The Minister for Finance has improved the weekly pension income for the over65s this week, and also helped to improve the lot of people who care for elderly relatives in their homes. But unfortunately the Budget bonuses are hardly going to make a dent in the enormous - and increasing - cost of long-term care for the elderly. A major report into this subject was issued last week as a precursor to a conference on Financing Long-Term Care that was held yesterday in Dublin, organised by the Irish Association of Pension Funds, the Irish Insurance Federation and the Society of Actuaries. This coincides with the announcement of a deal between the Danish group, EXOS, which specialises in running active retirement/nursing homes, and Ailesbury Corporate Finance, for a unique £20 million venture to build and operate a chain of 10 nursing homes around the State.
At the core of the working party report, Financing Long-Term Care in Ireland, is the prediction that more elderly people will be requiring care - whether in their own homes or in institutions - in the future. The reasons are not just that the population of over-65s is growing, but that fewer women, who currently make up 80 per cent of carers of the elderly at home, will be available to provide this mainly unpaid service as greater numbers of them enter and remain in work outside the home. As a result, more private and State institutions will be required to provide long-term care - but at a far greater overall cost. It is estimated the total cost of formal and informal care of the elderly in 1996 amounted to £877 million. This figure is projected to increase to £2.7 billion by 2026 (at 1996 prices), an increase of 211 per cent. Since the need for formal care is likely to increase at a greater rate, the estimated £310 million that was spent on formal long-term care of the elderly in 1996 is expected to go up to £1.3 billion in 2026 - an increase of 315 per cent.
Tackling the cost problems now is therefore the purpose of the working party and its report. The solutions are multi-dimensional and involve not just extra spending by the State and individuals - the latter ideally assisted with financial incentives such as tax relief on insurance contributions, tax-exempt roll-up funds and tax-free benefits - but also maximising healthy life expectancy, setting universal standards and access to quality care and increased provision for care in the community.
Anyone who has had to make provisions for long-term care, whether for themselves or for a relative, knows the main problems revolve around cost and the level and availability of care facilities and services. The average charge for institutional nursing-home care is £350 a week. This is paid either entirely privately from existing resources and/or a means-tested subvention from the State, or if paid entirely by the State part of the cost is met from the patient's State pension if they receive one. Expenses incurred in approved nursing homes are tax deductible for the individual concerned, or for the person actually paying the bills. But the shortage of affordable nursing-home places, especially in the person's neighbourhood, can be alarming and distressing, especially if the alternative is either an inappropriate hospital geriatric or psychiatric ward, or staying at home with inadequate care and supervision.
Raising £350 or more a week, despite the tax relief, to pay for institutional care, is very difficult for people relying solely on State or even occupational pensions. Often, even if there were such a sum available, it cannot be fully spent since there may still be another spouse to be maintained at home. Too often, states the report, a person (or couple's) only real asset - their home - must be sold to meet the costs of maintaining the infirm partner in the nursing home. Ironically, this wouldn't be necessary at all if more affordable long-term nursing or supervisory care could be provided at home.
The working party defines what it sees as the role of the State and the role of the individual in funding long-term care. If the State were to deliver on promises for better longterm care at home and in institutions for the elderly in its own proposal - The Years Ahead A Policy for the Elderly - it would have to continue to meet much of the cost, states the working party report. At the very least the State needs seriously to consider the immediate establishment of a long-term stabilisation fund to help stabilise increasing costs over the next 30 years.
For the longer-term, a social insurance model, based on PRSI contributions, is a possible alternative to heavy State funding, the report says. While more equitable than the meanstesting system currently in place, the downside of a social insurance option is that not only could it increase the overall costs, but it may emphasise institutional rather than homebased care. "The present political climate does not appear right for increased taxation," the authors add. An alternative, they say, is to finance longterm care by a posthumous charge on assets - that is, a tax on the estates of deceased citizens.
"It can be perceived as socially just that the present older generation should fund its own care costs from capital that they have accumulated over their own working lifetimes. It means that present and future generations would not have to fund both their long-term costs as well as the cost of care for the present elderly generation." Though the charge would likely be quite small, it could, suggests the report, be mitigated by taking out a life assurance policy held in trust.
Long-term care is currently financed by the private sector either through direct assets (usually the sale of the private residence), by funding a private retirement pension and with the purchase of serious-illness type insurance policies which include a payout of benefits if policyholders can show they are unable to carry out a number of basic independent life functions such as dressing and feeding themselves, being mobile, etc. Such policies are very expensive if taken out in late middle age.
None of these provisions alone, however, are adequate to fund long-term care and the report outlines how they could be modified, such as extending pension schemes specifically to include long-term care benefits; to allow retirees to use some of their accumulated pension fund to buy a long-term care insurance policy rather than pension income; and to create proper equity release or home reversion schemes to allow older people to use the money built up in their private residence to contribute to the cost of long-term care.
There are difficulties with all of these suggestions, but the report is clear in its recommendation that a partnership approach be taken between Government, the private sector and individuals which encourage people to make their own provisions for long-term care. One suggestion is that such an effort would be liable to Government support if long-term care continued to be needed after a three-year period, without means testing for people who took out an approved insurance policy. (Studies have shown that the average nursing home residency is approximately three years.)
In addition to tax reliefs, retirees should also be able to use some of their pension assets to purchase the insurance, the report recommends. The policies and schemes should be "kite-marked" for value and quality in the same way as has been recommended for the new Personal Retirement Savings Accounts outlined earlier this year in the report of the National Pensions Policy Initiative.
With 123,000 Irish people expected to need some kind of long-term care in over 10 years (the 1996 figure was 65,400), and 176,000 by 2026 - time is of the essence if proper solutions are to be found before a major crisis in care hits.
The timing of this debate couldn't be better: you need not look any farther than Wednesday's Budget giveaways to realise that Ireland Inc has never been in a better fiscal position to tackle this issue head on.
