26 May 2012

More elderly to pay for residential care

10:20 am on 26 May 2012

Legislation has passed in Parliament under urgency on Friday which changes the asset testing regime for elderly people in residential care.

The threshold at which they have to pay the full cost of their care will rise by the rate of inflation rather than by $10,000 - meaning fewer elderly people will be eligible for a subsidy.

The policy is retrospective and has been passed into law without select committee scrutiny.

Finance Minister Bill English made no mention in his Budget speech on Thursday of the move, which is expected to save $16.4 million a year by the 2015/16 financial year.

The Ministry of Health estimates that 170 people will be affected in the first year, and 610 by 2015/16.

Before the legislation was passed, the value of assets someone could hold and still get subsidised rest home care was limited to $210,000. This threshold increases by $10,000 in July this year, but under the change will increase only at the rate of inflation.

The move has been hotly debated, with the Opposition attacking the Government for making the changes retrospective for this financial year and not sending it to a select committee for scrutiny.

The Labour Party labelled the move the Budget's "dirty little secret". Other parties say the elderly have been ambushed and robbed of the opportunity to give their views before the law was changed.

Labour's aged care spokesperson Kris Faafoi says there was no obvious reference to it in the Budget and it is going to be rushed through Parliament without any interested parties being able to have their say on it.

The Green Party believes elderly people will be caught out by the legislation. MP Kevin Hague says it is a total surprise and the Government is trying to divert attention away from it because it would be deeply unpopular if it went to select committee stages.

However, Prime Minister John Key says the changes were signalled in Budget documents and it is the right thing to do for the long-term.

"The current threshold which I think is about $210,000 is maintained and it's inflation-adjusted forever. And that's consistent with the way we deal with all of those kinds of issues - whether it's benefits or other entitlements, we tend to CPI adjust them. The old rules were really a $10,000 adjustment - it was a very random adjustment."

And Finance Minister Bill English says the change to the asset testing regime is minor.

Grey Power national president Roy Reid says the provision will punish those who save for their retirement and reward those who don't. He says people will simply move assets into family trusts to avoid paying for rest home costs.

Superannuation costs rise

Budget figures show national superannuation accounts for most of the rise in social assistance over the next four years and a leading tax consultant said the sustainability of the scheme needs to be addressed.

PricewaterhouseCoopers chairman John Shewan says that while other social welfare payments are predicted to rise by 1% in the next four years, national superannuation goes up by almost 30% in the same period.

"It really does bring home the severe impact that the ageing population is having."

When asked about the affordability of the scheme, Finance Minister Bill English would say only that the Government will continue to pay it.