Government postpones aged care bond insurance plan
The Federal Government has delayed a requirement for aged care homes to insure residents’ bond payments.
It follows concerns raised by aged care providers during consultation, according to the 2013/14 budget papers.
Negotiations will continue with care companies and the insurance industry while the Government continues to guarantee all bonds under current arrangements.
“If a provider becomes insolvent or bankrupt and is unable to repay outstanding bond balances to aged care residents, the Australian Government will repay the balance owing to each resident,” the papers say.
Extra insurance costs would be a drain on resources, while talks with general insurers indicate no suitable products exist, according to Anglican Retirement Villages’ submission to the Government.
The cost of insuring the bonds would hinge on whether they are treated as subordinated or senior debt, a KPMG report finds.
“In discussions with commercial insurers and banks, it seems a new credit risk-based insurance product will need to be developed,” it says.
“If providers are not able to absorb the additional funding cost, it will have to be passed on to residents.”
The Federal Government is pushing ahead with plans to improve complex aged care arrangements, including the ways residents make payments.