Aged Care Financing Authority Review continues on RAD's
The Aged Care Financing Authority review continues on Accommodation Bonds/Refundable Accommodation Deposits (RAD's)
The government is in a hard place here, there is risk if one of the big player in residential aged care defaults. The government underwrites the repayments of these bond if an organisation defaults but can retrospectively charge a levy on the aged care industry as a whole to recoup to money the government has paid out. The government in the past has chosen not to levy the industry.
The big question:
What happens if a large payer defaults? Will the government have to enact the levy regulations? How much would this cost each organisation?
What are the alternatives to the retrospective levy:
Bond Insurance? This isn't a real alternative as this would be very expensive, to recoup this cost either the government would have to increase subsidies to aged care organisations or the organisations would have to increase the asking price of their bonds to cover the cost. Another alternative is a small levy every year that goes into pool held by something like the Future Fund. Then have the Government underwrite this pool. Only issue here is what would the administration cost of running a scheme like this ......
There is no easy solution.