Diana Clement: The pain of paying for aged care

A very basic room in a care facility can cost $1350 or more a week. Photo / 123RF

OPINION

Forget pain at the pump or in the supermarket ... if you want to know something that really hurts to pay for, it’s aged care. Thousands of New Zealanders are paying $1350 or more a week for a very basic room in a care facility.

I’m not talking about retirement villages for able-bodied adults. Rest homes, dementia units, geriatric hospitals and similar facilities are places for people who have been assessed by government agencies as needing full-time care.

We are all at risk of eventually needing aged care if we make it to a ripe old age. That time in life can be very trying and most individuals and families have virtually no idea how the system works or what it costs.

If you have less than $273,628 in assets you qualify for a government residential care subsidy. If your assets add up to more than that sum you pay for your care. Once your assets are eaten up and fall to the limits, the government subsidy kicks in.

There are some nuances. For example, if you have a partner who is not in residential care, you can choose $149,845 excluding the house and car as your asset threshold so that the other partner can stay in the house and keep the car.

The “maximum contribution” for aged-care facilities is set by the director general of health. Private payers who don’t qualify for a subsidy pay a maximum contribution which ranges from $1355.76 a week in South Waikato to $1464.26 Auckland City. That’s $76,141.52 a year in Auckland City. Residents who don’t have cash to pay up front can receive interest-free residential care loans from the government.

These sums sound like a lot. But it is costly to run these places, with their need for round-the-clock care.

Private payers continue to receive a slightly reduced NZ Super, which they need for things like clothing, trips, dentistry, glasses, hearing aids, non-prescribed medicines, toiletries and equipment not provided such as La-Z-Boy chairs.

For the record, the maximum contribution is for a basic room. It’s usually the size of a bedroom, with no bathroom and not much room to manoeuvre a wheelchair. Residents can choose to pay extra for “premium services”, such as a private bathroom or a larger room.

Whacking your assets into a trust to qualify for subsidised home care paid for by the government used to be a big thing.

It’s still possible to a more limited degree but assets moved into a trust are counted in the means test unless they’ve been “forgiven/gifted” at an annual rate of up to $27,000 per annum per couple. Lawyer Jeff Stringer, of Cooney Lees Morgan, says in the five years prior to applying for a residential care subsidy, you can only forgive $7500 per year, which adds up to $35,000 over the five years.

Due to the increase in property prices in recent years, coupled with no increase in the allowable gifting amount, fewer people will be in a position to qualify for residential care subsidies using a trust, says Stringer. If you have a $1 million house, it’s going to take a long time to forgive at even $27,000 per year.

Any gifts to others such as children in excess of the limits above can be added back into the calculation by the Ministry of Social Development (MSD) at its discretion, to ensure people don’t rort the system.

He adds that the MSD will look carefully to ensure the trustees have administered the trust properly. “For example, the trustees need to hold adequate documentation relating to their decisions and detailing the movement of assets to and from the trust.”

I’m painfully aware that in our ageist society, old people are sometimes devalued even by their own families. Families sometimes begrudge the cost. If you’re one of those people who is horrified that their parent’s care is eating up $76,000 a year, remember it’s their money that they worked for to cover their needs as they age. It’s not your “inheritance”. The median tenure in New Zealand is less than two years. Most people’s aged care is counted in the tens of thousands of dollars, not hundreds. Don’t begrudge them.