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Thursday, 21 June 2007
Page: 170

Senator STERLE (6:28 PM) —The incorporated speech read as follows—

The purpose of the Aged Care Amendment (Residential Care) Bill 2007 is to amend the Aged Care Act 1997 to support the proposed amendments to the Classification Principles 1997 to replace the Resident Classification Scale (RCS) with the Aged Care Funding Instrument (ACFI) as the means for allocating subsidy to providers of residential aged care.

This change was foreshadowed in the ‘Securing the Future of Aged Care for Australians’ package announced by the Prime Minister on the 11th of Feb 2007.

This Bill also proposes a number of amendments to do with the operational parameters of the Government’s residential aged care program and improvements to the administrative efficiency of the program.

Part II of the Bill provides for application and transitional arrangements to implement the amendments to this Bill and to ensure a smooth transition for approved providers.

Mr President, it has been well documented that Australia over recent decades has experienced significant ageing of its population. This is partly due to a progressive decline over time in Australia’s crude birth rate and partly because, on average, Australians are living significantly longer.

We live in an era where most people can expect to live an active healthy life many years after they move into retirement. It needs to be acknowledged that continuing improvements in the health status and the longevity of Australians is due in no small part to Australia’s Government funded universal health and aged care systems.

Medicare saves lives without discrimination.

Medicare improves health without discrimination.

The pay-off from Australia’s universal health and aged care systems is a healthier and longer living population.

Medicare is complimented by Australia’s aged care system which ensures older Australians received high quality aged care regardless of their financial means.

Because of our changing demographic there has been a substantial increase in the need for Government to ensure the provision of adequate aged care services, particularly for the growing numbers of people living well into their eighties.

The tragedy is that not all Australians are sharing equally in the improvement in longevity and health status.

I refer of course, in particular, to Indigenous Australians. The poor average health status of Indigenous Australians is unfinished business that is still not getting the priority it requires from the Howard Government.

The lower average standard of living of Indigenous Australians and their significantly lower health status demonstrates that where a Government doesn’t govern for all Australians there can be a devastating effect on the lives of individuals

It is essential that Government accepts it has a responsibility to ensure that there are no barriers to accessing Government funded universal health and aged care services.

Barriers to these services can result in lower individual health status and at worse can shorten lives.

In respect to aged care the Federal Government has a responsibility to ensure that changes to its aged care funding arrangements do not create unfair access barriers to required aged care services because of declining affordability for individuals.

In this regard Australian Institute for Health and Welfare (AIHW) figures show that in the period of 1999/00 to 2004/05 the total cost of high level residential care rose by 44%. In the same period the direct cost to individuals of high level aged care rose by 75%. These figures suggest that there has been a significant shift of a cost of high level aged care from Government to the individual over the past 5 to 7 years.

This follows the same pattern that is emerging in other key areas of the Government’s aged care and health responsibilities.

As I made note of in the debate on changes to the Pharmaceutical Benefits Scheme arrangements, the Government has lessened its cost burden in the delivery of affordable medicines.

The result is that under this Government it’s the users of health services, who in many circumstances are not well-placed to afford the cost of required treatments, who are having to foot the bill.

When it is considered that 88% of permanent residents of Government subsidised aged care facilities are pensioners, it is of concern that the cost to individuals of their residential care has been rising significantly faster than the Government’s share of these costs.

On top of this, many residents of aged care facilities are being asked to provide bonds often well in excess of $200,000 to get in the door.

Aged care services, particularly residential care services, are becoming big business—Mr President I will have more to say about this in a moment.

I want now to raise the matter of the availability of residential aged care places under the Howard Government.

The Howard Government’s handling of its aged care portfolio has been far from outstanding.

In its 11 years of Government there have been 7 ministers responsible for aged care policy.

No wonder the Howard Government has mucked up things so badly.

In its first 5 years the Howard Government increased the number of residential care places by only 5%. Over the same period Australia’s 70 years plus population grew by 16%.

The result has been a major block to access to residential care beds from which the Howard Government is still a long way from resolving.

To make matters worse the Howard Government ignored the extent of the growth needed in additional high care or nursing home beds. The result of this neglect has been that people needing to be admitted to a high care bed have often found that there are long waiting lists or that they have had to accept a nursing home bed a long distance from family and friends.

Entering a nursing home at the age of 80 or even older is a traumatic enough experience in itself without the stress of knowing that you’re going to be almost completely isolated from your previous life and friends.

This is something that does not get a guernsey in performance report card of the Department of Health and Ageing or the Minister for Ageing.

Having watched my own grandparents experience the trauma associated with losing their independence and moving into residential care, I can assure you that this is something very real to real people.

Between the year 2000 and 2006 Australia’s 70 plus population grew by 17.8% compared to total population growth of 7.7%. More importantly the number of persons over the age of 80 years grew by 34.8%. It is the 80 plus age group that are highly dependent of the availability of high care beds. Over 60% of high care beds are occupied by people over the age of 80 years.

A major problem with the Howard Government’s management of residential aged care services is that it has constantly been running several years behind the need for additional beds. It needs to be borne in mind that the process of bed allocation and the building of new beds takes several years to complete.

It is simply no good waiting for the aged care population to grow and then decide to allocate additional beds.

It has taken over 10 years for the Howard Government to properly acknowledge that it has let thousands of older people down by not supporting an adequate increase in high care beds.

It has only been in this election year that the Howard Government has made real effort to address this shortfall by pledging that two thirds of 2007 new aged care bed allocations will be high care.

In effect the Government has admitted that it has got the number of high care beds terribly wrong.

The Minister has recently announced that the Government has increased its high care bed target from 40 beds to 44 beds per 1000 persons 70 years and over

The fact that the Howard Government has admitted that its planning ratio for high care beds was 10% below requirement indicates that it has been running a residential aged care policy 6000 high care beds below requirement.

Inevitably, a substantial proportion of this bed requirement has had to be covered by the public hospital system. This has been done without any compensation by the Commonwealth

This situation has also been a significant contributor to longer wait times for elective surgery in public hospitals which the Howard Government has been quick to blame the State Governments for.

The annual cost to the public hospital system from the lack of high care nursing home beds is phenomenal.

A public hospital acute bed costs on average $350,000 to Government annually. This is 10 times the annual cost to Government of a high care aged care bed.

Every 1000 public hospital acute beds occupied unnecessarily by older people waiting for access to a nursing home, costs Australia’s public hospital system approximately $300-$400 million annually.

During the 11 years of the Howard Government, billions of tax-payer dollars have been thrown away by incompetence in aged care alone.

The indications are that at any one time there are hundreds if not thousands of older people waiting in a public hospital acute bed for access to a high care nursing home bed.

In my home state of Western Australia the State Government has had to take the step of purchasing access to high care beds in the aged care sector in order to discharge people in the State’s public acute care hospitals who have been waiting weeks if not longer for an available aged care bed.

The Howard Government’s approach has been bad aged care policy and bad economics.

Mr President, included in this Bill are legislative changes that it is hoped will decrease the administrative burden on aged person residential care operators from unnecessary form filling

This is an important issue as much of the complex form filling required by the Commonwealth falls on the shoulders of the small number of registered nurses which individual care facilities employ.

Today’s nursing shortage is a particular problem for aged care facilities who continue to point out that they experience real difficulties in competing with the higher salaries that the hospital sector can afford to offer nurses.

The aged care sector has been pressing the Howard Government for years on the issue of labour costs in their sector.

The reduction in nursing home paperwork will go at least a small way in assisting nurses in aged care facilities to cope with their high demand work loads.

Also, the changes in the Resident Classification System will give better recognition to the care needs of people with severe behavioural disorders, particularly the large proportion of people in high care beds who have advanced dementia.

Mr President this Bill may improve the Resident Classification System and may reduce paperwork, however, it does nothing for the fundamental issues affecting the long term viability of aged person residential care accommodation.

There continues to be too many nursing home facilities which are below acceptable building standards for the 21st century.

There remain too many older style buildings with poor physical amenity including multi-person bedrooms. These facilities still exist because of an overall lack of high care beds and because operators of these facilities claim that they cannot afford to fund the major renovations required or to build replacement facilities.

While this stand-off between the Government and aged care facility operators continues, significant numbers of older people are going in to nursing homes that are below what most people would regard as acceptable standard of residential accommodation.

This is a matter that the Howard Government has been unable or unwilling to tackle head on and is to the detriment of older people.

In addition, residential aged care provider peak bodies have for several years pointed out to the Howard Government that their funding formulas and policies mean that the building of new nursing home facilities is becoming uneconomic.

This situation has not been addressed in the funding changes that are included in this Bill. The result of the Howard Government’s failure to address this issue rationally is creating significant distortions in the way the capital requirements of residential aged care provision are being met.

In the absence of viable alternatives to generate the necessary capital required to upgrade existing aged care facilities and to build additional beds, aged care providers have adopted two main strategies.

It is now not unusual for people entering low care facilities or extra service facilities to be asked to provide a bond of several hundred thousand dollars.

In other words, people are being asked to pay a bond that is substantially higher in value than the cost of their share of the physical facilities in which they are to be accommodated.

New entrants to residential aged care facilities who pay a bond are cross subsidising other residents who previously paid a very low bond or who have not paid a bond at all.

To my mind this is unfair even if it has to be done to allow nursing home operators to build additional nursing home beds that are desperately needed.

Because a nursing home that offers extra service beds is able to demand a bond prior to entry, nursing home operators have a strong incentive to seek to have substantial proportions of their nursing home beds classified as “extra service” places.

The effect of inflated bonds and the growth in extra service nursing home beds attracting substantial bonds, is likely to make it much more difficult for a person that doesn’t have the financial means to pay a large bond or pay for extra services.

Mr President, it is difficult not to conclude on current trends, that future access to affordable aged residential care is under a distinct cloud.

Reputable private for-profit and church and charitable not-for-profit aged care service operators are all voicing their concerns.

On the 11th of February 2007 the Prime Minister released “Securing the Future of Aged Care for Australians.”

On the same day the church and charitable aged care provider peak body, Aged and Community Services Australia (ACSA) issued a media release praising the package. Also at the time the private for-profit aged care provider peak body, the Aged Care Association Australia (ACAA) welcomed the announcement of the package.

Just 15 days later ACSA announced that on closer consideration it was far less enamoured with the Prime Minister’s announcement than it first indicated.

Mr Greg Mundy, the CEO of ACSA, on the 26th of February 2007 had this to say, and I quote:

“ we were initially very pleased with the package but as more detail became available on the various offsets and trade offs contained within it, it became clear that the gains were modest and that there were significant negative impacts.”

In other words the “Securing the Future of Aged Care for Australians” aged care policy and funding package had on closer examination turned out to be another Howard Government dud. This sort of performance has become typical of this lazy tricky Government.

By late May this year the Aged Care Industry Council (ACIC), a new peak council of Australia’s aged care providers, had this to say and I quote:

“the prospects of a long term crisis in aged care are so real and so dire that Australia’s two peak aged care bodies Aged and Community Services Australia and the Aged Care Association of Australia have joined forces to form the ACIC to actively campaign for major industry reforms.”

A spokesman for ACIC went on to say:

“The aged care sector is facing an impending crisis as an army of ageing people is marching towards a system that will be incapable with coping with the increasing level of demand.”

So much for the Prime Minister’s “Securing the Future of Aged Care for Australians” package.

Mr President, these criticisms are not coming from fly-by-night opportunistic sources. They are coming from trusted and reputable aged care service providers who have been stand out performers in meeting the aged care needs for Australians for many decades and longer.

ACSA alone represents over 12,000 church, charitable and community-based organisations providing aged care services to over 750,000 Australians.

On the 8th of May 2007, Mr Greg Mundy, CEO of ACSA, had this to say about the Howard Government’s aged care measures in the 2007/08 budget:

“The budget does some useful things but does not secure the future of aged care services, as the government claims.”

In referring to the Government’s “Securing the Future of Aged Care for Australians” package Mr Mundy went on to say:

“The government’s package was never a complete solution to the problems facing aged care…”

Mr President, the “Securing the Future of Aged Care for Australians” package was a dud when it was announced in February this year and as far as the aged care sector is concerned, it is still a dud. The measures in this Bill will not change that fact.

Mr President it has become evident that big business has noticed that the residential care sector is experiencing a capital crisis.

Furthermore, there is a real sign that the big money players have worked out that many aged care facilities are located on valuable real estate.

For asset rich and cash poor aged care operators the potential windfall from the sale of their facilities may understandably be very attractive. It may in fact be their only financial option.

For example, the Macquarie Bank Group has commenced targeting asset rich aged care accommodation services providers as a future hight profit area of business. We know the Macquarie Bank people do not get out of bed unless they see the prospect of platinum grade investment returns.

Since 2005 the Macquarie Bank Group through one of its investments arms, Macquarie Capital Alliance Group (MCAG), has used a subsidiary company—Retirement Care Australia to become Australia’s third largest residential aged care service provider operating in five of the six states of Australia and the both territories. Currently the company operates in the order of 26 aged care facilities with over 2400 beds.

In 2005 MCAG funded the acquisition of aged care facilities previously owned by the Salvation Army. One of the facilities acquired was the Salvation Army Aged Care and Nursing Home and Hostel in the highly sort after residential suburb of Nedlands close to the Perth CBD and on the Swan River.

Already the residents of a dementia hostel on the site, which was partly built with Commonwealth money have been told that they will have to move to enable the company to demolish the hostel to make way for planned higher return redevelopment of the site.

An MCAG briefing to investors in March this year announced that within 2 years Retirement Care Australia had already achieved a 29% return on MCAG initial equity investment. In information for investors MCAG lists the positives of its aged care facilities investments as:

Long term growth driven by population;

Strong barriers to entry and substantial government funding; and

Highly fragmented market with continued sector consolidation opportunities.

What we are seeing is a classic financial play commencing. Macquarie Bank and trust me, there will be others, has recognised that there is an opportunity to acquire valuable aged care residential accommodation assets under distressed circumstances

Once acquired, assets can then be consolidated into high return and low return groups with the low return assets divested.

The ultimate result will be the evolution of a two tiered aged care residential care system. While the system will be still be largely funded by Federal Government aged care subsidies, it will leave many aged care facility operators in an even more perilous financial situation. Not to mention what it will do to those who actually need affordable and accessible care in their older years.

This will see Australia’s universal aged care system disappear.

Once again we will have the Howard Government to thank for this disgraceful legacy.