Rich Queensland aged care bosses sit on taxpayers’ millions
Exclusive: More than 140 aged care homes are in financial strife and the taxpayer may have to find billions of dollars to refund residents accommodation bonds if they go bust.
The government has been told it will need to provide a further $1 billion a year in daily care funding for aged care in the October budget and in addition provide up to $5 billion as a line of credit so funds can repay accommodation bonds to residents.
Australia's aged care homes hold nearly $30 billion in resident's money in the form of Refundable Accommodation Bonds that have to be repaid when the person dies or leaves the home.
The size of these debts is one of the reasons the government can't afford to shut down substandard homes aged care advocates Aged Care Crisis claims.
These accommodation bonds average $350,000-$500,000 but can be as high as $1 million per resident and are paid when a person enters aged care facility.
The home can keep the interest earned on the bonds and can use the money to invest in new facilities or maintain existing facilities but they have to return then money when a resident dies or leaves the home.
There is growing concern some providers may be unable to pay this money back as a government report warns 141 providers are at imminent risk of collapse.
The homes in financial jeopardy hold $5.3 million worth of bonds.
The federal government guarantees the bonds and will have to step in to repay residents if the homes can't.
Watch our special Aged Care 360 investigation in the video above
Aged care consultant Cam Ansell estimates as a result of COVID the industry has lost $1 billion in bond revenue as people die or leave aged care homes and are not replaced by new residents which means the bond revenue is not replenished.
"In Victoria at the moment for every four deposits you are paying out you are getting one deposit back in. In the rest of the country it's 2.5 to one," he said.
News Corp asked Australia's largest aged care providers to reveal how much they were holding in accommodation bonds and discovered Bupa, which until recently had more than half its aged care homes failing basic standards, held the largest amount in bonds - more than $1 billion.
Two private providers Estia and Allity each held over $750 million in bonds and not for profit providers Uniting Care held $671 million in bonds and Blue Care $267 million.
A number of family owned aged care companies refused to reveal how much they held in bonds and Anglicare and Baptist Care would not provide a figure when asked.
News Corp's Aged Care360 investigation earlier this month revealed nearly 100 aged care residents are being raped, murdered and assaulted every week, homes are drastically understaffed, incontinence pads are rationed and residents are ejected from homes if they complain about the food.
The $44 billion a year industry survives on government subsidies but homes do not have to report how many nurses or carers they employ, many employ none, some of the money goes offshore and into the hands of wealthy private family companies that do not report publicly.
Heritage care part owner Peter Arvanitis quit as a director after media attention focused the couple's prestige cars including a Maserati, Lamborghini and a Rolls Royce and their Toorak mansion which was featured in Vogue magazine.
Aged Care Crisis said the government bond guarantee was one reason it failed to take serious action against sub- standard homes.
Last year almost half the aged care homes run by Bupa were failing basic standards.
"Any small company that failed so badly so often, would likely lose its right to operate. If this happened to BUPA, over 70 homes would have to close and government might have to pay about 6,000 residents a total of up to $1 billion to refund their bonds. It's too big to fail. Instead, government is propping up the company," Aged Care Crisis spokeswoman Lynda Saltarelli said.
The federal government has already had to pay out over $43 million in bond refunds since 2006, all these homes were in the for profit sector. All of these homes were in the for profit sector.
The Department of Health said it had engaged with the majority of the 41 at risk providers, working with them to address their concerns.
"Residential aged care providers who hold Refundable Accommodation Deposits (RADs) are required under legislation to ensure that they hold sufficient liquid assets to meet their foreseeable RAD liabilities," the department said.
"In the case where a provider experiences an insolvency event, which requires the closure of a facility, the Department works with the provider to ensure the relocation of residents.
"The insolvent provider is still required to repay the outstanding RADs to the former residents. This will normally be done through the realisation of the providers assets. In the case that the provider cannot immediately repay the RADs, the Government will ensure that all residents receive the balance of their deposits."
Originally published as Rich Queensland aged care bosses sit on taxpayers' millions