The unwelcome subject of asset testing for the infirm elderly is expected to be thrust back onto the political agenda in the coming months.
Proposals could include letting the Government dig deeper into old people’s assets to pay the huge costs of caring for those with serious neurological disorders.
An alternative would be to leave asset thresholds at current levels and find some other way of filling the funding gap for aged care.
There has also been talk of increasing thresholds but this is not thought likely to gain traction.
Any reduction in asset thresholds would reduce the wealth available to be passed on to children as an inheritance, but it could help the aged care industry survive a looming crisis.
There will be 100,000 people over 85 next year, according to the Aged Care Association (ACA), and two thirds of them will need Aged Residential Care (ARC) at some stage in their life.
That number far exceeds the 40,000 beds the sector currently has.
This problem has been developing for many years, and led New Zealand First to call for an increase in funding for the sector in its election manifesto last year.
The subsequent coalition agreement with National included a pledge to hold a select committee inquiry into aged care.
The terms of reference for that inquiry have now been unveiled. They include looking at how the sector is funded, referenced against best practice and policies in other countries. They also look at “appropriate and sustainable asset thresholds for people with neurological cognitive disorders” as well as projections for the level of need in future.
Submissions to the Health Select Committee close on the 19th of August.
Groups involved in this matter are keeping their powder dry for now. But the issue of asset testing will have to be looked at by the select committee, according to the ACA, which represents the organisations that quite literally do the heavy lifting in aged care.
“They are going to have to make a recommendation, but whether that recommendation is picked up and implemented by the Government is a whole other story,” says the chief executive of the ACA, Tracey Martin.
“It will be very interesting to see if the Select Committee comes back and recommends the threshold is lowered to reduce the cost to the Crown and shift that cost onto residents.”
'The can that has been kicked down the road'
Martin says New Zealand must face up to the real costs of caring for growing numbers of elderly people.
“We knew this was coming, and every 30-year-old today is part of this wave (of old people). This won’t peak until 2078, so we must address it. If we do not, we are going to have large numbers of 80-plus New Zealanders, trying to manage at home, without proper support, hurting themselves from falls and other incidents.”
Age Concern agrees this issue must be faced up to.
“In some ways, it is the can that has been kicked down the road, so talking about it, getting it on the table, and having the will to make the policy changes that will support this is important,” says Age Concern's chief executive, Karen Billings-Jensen.
“There is no alternative, it does need to be dealt with.”
At present, people’s income and assets are assessed for subsidised aged care. This contrasts with many other state benefits, which are income tested only, and NZ Super, which has no tests at all.
At present, the asset testing threshold for an aged care subsidy is set at $284,636 including people’s homes, or $155,873 excluding the home if a partner or dependent child lives there.
These numbers are controversial and produced intense and sometime angry debate when thresholds were amended by the Bolger/Shipley Government.
"It got really brutal," recalls a politician who lived through that era.
Any attempt to change levels again would unquestionably produce renewed controversy.
In the 2022-23 year, the Government, via Te Whatu Ora, paid $1.4 billion in ARC costs, while residents paid $1 billion via means testing, including superannuation deductions.
But a report done for Te Whatu Ora by the consultancy, Sapere, says the current arrangements cannot last. Not only are not enough new facilities being created, but some are closing down, and patients can wait over six months to get into a place, even if they have serious dementia or a severe psychogeriatric illness.
Despite these needs, one third of all aged care operators are not planning to increase their total number of beds, according to a survey of ACA members. The most common reason was "insufficient income to justify the cost".
The New Zealand Council of Christian Social Services is adding to this concern with a just released action plan.
Its executive officer, Nikki Hurst, says her members who are in the not-for-profit sector, have been underfunded for years, and in some cases are having to close their doors.
But reducing the threshold for asset testing would not necessarily be the right way to go.
"We have means testing and asset testing in other areas, and it results in financial arrangements making it appear that some people have assets and others don't, and it would take quite a bit of work to be able to look through and see actually what (the real situation is).
"I think in the short term we probably are at a point where the thresholds could be adjusted, particularly as we are adjusting other thresholds for tax.
"But I think we need a better longer term solution, since New Zealand has a social contract where we look after our people as they age."
Comprehensive funding review
Meanwhile Te Whatu Ora is completing the final stage of a comprehensive review of all aspects of funding for the sector.
The real costs of running aged care facilities are rarely appreciated by the public. Figures released by the ACA show the organisations running them get a payment of $177 per day on average for reasonably competent residents, and $317 a day for people with high-level problems. The weighted average is $235 per day, but wage and price inflation add $20 to $30 a day onto the real cost, and the number is greater still if an adequate return on capital is factored in to fund future development.
This controversy is developing at the same time as the ACA and Te Whatu Ora argue over the level of payments for the current year. But the ACA says any settlement reached for the 12-month period will not solve the sector’s long term problems.
It adds only about a third of this suite of problems will land on the desks of big, listed retirement companies, like Summerset or Arvida. Two thirds of aged care providers are small operators, or church groups and community trusts with limited funds.
Altering thresholds is only one potential solution to the huge burden facing the aged care sector. Another would be to augment schemes which help older people age in place with visits by nursing staff to their home.
Another option would be to direct asset testing to the accommodation costs for elderly people, and keep the costs of their medical or pharmaceutical care separate.
This would preserve the tradition of people paying for their own housing, which they do throughout their lives, while making sure they get taxpayer funded healthcare, which would also match their earlier experience.
The Associate Health Minister Casey Costello, who is also Minister for Seniors, is saying little about this except that the Government is committed to "a sustainable, effective system for aged care provision."
She adds the select committee work is separate from her job as a Minister, but it will be an important forum to the funding of aged care and people's personal contributions to it.
*This article was first published in our email for paying subscribers early on Friday morning. See here for more details and how to subscribe.
22 Comments
Asset testing or an inheritance tax correlated to the cost of Govt care post retirement age that covers paying back both the pension and aged care. Those that are sitting on wealth because their kids wont let them spend it need to have it taken from them.
Privatising aged care as Summerset is doing will pick off the wealthy ones anyway, as they cough up for Care ORAs in premium aged care facilities. That leaves the Govt to fund a basic level of care for the masses.
Also we should be looking at what constitutes "health care". Should free healthcare be restricted to providing medical treatment (the "health" part) only and not living arrangements (the "care" part)?
Having spent 6 years looking after my (now 100 years old) mother with Alzheimers, I can assure you that medical expenses can be huge, and involve a lot of stuff that isn't medications.
Mum has needed wheelchairs, supports, bed rails, additionall mattresses and quite literally tens of thousands of dollars worth of disposable adult diapers, and that still isn't considering the cost of support workers who attend to bathing and bedsores.
Keeping me at home 24/7 to look after her also comes with a cost, although it falls way short of what a reshome costs. My Supported Living Allowance comes to the equivalent of $60/day, but after 6 years that's also $100K+ spent on keeping me in the role of caregiver.
Who owns the house? If your mother does then she can go into rest home care and still retain probably about $130,000 in other assets (e.g. money in bank), etc. and the house and the government will pay all rest home fees except having hair done and cutting fingernails.
Could it be that you are doing the looking after your mother so you can realize a greater amount of her estate eventually.
More information on this subject should be found if you google 'asset thresholds' for going into rest home care.
If your mother never goes into rest home care then your mother can keep the house, if she owns it, and all her assets.
If your mother doesn't own the house she can keep up to somewhere around $260,000 in other assets (eg money in the bank) and still get free rest home care. This amount could be distributed from her estate. How much you would get of the estate would depend on how many beneficiaries (eg presumably only yourself, or yourself and any other beneficiaries e.g. your other brother/s and sister/s, or, perhaps, the cat's home.)
" If your mother does then she can go into rest home care and still retain probably about $130,000 in other assets (e.g. money in bank), etc. and the house and the government will pay all rest home fees except having hair done and cutting fingernails. "
You're quite sure about that?
Residential Care Subsidy - Work and Income
"your house isn't counted as an asset if it's the main place where your partner or dependent child lives"
I'm assuming the father is deceased and the son is not dependent on the mother which is obviously the case.
I'm just drawing on my own experience when I researched all this stuff some years ago. My mother went into a rest home in her mid-90's after the hospital insisted because she began to have a series of falls at home, each time ending up in hospital.
So I'm only giving an estimate of the figures which would be fairly close to the mark. The asset thresholds increase every year so I guess that is still the case.
(If the mother's got full Alzheimers then that would be a hell of a job looking after her. At some stage she would almost certainly have to go into rest home-hospital care. I don't know how one person could manage by themselves and I have known of persons who have tried, usually because they want to inherit all they can, and relented in the end when the burden got to much.
My own father had Alzheimers and he had to go into care in the end..
Yes, thanks for that consideration.
The house was a grey area regarding asset test. We bought it together after dad died (joint ownership each with 50%) so that she could have the security of me being near... but I'm not a dependant child, so it isn't really clear whether they'd have a claim over her half of the house.
I've wondered at times if she'd be better off in a resthome. Certainly socially better off, but on the other hand, in a dementia ward she'd also be sleep deprived, stressed and at times likely battered by other residents, and they certainly wouldn't have watched her closely enough to protect her when she was capable of standing (and then promptly crashing down to the floor).
Also, since covid I do believe she's a lot better off at home rather than in a stew of bugs in a more communal rest home setting.
A curious twist of fate though... I had a brother who saw my actions more as an asset grab. He was determined to get a slice of the house. He's now died and it's his place, monies and assets getting sliced up, and more left for the rest of us now when mum goes.
Not necessarily. Unless there is a will in place the law dictates that the issue (children) of your deceased brother will benefit from what would have been your brothers share.
even having a will in place is no guarantee as your brothers widow/ex could contest the will if no provision is made for the children.
if your brother had no kids, then your point is valid.
How to pay for aged care is just one aspect of the much broader question of how to deal with the economic impacts and challenges of our aging population over decades to come.
It shouldn't be looked at in isolation from other issues such as superannuation eligibility, kiwisaver policy, general taxation, wider health budget etc.
This "can" that has been continually kicked is more like a 44 gallon drum...
Well, yes. Take a look at the share price of the retirement companies over the last few years and see whether this criteria is being met.
They are all stepping back from providing this kind of care because there's no money in it. This means the service simply won't be available to some who need it unless the government does the heavy lifting themselves. There's a sea of capital ready to invest in it if the payments rise sufficiently to incentivize businesses.
"Summerset now has villages where the only way to get into their aged care unit is to buy a Care ORA (this is seperate from their independent living ORAs). "
Is that not providing for those who can meet the incentives?...unless you suggest the Gov will increase funding to cover the additional cost (and return).
As said care will always be available to those who can pay the asking price...the question is how many can pay the asking price without financial support....increasingly fewer i would suggest, and that has implications for the viability and scale of the (corporate) industry.
Care will still be needed (and on an increasing scale, at least initially), the question is how will that care be provided if not for profit?
The weighted average is $235 per day, but wage and price inflation add $20 to $30 a day onto the real cost, and the number is greater still if an adequate return on capital is factored in to fund future development.
A.K.A if capital gain keeps an upward trajectory for those facilities. It becomes increasingly obvious that the largest generation have kicked the can to the following generations in the name of individual prosperity. But everyone had faith in the system, and the system is not equipped currently to handle the incoming demand. There could have been a plan to help with this, but the mentality of funding one's own retirement through hard work was strong I suppose. Less regulation was demanded, low rate increases, tax cuts at the prime age of having young children, no more free educations after they had gotten their own.
I do however genuinely feel for the families who have seen their loved ones go through the likes of Alzheimers or Dementia, especially if this occurred far sooner than it naturally would be expected to. I have seen first hand from experience the sadness it brings to the family and friends.
Even for those with assets going into care it is not a simple cut and dry matter. As care may only allow spaces for individuals but the housing asset is owned by a partnership. So where does the other partner go. We have in NZ a system set up so both parties can retain the asset and get care & housing at other facilities paid for. So there is a lot of financial benefits to those who are property owners (especially those who set up other assets in a trust or company a long time ago as there is a max amount that can be transferred to a trust/co. per year). But it remains that there is not great provision for partners in care facilities (not even via beds) which does impact the experience in the facilities culturally.
Sadly though there is no system for those under 65 who need supported medical housing, so early onset dementia, ALS, other MND & MD, severe MS or other conditions often result in homelessness, break ups or long term destitution with poor provision for both medical & living needs. Many will not even find a home they can rent and share with their partner to begin with, let alone have support for housing for the one who needs nursing care. And without housing, nursing visits are often denied, (also if they have a partner nursing visits are often denied even though the partner cannot replace medical care). Fun times.
For a long time NZ has been abusing family relationships but not everyone has family support available, in these cases we often see long term trauma from the systemic denial of essential medical support. But unless they are of certain ethnicity NZ health and disability review excluded all disabled people's existence altogether, both those over and under 65. So nothing was reviewed or done to even see the disparity in care and support systems. Because NZ only cares about two groups and most of the population in dire need can go die in a ditch (that was literally the option available, but at least which ditch was a choice).
Assisted care facilities are so short in the US, that my sister pays a reservation/premium (like an insurance-based system) to ensure she will have a place in one when/if the times comes that she cannot take care of herself in-home. It's a non-refundable premium in the event she never needs/uses it. The cost of the care, food and accommodation is a separate charge if one does need to enter/live-in the facility.
And of course, you can't even register to make such a premium payment (i.e., to guarantee yourself a place) unless you have a certain level of assets.
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