Accommodation payment plans in residential aged care: The impact of consumer choice

Abstract

Objective To examine changes in accommodation payments to residential aged care facilities following the introduction of consumer choice reforms in 2014. These reforms have allowed residents to choose between making lump sum refundable deposits and/or rental‐style payments. Methods Quantitative analysis was undertaken for facility‐level quarterly data of 136 separate facilities, which were operated by six providers over the period under study. Results While the total pool of payments has grown strongly, consumers have increasingly favoured rental‐style payments over lump sum refundable deposits. Conclusion Consumer choice has changed the landscape of accommodation payment receipts in the provision of residential aged care services. Greater understanding is needed on how consumer preferences impact on the financial risk borne by providers and their ability to invest in future capacity.

How strong is the housing assets pillar of funding for residential aged care?

“…These variations are demonstrated in a recent study of 136 RACH which found that from 2014 to 2019, the share of their capital pool coming from RADs fell from 96% to just under 80%, with a commensurate rise in DAP income. The impacts on balance sheets of highly leveraged providers, especially in the private sector, and the likely need to adjust business models were noted 37 …”

“…The impacts on balance sheets of highly leveraged providers, especially in the private sector, and the likely need to adjust business models were noted. 37 The consumer perspective presents a less certain picture. From the outset, the Productivity Commission recognised that although growing wealth indicated increasing capacity of coming cohorts to pay for accommodation, those at the older end of the retirement spectrum were likely to have lower assets and more would be eligible for some subsidy than indicated in its projections based on the total population aged 65 and over.…”