaints scheme and will have a stronger focus on resolution rather than investigation of complaints. The bill proposes to shift the focus of the system from investigation, whereby the department investigates complaints and determines whether there has been a breach or not, to a more flexible scheme, whereby the department can employ a range of mechanisms for assisting to resolve a complaint—including early resolution, conciliation and mediation—that encourage the parties to resolve the issues themselves.

Other amendments contained within the bill will make some minor operational changes to remove redundant provisions relating to aged care. Amendments to the Aged Care Act 1997 will strengthen consumer protection around accommodation bonds and the arrangements for managing complaints. The purpose of the bill is to amend the Aged Care Act 1997 to address current legislative inadequacies regarding the permitted use of accommodation bonds. In particular the proposed amendments will clearly articulate the permitted use of accommodation bonds, introduce new criminal offences where misuse has been identified, introduce new information-gathering powers and remove restrictions on the use of income derived from bonds, retention amounts and accommodation charges. The bill will also enable the making of the complaints principle in place of the existing investigation principles, which will improve the process of handling aged-care complaints and make other minor amendments to remove redundant provisions.

Subject to the passage of the bill through parliament and the development of associated changes to delegated legislation, it is proposed that the reforms regarding accommodation bonds will take effect in relation to new accommodation bonds taken by approved providers from 1 October 2011. A two-year transition period until the end of September 2013 will allow the sector time to become more familiar with the new requirements. It is proposed that the introduction of the new aged-care complaints scheme will take effect from 1 September 2011 with a limited transition period for existing complaints to be transferred to the new arrangements. To ensure smooth implementation, the government will continue to work collaboratively with providers and key stakeholders and listen closely to all their views. It is proposed that the effectiveness of any changes to the legislation be monitored by the department and that a post-implementation review be conducted. Given the two-year transition periods for reforms to accommodation bonds, it is anticipated that the review is likely to be conducted in 2014-15.

These are important changes to aged care that aim to ensure there is better regulation around the operation of accommodation bonds to give greater confidence to the public and also to set in place a new complaints regime so that the public can have greater confidence in the operation of our aged-care sector. This is an important bill and I commend it to the House.