Calls for financial reform in aged care sector

The Royal Commission into Aged Care Quality and Safety reported horrifying instances of abuse and neglect in its interim report, which also points to a financial focus that needs to be considered in the development of a new model for the sector.

Non-compliance, financial abuse of the elderly, a lack of education and training, financial viability for the sector and funding issues are all on the table as the Royal Commission continues hearings in preparation for the release of the final report in February 2021.

CPA Australia has provided a submission to the Royal Commission, with recommendations focused on the financial aspects of the industry and concerns raised by CPA Australia members.

“The Royal Commission’s interim report does not mince words about the neglect people have experienced. However, when we talked to members and accountants with experience of the industry, it was all about the complexities of the financial aspects of it, which can be as stressful as the concerns around the level of care to be provided,” says Michael Davison, advocacy manager at CPA Australia.

Sustainable business

The aged-care industry is growing in line with Australia’s ageing population. It is valued at more than A$20 billion and employs more than 224,000 staff across more than 1800 businesses. It is big business, and it is generally acknowledged that without reform, it will not keep pace with demand.

Chris Mamarelis FCPA, CEO of Whiddon, argues it is important to be aware of the limitations on investment in the sector and how financial reform is essential to creating a viable future for the industry.

“It’s a threat that the entire sector faces, and one that’s been discussed at the Royal Commission – that we have very real challenges in creating viable and sustainable outcomes with the current funding model that we operate in,” Mamarelis says.

“Figures are quoted stating that we require 80,000 additional new beds in the aged-care sector over the next few years. They talk about A$30 billion worth of capital expenditure over 10 years to support this growth, but due to these viability challenges, returns on investment are extremely low, so there is absolutely no incentive for investment without financial reform, or by changing the business model and operating outside of the Aged Care Act.”

Staffing is also under the spotlight at the Royal Commission. Luke Westenberg, CEO of the Aged Care Industry Association, says it is important to factor in those challenges when looking at reform.

“Other key challenges include the need for a large number of trained staff with the right personal qualities to care for older Australians – projections suggest we will need hundreds of thousands more people to work in aged care in the next 30 years,” Westenberg says.

Professor John McCallum, CEO of National Seniors Australia, says the peak body embraces the need for a fundamental overhaul of the system, and makes the point that many individuals have an over-reliance on government funding.

“The reality is that we implemented the superannuation guarantee so that people had savings for their later life. The idea is not that they leave it as an inheritance, but that they use it for a better later life. And we haven’t really achieved that goal.

“That’s why we’re very strongly talking to financial advisers, people who talk about money – we think it’s very important that they are in the mix, and that information is coordinated in a way that people have reliable information, so they don’t reach a critical crisis point and have to work everything out there,” McCallum says.

The organisation has been undertaking research in the area for some time and, in preparing its submission, contacted approximately 4000 people through a survey to get a sense of key concerns.

“The answers to some of our survey questions show that a lot of people don’t plan financially for their old age – they don’t ask themselves the question, “Would you ever think you’d be spending more in later life when you’re going to need to pay for expensive care?”, McCallum says.

The announcement of the Royal Commission came at an opportune time for siblings Fred, Mary and Fiona Duncan. Reeling from the discovery that their mother, a resident of an aged-care facility, fell victim to financial abuse, they were struggling to make sense of the situation they found themselves in and looking for answers in a complex environment.

The Royal Commission had just been announced, and, while the initial reports were focused on the physical abuse and the neglect residents were suffering, the three siblings knew there was also the crucial aspect of financial abuse to consider, which they say has been allowed to flourish under a complicated and stretched industry.

“If it could happen in our family, it could happen in any family,” Mary says.

The family say there were many points at which concerns should have been raised to prevent the financial abuse from occuring.

The fact red flags did not go up regarding their mother’s financial affairs forms the basis of the changes to the sector the Duncan siblings would like to see.

“If your elderly relatives go into aged care, there is an expectation that for their last few years they will be cared for.

“That doesn’t only mean physically, it means financially as well. To do that, [aged-care facilities] have to be transparent and provide visibility that they are doing something about it,” Fiona says.

Financial planners and accountants can also play a significant role in identifying financial abuse, say the Duncan siblings.

“For others, we would advise checking everything again and again, and that accountants and financial advisers can help with noticing irregular payments, for example,” Fred says.

Igor Statkevitch CPA, managing director of blisscare health, agrees accountants and other financial service providers have a critical role to play in addressing financial abuse in the sector.

“My advice to CPA members who are either working in or wish to work in the industry is to have a complete understanding of the aged-care funding model and how every resident receives funding, and, more importantly, matching the principles between government funding and services delivered,” Statkevitch says.

CPA Australia has identified some of the warning signs of financial abuse as the accumulation of significant debts, irregular payment of debts, cancellation of direct debit payments and payments made from unusual sources, and recommends specific guidance.

“We encourage the Royal Commission to recommend the development of a guide specific to the industry to identify and prevent financial abuse,” Davison says.

Regulating the sector

Regulation is a sensitive subject, with some concerns that more red tape could mean less time spent caring for residents.

The Duncan siblings suggest the system of appointing a power of attorney needs a broad overhaul, and that changes need to be made to the process of setting up resident representatives, who are responsible for managing the affairs of the person in care.

The Duncan siblings recommend that families have more than one representative when setting up financial management plans for elderly family members, and that annual financial statements be sent to both those representatives.

“I think there should be a much greater obligation on the power of attorney, so that when the person dies, they need to provide documents to the solicitor who has carriage of the will to at least demonstrate where major expenses have gone. There needs to be a record. It should be a deterrent for people helping themselves to the person’s money,” Fred says.

Statkevitch says that, while regulation is crucial, it must be tested across the sector first.

“Healthy accountability is important, and I support that. However, the model of funding or accountability for reporting must be designed and tested before being implemented in the industry. My concern is that, if a model is not properly tested, it will have a major impact on the industry’s resources and its people. The focus will shift from caring for people to managing the red tape,” Statkevitch says.

 

"We need to find ways to improve the interfaces between aged care, the health system and government agencies. And we need to see government agencies working collaboratively, rather than taking an adversarial approach with aged-care operators."

 

Mamarelis agrees and says that, while more regulations could make it harder for organisations to provide day-to-day services, it is crucial that change takes place.

“I think that the way the system is managed and the way various authorities and bodies communicate and interact with aged care are fundamental hurdles that are preventing aged care from going forward. We need to find ways to streamline the system.

“We need to find ways to improve the interfaces between aged care, the health system and government agencies. And we need to see government agencies working collaboratively, rather than taking an adversarial approach with aged-care operators,” Mamarelis says.

Westenberg brings the focus back to the service at the heart of the industry.

“The core element of aged care is people caring for people; the rest of the system is really to support and enable this care.

“When I talk to people who work in aged care, they always tell me the best part of the job is making a difference to other people every day and being able to see that difference.

“What we, as a sector, would like to see is the community, consumers, providers and government all having a clear understanding of what services are available and how those services can be accessed,” Westenberg says.

The final report of the Royal Commission is due to be handed down in late February 2021.

CPA Australia's submission to the Royal Commission

The CPA Australia's submission identifies three key areas for reform:

1. The complexity of the funding model and getting necessary advice to navigate the complex rules.
2. The complexity of retirement living arrangements, in particular contracts.
3. Financial elder abuse and how aged-care facilities can identify and respond to it.

It also recommends more information be made available to support people to make an informed decision.

The submission outlines the myriad choices available, including the location, services and care provided, whether it is government-subsidised or privately provided, how to fund the cost and whether to pay upfront or on an ongoing basis. It also highlights the decisions to be made regarding the ability to pay ongoing fees.