THE Gillard government's aged care reforms have hit investor resistance, triggering a freeze of $3.5 billion in nursing home developments, an industry report says.
The heavy cuts in care subsidies and the uncertain future of industry costs under a proposed industry watchdog are creating doubts about the future viability of the sector among banks and other investors, the report by Grant Thornton says.
The report also says that the government is seeking further cuts estimated at about $500 million next year on top of the $1.6-billion four-year clawback in care subsidies which were proposed when the reforms were announced in April.
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The Minister for Ageing, Mark Butler, said then that the savings were feasible because some providers were getting paid more than they should have been as a result of over-claiming for care subsidy payments.
In response to the latest report, Mr Butler yesterday said the government was confident the reforms would ''stimulate investment in the aged care sector''.
Detailed work still needed to be done on implementing the changes. ''We are working right now with the sector and the banking and investment community on that,'' Mr Butler said.
The industry analysis said that a central problem in funding aged care has been ''frailty drift''. That was exposing aged care to rising costs because residents now hold off leaving their own homes until they were in need of more intensive and costly care in nursing homes.
''The industry was alarmed to learn that the government had planned to cut $500 million from projected funding for 2012-13,'' the Grant Thornton report states.
In the two months since the reforms were unveiled, ''over $3.5 billion in planned aged care development projects have been shelved'', because of subsidy cuts and uncertainty about capital, it said.
The Department of Health and Ageing had last month proposed changes to subsidies to meet the savings targets proposed in its reform plan, which would make it harder for providers to claim back the costs of providing personal hygiene and medication.
Cam Ansell, who heads aged care research for Grant Thornton, said the proposed reduction in care funding raised ''serious viability concerns in an industry already suffering from declining investment levels''.
The government's own figures showed that nursing home operators achieved gross earnings of only $6417 per resident for facilities that cost $225,000 per bed to build, Mr Ansell said.
Ian Yates, the chief executive of the Council on the Ageing, said he took a less pessimistic view and it should be remembered that many of the reforms the government was introducing had been sought for years.
But Mr Yates said that government should give a reassurance that if a funding clampdown were to reduce quality of care it would remedy the issue quickly.
Read more: http://www.smh.com.au/national/cuts-to-aged-care-shelve-nursing-home-projects-20120615-20fnk.html#ixzz1yakgDfPV
