The Aged Care Financing Authority has today released its report on the Accommodation Payment Guarantee Scheme. LASA will review the report’s findings and engage with Members to inform further advocacy with Government on this important matter.
In November 2015, ACFA was tasked with studying alternatives to the existing Accommodation Payment Guarantee Scheme and providing advice to Government.
Having reviewed the effectiveness of the Scheme and examined various alternatives for achieving its objectives, ACFA has identified the following options for further examination:
- Option 1A – Retain the existing Scheme, noting that the decision to implement a retrospective levy on providers following a default event rests with the Minister.
- Option 1B – Retain the existing Scheme, but automatically trigger a retrospective levy on all providers following each future default event.
- Option 2 – Create a guarantee fund pool through a prospective levy on all providers.
ACFA has confirmed that the Scheme is important to consumer confidence and that consumers’ funds must continue to be guaranteed.
It should be noted that ACFA was not asked to provide recommendations on changes to the existing Scheme, or the introduction of alternatives. Any decision to change the existing Scheme rests with the Government.
What is the Accommodation Payment Guarantee Scheme?
The majority of people entering residential aged care contribute to the costs of their accommodation. This contribution is often made by paying a lump sum upon entry, called a bond or entry contribution (prior to 2014) or a refundable accommodation deposit or contribution (since 2014).
Collectively, these payments are referred to as lump sum accommodation payments and are returned to residents (or their estates) when they leave residential care, less any amounts that have agreed to be deducted.
Lump sum accommodation payments play a critical role in the capital financing of the residential aged care sector. For many decades, residential aged care providers have been able to receive upfront lump sum accommodation payments from consumers.
These have served as interest-free loans to support the provision of their accommodation. These payments have assisted the sector to create and renew the building stock required to support the current and future demand for services.
At 30 June 2016, the residential aged care sector held lump sum accommodation payments of approximately $21.7 billion, and at this time, the average new agreed accommodation price was $370,541.
Lump sum accommodation payments are large sums that can represent most of a resident’s wealth, therefore it is vital that these investments are secure. For this reason, a consumer’s refund is guaranteed under the Scheme, in the event that the provider becomes insolvent.
The ACFA report can be downloaded here.