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Residential homes struggle for survival

Residential homes struggle for survival

Heather Roy
Tuesday, 9 August 2005
Speeches - Health

Speech to Mana Tawa Grey Power - Political Panel on Retirement Homes/Asset Testing.
Porirua Club, Lodge Place, Porirua, Tuesday 9 August, 1.30pm

Residential homes for the elderly are currently in something of a crisis. At first glance the situation is perplexing because there is a waiting list for many homes and others are closing down. For example, the Salvation Army, earlier this year, put all of its residential aged care centres on the market. There have also been residential care facilities and private hospital closures in Dunedin and Christchurch.

Now you would think that if there was a shortage of places then residential facilities should be opening not closing. And when you see things happening back to front it is wise to find out what involvement the government has.

The problem is that the price of the care given by residential homes is fixed and if any charge is made to the resident then the rest home receives no payment at all. The current Labour Government sticks stubbornly to a rigidly controlled price even though the history of price controls is one of unmitigated disaster in every sector and in every economy in which it has been tried.

The Government fears profiteering by residential homes. My own feeling is that these fears are misplaced. Organisations like the Salvation Army are not known for their avarice and it is simply unrealistic to expect anyone, no matter how committed, to take a loss on their business year in and year out.

The rest home industry was thriving at one stage but things are going downhill fast.

There is a worst case scenario, which could result in the worst of all possible worlds. As residential homes try to operate on a fixed income in the face of rising costs this leads inevitably to a financial disaster. The continuation of the current regime, which is inflexible, will cause many rest homes to record a loss. The question on owners' minds will be: "How do we get out?" There is already an under-capacity and it is beginning to get difficult to place patients. I predict that the queues will get worse as more rest homes close down.

The public will look on bewildered as demand for residential homes rises and the supply of rest homes plummets. The problem is that most people are unaware of the financial arrangements surrounding aged care.

Asset testing, the other area we have been asked to address, is of course part of these financial considerations. At this point I begin to feel a little like Daniel entering the Lions Den

- I realise that many of you will not agree with my ACT views on this subject. It is one that elicits great emotion. ACT prides itself on being a party of principle with our primary consideration - what is best for the country and therefore fair to all. We are the party that pinches your arm for a reality check.

ACT considers the progressive relaxing of asset testing by the Labour Party as a clinical political move to buy retired votes. Estimates show that this will cost about $200 million a year when fully implemented. ACT opposed the total removal of asset testing in parliament for one very simple reason - the country cannot afford it.

This is why Labour was forced to delay its promise - first announced as one of Labour's credit card promises in the 1999 election. Instead of removing the asset testing in their first term, they simply raised the thresholds for its application, instituting a system for thresholds to slowly increase over time, and commence in election year, this year on 1 July, six years after the promise was made.

Is Asset Testing about health? No, it's about one thing - Inheritance.

It is understandable that people who have worked hard all their lives to build up assets, such as a family home, would want to be able to leave some sort of inheritance for their families. The idea that the family inheritance could be whittled away in order to fund a lengthy stay in a rest home does not sit well with people.

Labour has raised the limits for single or widowed persons in care, and for couples in care, to $150,000. Labour has left virtually unchanged the threshold for a retired couple where one is in care, changing from $45,000 to $55,000.

ACT believes it is not fair to ask current working taxpayers to fully subsidise the inheritance of others whose parents go into geriatric care. People should be allowed to keep a reasonable amount in their bank accounts to cover their additional living expenses comfortably.

It's a question of fairness that I ask you all to reflect on.

Should taxpayers pay an extra $200 million a year to protect more inheritances?

Or would this be better used providing 10, 000 more waiting list operations at $15,000 per operation (the cost of a hip replacement). We have 180,000 people, mainly elderly, waiting on hospital waiting lists for their First Specialist Assessment or surgery.

That is a disgrace.

ACT believes the total removal of asset testing is a political bribe for the elderly vote. It will cost around $200 million a year when fully implemented. What's more when you understand the history and what else we could deliver, like operations and more police you realise it is bad policy, but good left wing politics.

If a person has a million dollar house, ACT believes there is a strong case for a level of asset threshold, so that taxpayers do not pay for huge inheritances. With the undisputed aging of our population, the cost of total removal is simply enormous, at over $345 million a year within 15 years.

ACT has not set a predetermined level for the threshold, or the commencement age, and would review this for greater fairness.


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