Social Security ( long term residential care ) Amendment Act

6th December 2004

The new Asset testing regime

On the 6th December 2004 the Hon Ruth Dyson Associate Minister of Health made the folowing media release

Asset testing legislation fair for older NZers

Legislation passed last week to progressively remove asset testing of older people in long-term residential care is based on fairness and security for older New Zealanders, Associate Health Minister Ruth Dyson said today.

From 1 July 2005 single people and couples with both partners in care will be able to keep up to $150,000 in assets (including both property and savings) before their assets are used to contribute to the cost of their care, up from $15,000 and $30,000 respectively.

Couples where one partner is in care will retain their current exemptions of a house and car, while their cash asset exemption will rise from $45,000 to $55,000.

The exemption thresholds for all groups will then increase by $10,000 a year, progressively removing asset testing.

Associate Health Minister Ruth Dyson said the decision was in line with the government's 1999 election promise and was based on human rights considerations.

"It is unfair that people aged 65 and over are required to use up their assets to contribute to the cost of their care, whereas younger people are not. The gradual removal of asset testing will balance these important human rights considerations against the very substantial costs involved."

The policy is expected to cost $110 million in 2005/2006, rising to approximately $170 million in 2009/10.

"The increased costs over time reflect the annual $10,000 increase in the exemption thresholds, and the growing number of older people in the population," Ms Dyson said.

The income test is retained under the legislation.

"The government never intended to remove income testing. If older people are receiving income from sources such as investments, rent and superannuation, it is fair to expect that they will contribute to the cost of care they would expect to pay if living in their own home.
However, some changes are proposed to the income test, in light of increased asset thresholds and the needs of spouses.

"The legislation sets out all the provisions for income and asset testing in one place for the first time. It also addresses some significant anomalies, such as removing asset testing completely for people aged 50-64 years, and changing the income test so that a partner of a person in care does not have to contribute their income from paid employment towards the cost of their partner's care costs."

Around 31,000 people - seven per cent of those aged 65 and over - are currently in long-term residential care.
The new policy will apply to all new admissions, and to people already in care who are not currently eligible for a residential care subsidy.

Around 5,600 additional people are expected to receive the subsidy from 1 July 2005, taking to 70 per cent the proportion in care who receive the subsidy.

"The government has made separate provision for the additional funding to pay for the progressive removal of asset testing. This funding will not reduce the amount allocated to current health and disability services," Ruth Dyson said.

A copy of the Social Security (Long-term Residential Care) Amendment Bill can be purchased from Bennetts Government Bookshop and is available on the Parliamentary Council Office website http://www.knowledge-basket.co.nz

Progressive Removal of Asset Testing:

Questions and Answers from Ministry of Health

The Social Security (Long-term Residential Care) Amendment Bill makes a number of significant changes to income and asset testing for older people requiring long-term residential care. These changes come into effect from 1 July 2005.

The following questions and answers provide information about the proposed changes.

1. What is the current situation?

People aged 65 and over, and some 50-64 year olds, who require long-term residential care can apply for a residential care subsidy to cover the cost of their care.
To be eligible for this subsidy, you must under go a financial means assessment, which includes an asset test and an income test.

Under the current asset test, if you have assets below the following levels you may be eligible for public funding:

$15,000 for a single or widowed person in care;
$30,000 for a couple with both partners in care;
$45,000 plus the house and car for a couple where one partner is in care.

Assets such as the house, holiday home, car, shares, bonds and savings are.considered in the asset test.

2. What are the changes to asset testing?

The government has decided to increase asset thresholds to enable older people to retain more of their assets.

From 1 July 2005, the thresholds will increase:

from $15,000 to $150,000 for a single or widowed person in care;
from $30,000 to $150,000 for couples with both partners in care;
from $45,000 to $55,000 for couples with one partner in care (house and car remains exempt).

All the exemption thresholds increase by $10,000 per year thereafter.

NB. Couples with one partner in care can opt to be tested against the $150,000 threshold for their total assets (instead of $55,000 plus house and car).

3. Why is the Government changing asset testing?

Only a small proportion of older people require residential care, but for those who do, the costs are very high.
Younger people are not required to contribute from assets for similar care.
The Government decided to substantially increase the asset thresholds to strike a better balance between fiscal responsibility and fairness for older people.
The changes mean that older people will be able to retain more of their assets.

4. Will the income test still apply?

Yes. The Government considers that it is reasonable to expect older people to contribute towards expenses they would have to pay for in their own home.

However, there will be some changes to income testing:

income from any assets will be included in the income test, except for the first $780 per person per year;
for couples with one partner in care, any income from paid employment of the partner living in the community will be excluded.

5. How much will the changes cost?

The total cost of the changes is estimated at $112 million in the first year (2005/2006), rising to $166 million in 2009/10.
The increase in cost over time reflects the $10,000 annual increases to the asset thresholds and the growing number of older people in the population.

N8. It is estimated that to remove asset testing completely it would cost $252 million in 2005/2006 rising to $322 million in 2010/11 and $507 million in 2020/21.

6. Where will funding for the changes come from?

The Government has made separate provision for the additional funding to pay for these changes, over and above funding for current health and disability support services.

7. Who is responsible for funding residential care services for older people?

From 1 October 2003, funding for residential care services for older people transferred from the Ministry of Health to District Health Boards.
This is as part of District Health Boards' new responsibility for disability support services for older people.

8. Who will the new policy apply to?

The new policy will apply to people who are already in care and to all new people who are assessed as needing long-term residential care from 1 July 2005.

People who currently receive a residential care subsidy will continue to receive the subsidy.
From 1 July 2005, an additional 5,600 people are estimated to receive the subsidy. At that time, it is estimated that 70 per cent of people in residential care will be receiving public funding through the subsidy.

9. Will the new policy be retrospective?

No, the new policy will apply only from 1 July 2005. No refunds will be given.

10. How do people apply for a residential care subsidy?

People must first have a needs assessment through their local DHB that shows they need long-term residential care indefinitely.

The Ministry of Social Development (through Work and Income) then carries out a financial means assessment.
If their assets are under the asset threshold, they may qualify for a subsidy. They are then income tested. The level of subsidy paid depends on the level of their income.

11. What happens if a person's assets are worth more than $150,000?

If a person's assets exceed $150,000, they will have to contribute towards the cost of their care until their total assets reduce to $150,000.

People whose assets are over $150,000 and who own a home may be eligible for a residential care loan. Under the loan scheme, the Crown funds residential care costs as an interest-free advance.
The loan is secured by a caveat over a person's house.
When the house is sold or the estate is wound up, the loan is repaid to the Crown.

12. If a person's assets are worth more than $150,000, how much will they have to contribute weekly to the cost of their care?

At present, people who are needs assessed as requiring residential care do not have to pay more than $636 per week for the basic package of care services, regardless of whether they are in a rest home, dementia unit or hospital.

From 1 July 2005, people needs assessed as requiring residential care will pay the same amount as the government pays for rest home care services.
That is, regardless of whether they are in a rest home, dementia unit or hospital, residents will only have to pay the price of the District Health Board (DHB) contract for rest home services in their local area.
At present, the contract price for rest home care services ranges from, approximately $595 to $655 per week in different regions.

However, people can choose to pay extra fees for services that are additional to those covered by the DHB contract. For further information on this, refer to the document brochure published by the Ministry of Health in June 2004
Long-term residential care in a rest-home or hospital: What you need to know.

13. What if a person's assets are worth less than $150,000?

If a person's total assets, including their house, are worth less than $150,000, they may apply for public funding via the Residential Care Subsidy.

To do this they must apply for a financial means assessment from the Ministry of Social Development (Work and Income).

14. Does income and asset testing apply to people aged 50-64?

Currently, single people aged 50-64 without dependents are subject to the same asset est as people aged 65 and over. From 1 July 2005, asset testing will be fully removed for people aged 50-64.

15. Where can I get further information?

A copy of the legislation can be purchased from Bennetts bookshops and will also be available on the Parliamentary Council Office website http://www.knowledge-basket.co.nz/gpprint/docs/welcome.html

For information about local needs assessment and service co-ordination agencies, contact your local DHB or call WEKA on free phone 0800 17 1981 or visit their website http://www.weka.net. nz

For information about applying for a residential care subsidy or residential care loan, contact Work and Income's Residential Subsidy Unit, free phone 0800 999 727.

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