Communist Party of Australia

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Issue #1514      17 August 2011

Dumping aged care as community service

The Productivity Commission’s (PC) report “Caring for Older Australians” is a blueprint for a neo-liberal deregulation and privatisation of aged care services in Australia. Its prime focus is caring for profits, not people. It proposes increasing the price “customers” pay for community and residential aged care and so boost the return on investments (profits) made by the corporate sector. “This report abandons aged care as a community service and replaces it with a user pays system funded by flogging the family home,” Combined Pensioners and Superannuants Association of NSW (CPSA) policy coordinator Paul Versteege said.

The CPSA, whose members are pensioners, superannuants and low-income retirees, described the report as “a declaration of war on older Australians”. “Flog off the family home for a nursing home bed? Over my dead body,” is the response of some members who have told the CPSA they would sooner die than sell the family home to be institutionalised in a nursing home.

“Choice” is a constant theme in the report, one taken up by PM Gillard to sell its privatisation and deregulation agenda. Choice will depend on the hip pocket and the value of the family home. Those who have rented all their lives, have a small modest home and low income will have little choice.


The sector is tightly regulated with the number of government-subsidised beds limited. Nursing homes must meet specific standards regarding staffing, facilities, food, etc to gain accreditation for different types and levels (low, acute, dementia) of care. Unfortunately, these regulations are not tightly monitored. Unless there are a large number of complaints, an annual “spot inspection” is about all the providers need to worry about between regular accreditation renewals.

The PC proposes the abolition of spot checks on all centres, limiting them to where there are complaints.

It also recommends that the distinction between high and low care be removed, which is not in itself a bad thing. But it then wants to open up the area so that all levels of care can be subjected to a bond or a daily charge in its place. At present nursing homes can only impose a bond on those assessed as requiring low care accommodation.

The bond would be set at a level equivalent to a public accommodation charge which must be specified up front. At present some nursing homes look at the finances of an applicant and set the bond accordingly!

The daily charge could be set at any amount that the market could bear – that is where the “competition” and “choice” come in. The present system of licensing which limits the number of beds would be abolished. The private sector could expand as hard and fast as it can raise the capital – paving the way for future collapses and the tragic consequences that follow for patients and their families.

Higher charges

Raising the charges for care and extending bonds to high care beds and to those with lower incomes and would provide the corporate owners of nursing homes with billions more in interest and investment capital. To do that “consumers” require more money to pay.

At present around 40 percent of people in nursing homes have paid a bond to secure a bed. The average bond is around $213,000, with many paying in excess of $500,000, some more than one $1 million. The minimum basic daily fee in a nursing home is 84 percent of the base rate of the pension (currently $38 per day).

As the CPSA points out that, “Aged care pensioner residents pay most of their income in daily fees, imposing considerable financial strain upon them and their families. Pensioners who have no private income must still pay for medication, toiletries, clothing, specialists and dentists on 16 percent of the base rate of pension. Families of aged care residents are typically exhausted and time poor (especially if they previously cared for the resident) and are in a far from ideal position to negotiate the sale of the family home to fund a bond.”

The PC expresses concern with the fact that many people are forced to sell off their home to get into a nursing home. “The Commission proposes that older Australians should not be required to sell their home to meet their aged care co-contributions or accommodation costs.”

It comes up with a second approach – sell it when they are dead! The family home for working class Australians represents a life-time of hard work, sacrifices and savings, which they rightly wish to pass on to their children, not give back to the banks and others in the nursing home industry.

Sell – dead or alive

“Many older Australians with low income have substantial wealth…,” the PC says, which could be freed up to meet nursing home or home care costs.

To draw on this wealth and not be “required” to sell off the family home to gain a nursing home bed or pay for home care, the PC puts forward two options:

The first is sell after death – by means of a government-backed Australian Aged Care Home Credit scheme. This is a reverse mortgage by another name – a loan using the family home as security which could be drawn on for home or residential care costs. Interest would be charged in line with increases in the consumer price index (CPI). There would be a limit on how much could be drawn and how much interest paid, with a guarantee that repayment would not be more than the income received from the sale. In other words the sale of the home is deferred and interest payments incurred as well. Protection is proposed for a spouse, partner or dependent child with a disability still living in the residence at the time of death.

The second is the sale of their home with all or some of the income deposited in an Australian Age Pensioners Savings Account scheme, which would accrue interest in line with CPI rises. The incentive is that the savings in that account would not be included in asset and means testing for the age pension. At present, income from the sale of the home is included, even though the home itself is not included in the assets test. Use of these savings would be restricted to aged care costs.

This would, according to the PC, enable people “to choose where they live, which provider they would use, the way in which services are delivered, and whether to purchase additional services and/or a higher standard of accommodation.” No thought is given to the needs of the many low income, asset poor (eg a pensioner or low income self-funded retiree living in rental accommodation) who would be condemned to a low standard of care and little real choice.

At present people are asset and means tested to determine the amount they pay for home care packages and government subsidised care in nursing homes. The family home is exempted from the assets test.

As an added measure, to make it even more difficult to hold onto the family home, the PC proposes the inclusion of the home in the assets test for a government subsidised aged care bed. It says, “The assets test would apply to those assets exempt from the Age Pension assets test (such as the principal residence and accommodation bonds).” (The home would still remain exempt from the assets test for the age pension; one wonders for how long.)

Aged care as a commodity

The aim of the neo-liberal, pro-big business PC is to make aged care a commodity to be bought and sold on deregulated, “competitive” markets. Those receiving the care are “customers”. It is a similar story to the government’s “education revolution” and changes to the public health system, with the government pulling back on its responsibility to care for those in need.

“The majority of aged care places are owned by profit-based providers, and the proportion of profit-based providers continues to grow, suggesting that there are considerable profits to be made in the aged care sector,” the CPSA said in a submission to the PC’s review. Macquarie Bank, Lend Lease, AMP Capital and ANZ are all investors in the aged care market.

“There is a clear contradiction when care and profit are forced to compete,” the CPSA submission said.

With an ageing population, the PC is seeking to make aged care a highly profitable industry that will attract big investors.

As the government continues to reduce the taxation paid by corporations and the rich, it cries poor and portrays an ageing population as a problem. It is not a problem. Older Australians who have worked and paid their taxes and made a huge contribution to society are entitled to live in comfort and dignity, remain in their homes as long as they wish and are able. They are entitled to the care they need in the most appropriate setting, regardless of ability to pay.

Aged care – a service

There is no shortage of funds for the public sector to provide aged care. The government spends $30 billion a year on the military, fighting the US’s wars. It pays out billions of dollars in subsidies to the private hospital and aged care operators guaranteeing them huge profits. A tax hike on the rich and a super profits tax across all sectors could bring in billions of dollars in extra revenue.

Remove the private sector, remove the layers of private profit and the costs will come tumbling down and the quality of care improve by miles. Public provision of aged care would remove the conflict of interest that the CPSA referred to. Aged care should be a service based on needs, a responsibility of government, not a commodity traded on private markets for profit.

Reforms are urgently required. There are huge problems regarding quality of service, shortages of place and lack of affordability.

The PC acknowledges many of the shortcomings of the present system and makes a number of important recommendations about improving services, increasing the number of staff, improving their skills, paying them higher wages, providing more home care packages, etc.

Unfortunately, many of these highly desirable reforms are unlikely to materialise if left to the private sector. Higher charges and bonds will be used by the private sector to expand their operations, for investment in more profit-churning nursing homes, instead of being used to improve quality which eats into profits.

Deregulation, in particular, the abandoning of spot checks on nursing homes is more likely to result in a deterioration of services, particularly in the lower end of the market, than improve the quality of care.

Act now

Gillard is holding a two-month “conversation” with the public (and industry) before announcing its policy position which will be based on the PC report.

This leaves little time to campaign against its recommendations. Write to your local federal MP, the Prime Minister, the Minister for Ageing Mark Butler, use the media and your social networks to oppose the use of bonds and reverse mortgages to pay for aged care

Show your opposition to bonds and reverse mortgages to pay for aged care. Visit www.cpsa.org.au for campaign details and to get postcards to send to your local federal Member of Parliament.  

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