Wednesday 26 October 2016

Fair Deal: How the scheme works

John Cradden explains the State nursing home plan

Published 26/11/2015 | 02:30

Picture posed
Picture posed

WATCH, listen or read any media coverage about the costs of nursing homes and it's likely you'll hear the term 'Fair Deal' used a lot. But what is the Fair Deal?

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It's the name of the government scheme that provides long-term financial support towards the costs of nursing home care.

The idea is that you pay a contribution towards the cost of your nursing home care and the State pays the balance. Before the scheme was first introduced in 2009, those who required nursing home care could either apply to enter a public or voluntary nursing home or else pay out of their own (or their family's) pockets for a private home. But amid the growing waiting lists for places in public and voluntary nursing homes, there were calls to provide financial support for those who had no choice but to go into private homes.

So, under the terms of the Fair Deal scheme, a person will receive the same level of state support, regardless of whether they choose a public, voluntary or private nursing home.

So how does it work financially?

If you are assessed as being in need of long-term nursing home care and your application to the Fair Deal scheme is approved, the HSE will look at your income and any assets you own to decide how much you should pay towards the cost of your care.

The general formula under Fair Deal is that you contribute up to four-fifths (80pc) of your income and 7.5pc of the value of any assets you own every year to the costs of your care - with the HSE paying the rest.

Your income can include any earnings, pension, social welfare benefits, rent from property, etc. Your assets can include your family home and any land or other residential property, but in the case of your home, the contribution from its value is only charged for the first three years after you enter nursing home care.

Also, the first €36,000 worth of your assets (or €72,000 if you are married) are excluded when calculating how much you have to pay for your care. It's also worth noting that the payment of the 7.5pc contribution based on any assets can be deferred until after you die.

This is made possible by a HSE loan that can be repaid at any time, but ultimately must be paid off by your estate sometime after you die. There is no fixed interest rate as such on this loan, but the HSE will take into account any inflation or deflation since the loan was taken out based on the Consumer Price Index when calculating what is due.

This loan is entirely optional. You can choose to raise whatever amount is due on your house (or other land or property assets) any way you like and pay it to the State while you are still alive and in nursing home care.

Figures suggest that only a minority of nursing home residents and their families have availed of this loan, however.

So, can anyone qualify for financial support towards nursing home care?

Well, first you need to be assessed as being in need of long-term nursing home care. If you only need short-term, respite, or convalescent care, then you won't qualify.

You can apply to any public, voluntary or private home that participates in the HSE scheme and is assessed as suitable for your needs, but regardless of which you choose, you'll still get the same degree of financial support.

If your parent or relative needs nursing home care but is of "diminished mental capacity", you can apply for Fair Deal on their behalf.

What if I don't really need financial support?

If you're wealthy or have a very good pension, then the Fair Deal might not be for you, particularly if you don't like the idea of the State having a stake in your estate.

Certainly, under the old means-tested nursing home subvention scheme that was in place before the Fair Deal came along, it's likely you would have paid for your own care in a private nursing home.

A recent survey by Nursing Homes Ireland, which represents private nursing homes, shows that the average weekly cost of a private nursing home is €896 or just under €50,000 a year. So if you have a pension income that is well above that, you could be footing most of that bill yourself.

So, it might suit you better to pay for your nursing home care yourself, particularly if you are a higher-rate taxpayer, as you can claim 41pc tax relief on the costs of private nursing home care. There's also the five-year 'look-back' rule, whereby any assets formerly owned by you that were transferred to others within five years of applying for Fair Deal will still be taken into account in the financial assessment of your means.

This means that if you have a lot of assets but not a lot of cash, you could restructure your wealth at least five years before you expect to enter a nursing home to as to keep the State's hands off those assets.

What's the story with funding for the Fair Deal?

When the Fair Deal was established in 2009, it was given a fixed budget, but as the older population grew, this resulted in the scheme running out of money on several occasions, leading to waiting lists for approval for a nursing home place.

After throwing an extra €3m at it at the end of 2014, the Government allocated a further €44m earlier this year to the scheme to provide 1,600 extra places, thereby reducing waiting lists.

However, the Government has signalled that the scheme should be 'demand-led' in the near future, which would mean that the budget would no longer be capped every year.

A long-awaited review of the scheme, promised back in 2012, was finally published earlier this year, which estimated that the current €1bn cost of the scheme would increase by about €50m a year by 2018 as the number of older people rise.

It also set out some options for covering the rising cost of the scheme, including increasing the contributions from residents.

But the Minister of State for Health, Kathleen Lynch, promised that current nursing home residents would not be asked to contribute more. It remains to be seen if they can keep that promise.

Irish Independent

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