An age old problem

In P.D. James's novel Children of Men, set in the year 2025 after a generation of universal infertility has gradually seen all children and youth disappear, Britain is ruled by a harsh dictator and outside the cities anarchy reigns.

The authorities in this nightmarish future organise mass "voluntary" euthanasia rituals for elderly people who cannot be cared for by the state. The gruesome ceremony is called the quietus.

Should we be worried about who will look after the elderly in the Republic of Ireland in 20, 30 or 50 years time? Who will take responsibility and who will pay for the increasing numbers of older people needing care in the State?

It's estimated that, in 1996, the number of older people requiring at least a moderate level of care was 102,900. That is expected to increase by 71 per cent to 176,000 by 2026. If there is a care shortfall the individual will suffer, so each of us has to take responsibility.

Without clear leadership and proper assistance, however, the individual is hamstrung.

The financial institutions have not come forward with any products facilitating planning for our final years. The government is officially concerned and looking into it. Means-tested private nursing home subvention has remained at the same level for seven years, although there have been improvements in financial support for carers in the community.

For the majority of people who don't qualify for the £120 nursing home subvention, the prospect of paying out an average of £350 a week for nursing home care for an indefinite period can be financially devastating.

In its review of the Action Programme for the millennium, the Government stated that one priority would be to develop a partnership model to facilitate the development by the State, in conjunction with the private sector, of an improved system for meeting long-term care costs.

But there has been little movement on this undertaking since the completion two years ago of a report entitled Financing Long- Term Care in Ireland. The working group for the report included representatives of the Irish Association of Pension Funds (IAPF), the Irish Insurance Federation (IIF) and the Society of Actuaries.

These expert contributors made a raft of recommendations, none of which has been fully implemented.

A consultancy study on the feasibility of PRSI as a means of funding long-term care, which was to have been carried out by the Department of Social, Community and Family Affairs last year, is now expected to be completed by the end of this year.

As part of that study the report suggests that consideration should be given to raising funds by way of a posthumous "care duty". The report also recommends that consideration be given to the establishment of an explicit mechanism to fund the expected substantial growth in long-term care expenditure on a similar basis to the National Pension Fund.

The State has a role in encouraging people to make provisions for their own long-term care needs. According to the report, one possible model for partnership would be the State paying for care after a fixed period of three years for those who have taken out an approved long-term care insurance policy to cover the first three years of care.

One of the sobering statistics relating to this subject is that the average stay in a nursing home is three years.

Mr John Costello, solicitor and author of Law & Finance in Retirement, has many elderly clients who are terribly worried about how to pay for care when the time comes.

"It would be an excellent idea to provide interest-free loans to individuals to pay for nursing home care. That would ease a serious strain on older people's mental health," Mr Costello said.

In the course of his work, Mr Costello has arranged equity release plans for clients, whereby they can realise capital on some or all of the value of their property without selling it.

Depending on the type of plan used, when the older person needs to go into a nursing home or dies, the home is either sold to meet the outstanding loan or passed directly on to the new owner.

Such arrangements are currently being made here privately as there are no products available from financial institutions to deal with this situation yet.

Not only is there a vacuum in services for people trying to secure finance for their twilight years but there is no insurance option available at an earlier stage in life. It would be an expensive product of course but it would be in everybody's interest if it were introduced, according to Ms Jennifer Hoban, life assurance manager with the Irish Insurance Federation.

"We would wonder how attractive such a product would be without tax relief. People need to be encouraged in some way," Ms Hoban said.

The Financing Long-Term Care report states that the tax position for long-term care financing should be clarified. Specifically it recommends full tax relief on premiums paid and gross assets built up.

Recognition of the question is critical at this stage, according to Mr Des Crowther of the IAPF. "The real issue right now is to grasp the nature and extent of the problem because, so far, it hasn't received the attention it merits," Mr Crowther says.

"It is a vexing and difficult question which requires the Government to act because it is only then that a framework can be developed."

The IAPF has recommended that retirees should be permitted to use part of their pension assets to purchase long-term care insurance on a single premium basis. This view is shared by Ms Hoban and she points out that it's not just about nursing home care. In most cases, a level of informal care goes on and that too needs to be supported further.

"The vast majority of people want to remain at home with independence and dignity as long as possible," Mr Eddie Collins-Hughes of the Carers Association said.

Supporting families caring for frail older people makes sound economic and healthcare sense, Mr Collins-Hughes believes. At present, there is no planning process for the transition from home to nursing home and it can be very ad hoc and traumatic for all concerned, he says.

The National Council on Ageing and Older People has produced various reports addressing the issues affecting older people but so far the financial support system has been readjusted rather than overhauled. An expenditure review of the subvention system is under way but the issue is so complex that there is a clear need for an orchestrated and comprehensive approach from the Government.

Tax incentives for investing in nursing homes, which were introduced in the 1999 Finance Act, have led to increased investment in the business. AIB set up a £50 million fund in 1998 and there has been a 55 per cent take up to date. The bank gives preference to owner-manager proposals and, despite rumours of international chains eyeing the Irish market, none has set up here yet.

This is because the growing demand for beds is being offset by significant barriers to entry, according to Mr John Kelly, head of business banking in AIB.

"The fact that there is no specific plan for long-term care in Ireland and the reliance on the subvention system through the health boards constitutes a major risk element for investors," Mr Kelly said.

"Added to that, the fact that the insurance industry hasn't been able to provide a product to cater for the long-term care eventuality may be holding chain operators back."

There is one more demographically-linked problem for the future of nursing homes, the severe shortage of staff. It's not simply a question of how a person can plan for, or afford, care. Elderly people can add another worry to their list - who will be there to provide the hands-on care.

The issue is crying out for planning and there is no shortage of recommendations and commitments in place. Although the topheavy demographic shift isn't quite as critical here as in other European countries, it is close at hand and there is an opportunity to deal with future care needs in a broad-ranging sensible way.

Commentators and interested parties all agree that, for everyone's sake, the issue should be prioritised as a matter or urgency so that we don't have to deal with it as an emergency in a few short years.