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Co-payments key to solving problems

Co-payments key to solving problems facing the elderly care sector

Heather Roy Wednesday,

4 May 2005 Speeches - Health

Speech to Healthcare Providers New Zealand, Aged Care Policy Summit, Civic Centre Wellington

I am well aware as I speak to you today, that there is a crisis in the sector of care for the elderly.

While mainstream media are preoccupied with whether or not John Tamihere is a misogynist and Dover Samuel’s activities in hotel corridors, I’m sure that this audience is well aware that the Salvation Army is putting all 12 of its 70-year-old residential aged care centres on the market.

This has followed residential care facilities and private hospital closures in Dunedin and Christchurch. Yet I know it can be hard to get a bed for an elderly person in our residential care sector.

The cure to the many problems facing the residential care for the elderly sector, can be found in one simple term: co-payment.

In my view people do not expect free care. No other type of residential facility provides free care. They simply want affordable care. By giving residential homes the ability to charge modest fees by turning the current government allowance into a subsidy, we could make a big difference to the bottom line of rest homes at no expense to the government and at modest expense to the patient.

Furthermore, it would allow more flexibility in the provision of care, as some rest homes could specialise in ‘a no frills’ service, while others could provide a luxury service with an extra charge.

If ACT was in government, we would remove the expectation that residential homes meet bills for medical consultations, pharmaceuticals and medical supplies.

The problem is that the price of the care is fixed and if any charge is made to the rest home for medical supplies and medical services a resident receives, then the rest home receives no payment at all and is not allowed to seek reimbursement from the patient.

The current government sticks stubbornly to a rigidly controlled price, although the history of price controls is one of unmitigated disaster in every sector and in every economy in which it has been tried. Even cost of living adjustments have been denied the sector since the mid 1990’s and the 3% announcement at the end of last year is still being worked through.

The Government fears if it allows co-payments, it will allow profiteering but the sector is currently robust enough to provide strong competition. In any event organisations like the Salvation Army are not known for their avarice. Customers will simply go elsewhere if the payments in any one rest home are excessive.

The rest home industry was thriving at one stage but there is a worst- case scenario, which could result in the worst of all possible worlds. A fixed income in the face of rising costs inevitably leads to a financial disaster.

The continuation of the current inflexible regime will force many rest homes into a loss situation and 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 and many rest homes will close. The public will look on bewildered as demand rises and supply plummets. The problem is that most people are unaware of the financial arrangements surrounding aged care.

It is no secret that ACT would like to increase the role of the private sector in the provision of non-residential health care for the elderly, such as surgical services and general medical care.

At the moment we are moving in the wrong direction in general practice. Forcing GPs into Primary Health Organisations, so they can provide their patients with cheaper care, is short-sighted, provides the wrong incentives and has largely eliminated choice for patients.

Private hospitals are ignored by the current government, despite escalating numbers of patients waiting for first specialist assessments and treatment they may never get.

Our private hospital system, in financial terms, is much smaller than in comparable countries even though there is considerable evidence that private provision is more efficient. Our current system with 21 District Health Boards is particularly inefficient and Treasury reports over the past two years have highlighted the concern they have over the decreasing productivity seen in our hospitals. These reports aren’t easy to obtain but I’ve got a copy should anyone want one.

There are some ways in which the services for care of the elderly can serve as a model for other parts of the health system.

ACT believes there are ways to use the private sector to provide public sector services and in some respects the aged care sector has been leading the way. What we have learned from your experiences is that the Government cannot fix prices and should contain costs by fostering competition.


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