Nursing Home Policy: Who Pays?

Gary Johns

The Coalition's backdown on the Accommodation Bond for nursing homes will have perverse long-term consequences, according to former Labor minister Gary Johns.

THE public thrashing of the Coalition on its introduction of the Accommodation Bond policy for nursing home residents demonstrates once again just how tough it is to have people pay for something they once got for nothing. The Government buckled under to self-interest and switched to an accommodation charge. This charge, although to some extent satisfying the equity criterion that the user should pay, leaves the sector well short of funds for upgrading the capital needs of many nursing homes. In some States, up to 37 per cent of homes will fail to reach the government standard for certification because of lack of capital.

Perversely, the Labor solution---to fund the shortfall from the Commonwealth Budget---and the demands of those who screamed loudest against the bonds, will not only perpetuate the inequity in the system, but will cause a shift of beds into the hands of private-sector providers, who will pick up capacity from the charitable institutions and smaller operators who needed the capital injection that the bonds were to furnish. In other words, it will accentuate a shift from a universal service model to a two-tier market model, which is, presumably, precisely what they did not want.

The essential difference between the bond and the charge is this: that the bond enabled the proprietor to use the stream of income from a sizeable deposit from day one, rather than from the much lower figure, and available at a slower rate, from the charge. The interim charge has been set at $12 per day or up to $4380 per annum (half that amount for assisted residents). This is unlikely to provide sufficient funds to borrow against for upgrades. Charges may well rise to a maximum of $10,000 per annum as of March 1998, but even this amount may not be sufficient, if the mechanism is the slow drip, rather than the quick capital injection.

There seems to be little dispute over the need for funds; the vexed question is, who pays? Economist Dr Bob Gregory reported to the previous government on the need to inject $125m annually into the sector in order to overcome the worst of the problems:

Gregory recommended against the imposition of a bond for nursing-home residents (despite such bonds being in place for hostel residents), on the grounds that residents are generally too frail or incompetent to make decisions about their future. Such a recommendation is understandable on emotional grounds. But if need becomes the primary concern, the policy is in fact even more applicable to homes than to hostels.

Many hostel residents may return to their family home, while almost no nursing-home residents return home. As one manager confided to me recently, in his twelve years in managing an aged care facility only two people had moved from a nursing home to a hostel. Further, residents in a nursing home generally stay for less than three years, and that period is declining. In short, the residents of nursing homes need a good facility in which to spend their last months---it becomes their home, and a very expensive one at that.

nursing home picResidential aged care costs the taxpayer nearly $3 billion per year, providing care for 130,000 people, and allowing for the provision for an extra 2,500 per year to meet the needs of an ageing population. The number of very old people, those over 80 who are most in need of high-level care, is expected to increase by 49 per cent between 1991 and 2001.

The Labor government introduced accommodation bonds for hostels as a means of raising funds for capital improve
ment. The Coalition policy was merely to extend the policy. That policy has now foundered on the rock of self-interest, in this case a powerful alliance of the aged---with their desire to escape the consequences of the increasing gap between the ability to generate an income and the propensity to generate costs to the wider community---and their children, awaiting and expecting their inheritance.

The Coalition was unable to withstand the combination of this core Liberal constituency and those who would always argue that equity lies in public subsidy. The retreat on the nursing-home bond has also now been extended to hostel care, where the option of the annual payment has been added to the bond.

A variety of mechanisms is being developed to assist people in making the payment, including the repayment of loans from the user's estate. The government has also moved to exempt rental income from the family home from pension tests where that income is used to meet the annual payment. There is a guarantee that there will be no forced sale of the family home in order to enter nursing home care.

In the longer-term policy context, all this is perverse. The policy of universal provision of services at no cost to the consumer has been well and truly overturned in recent years. We have seen, for instance, the means-testing of benefits like the age pension, and the levying of charges such as the Higher Education Contribution Scheme; not to mention Labor's two (unsuccessful) attempts to introduce a co-payment for Medicare services. If the principle of partial contribution for a future benefit, such as higher education, is acceptable, it must be unassailable with a consumed benefit where the beneficiaries, in this case the nursing-home residents, will have no further personal use for their assets.

Gary Johns picThe extent of the subsidy by the non-user taxpayer to the user taxpayer should be minimized, especially where users have the means available to pay for their stay. A former Commonwealth Treasurer was once said to have remarked, 'hot bath, cold draft', as the solution to the cost of aged care. Those who advocate the greatest degree of taxpayer support for aged care accuse government of this sort of callousness. But in fact they are doing no more than arguing for the preservation of the family home as an inheritance, which is hardly a just cause.

The Hon. Gary Johns is a Senior Fellow with the IPA, attached to the Indigenous Issues Unit