The new proposal for financing long-term residential care is much fairer than the existing system, argues Mary Harney
The new scheme to support and finance long-term residential care says the following to older people and their families:
You will never have to sell your home to pay for care, whether you are single, married, or cohabiting.
Neither you, nor your spouse, nor your dependent child will ever have to remortgage your home to pay for nursing home care.
Your children or family will not have to find cash from their own incomes to pay for your care. Nor will they have to remortgage their houses to pay for your care.
You can be sure that everybody's need for long-term nursing care will be assessed the same way by the HSE.
Everybody's financial situation will be assessed the same way.
Everybody needing long-term nursing home care will pay their share in a totally fair and equitable way.
You will never be asked to contribute more than 80 per cent of your actual disposable income to pay for care.
Your inheritors will never be asked to contribute more than 15 per cent of your house value to your care costs.
You will be asked to make a contribution, and the State will pay the rest.
This is a radical change from the present. Under the subvention system, the State gives you a contribution and you pay the rest. In future, it will be the opposite and the State will bear the risk of cost or price increases. None of those assurances and commitments we are now giving are in the jumbled and unfair system we've had since at least 1993.
No person can be sure at present if they will get a public bed or a private bed, nor how much they will have to pay.
Some people claim the new scheme is breaking a contract between the State and older people. Well, that contract, such as it is, has been a very bad one for older people. I've said it's scrappy, inconsistent and unfair.
People whose parents need care say a lot worse things about it.
For some people and their families, it makes the trauma of going into nursing home care a financial catastrophe.
One of the worst aspects of the 1993 system has been "imputed income" from your home. Imputed income is one of those factors that makes perfect sense on paper. It means that if you own a house, 5 per cent of the value of that house is taken as an income for the purposes of working out how much you should contribute towards the cost of long-term nursing home care.
Of course, imputed income isn't real income. It's not cash. If you have a house worth €300,000 (roughly the average value across the country), the old system tells you that you actually have €15,000 income from that to pay for your care.
Someone has to go and find the cash and that is a pressure no older person should face. And it doesn't matter if the value of your house goes up - you still don't get any money into your hand. Nobody does. But with rising house prices, the 5 per cent of imputed income continues to rise, without any actual increase in disposable income.
It makes sense on paper. It makes no human sense at all.
We are stopping that nonsense. But some people claim we are bringing the house into the equation for the first time. That's wrong. It's been there since 1993. In fact, with this new scheme, we are removing the pressure on many old people and their families to find cash to the value of 5 per cent of the house immediately.
And it's been a pressure that went on year after year. Many older people and their children have had to find cash to the value of 5 per cent of the house value for every year of care. Many had to pay even more. No wonder so many people have been forced to sell or mortgage houses under the present system.
The fact is that, up to this Budget, a single person with just the non-contributory old age pension with a house worth €235,000 would qualify for zero nursing home subvention. He or his family would have to pay the full cost of care in a private nursing home, possibly €1,000 a week. The entire house value would be gone after five years' care.
At the same time, he could have had a neighbour with a more valuable house and 10 times the pension who managed to get into a public nursing home bed, and paid only €120 a week, the public bed charge.
That's a very unfair system, and we are putting a stop to it.
Under our Fair Deal, the person in care will never pay anything except a cash contribution, always less than their actual income, during their life. They will always keep at least one fifth of their own income.
Their adult children will not have to come up with any cash at all. The people who inherit the estate - and that could also be distant relatives, non-family beneficiaries, institutions like churches - will have a deduction on the inheritance value of 5 per cent of the house value for each year the person is in care. It will be limited by three years to 15 per cent, no matter how many years the person is in care. If the person is only in a nursing home for a month, it would be one-twelfth of the annual amount.
The deferred charge will not be collected until after a spouse or dependant living in the house has also passed away. We will also take account of situations where, for example, a daughter lived with and cared for an elderly parent for many years before nursing home care became necessary for the parent. The deferred charge can also be held over in circumstances like that. Some ask, why include a house at all in the means test. Because of fairness.
If we want a system that is fair to all, should we really treat in the same way the beneficiaries of estates of two people who were in care, both with the same incomes, but one who owned no house at all, and the other who owned a very large house? The deferred charge is a matter of fairness between estates. It is not a matter at all of taking houses or parts of houses from older people.
The Government and I are convinced this new system is fair and reasonable.
Some people have accused us of being "ageist" by having shared costs based on income for long-term care, but not for hospital care. In nearly every country, the arrangements for long-term care are different from those for hospital care. Every government in our country has made this distinction.
Some people argue for free healthcare at every stage - GP care, hospital care, long-term care. That is a political choice, but our country has not chosen that healthcare model that requires much higher taxes. And none of the major parties advocates it.
It is relevant that the National Health Service system in England, which has free primary and hospital care, effectively requires a person who is in long-term care for some years to sell their house to pay for care. By capping the deferred contribution at 15 per cent, our new system is much more favourable to inheritors of estates.
Cost-sharing between the State and individuals is commonplace. Some countries with social insurance health systems require people to pay the difference between the insured benefits and the actual cost of care. An ESRI survey here found that two thirds of people supported the idea that the State and families should share the cost of care.
I am open to discussions about how to fund long-term care for the decades ahead. We will examine the option of pre-funding costs, as we have done with the National Pension Reserve Fund.
At an overall level, under this policy, the State will continue to meet two thirds or more of the cost of residential care. We are also expanding care in the community as part of one coherent policy. We have increased funding for services for older people by €400 million over the last two budgets.
We will provide five times the level of home care packages in 2007 than in 2005. We are also adding 1.75 million more home help hours than in 2005.
There is no basis for any accusation that my motivation or that of the Government for the new scheme is to save cost on services for older people. The opposite is the case: we are expanding funding and services.
Mary Harney is Minister for Health and Children