Collapse of the ‘Fair Deal’ pyramid scheme

IT certainly seemed like a ‘Fair Deal’ – for a short while. But like all pyramid schemes, the Nursing Home Support Scheme was just another promise the government could never keep.

IT certainly seemed like a ‘Fair Deal’ – for a short while. But like all pyramid schemes, the Nursing Home Support Scheme was just another promise the government could never keep.

Money Express with Jill Kerby in association with Aviva

And like every pyramid, or ‘Ponzi’ scheme, the people who got in first are the ones who benefitted the most – in this case the 22,000 elderly people already in €1 billion annual Fair Deal scheme and the nursing home operators.

Many older people worry about how they will pay for nursing or institutional care in their advanced age– and for good reason. It is extremely expensive.

Nursing homes can cost from about €875-€1,250 to €1,245-€2,100 a week, depending on whether you are accommodated (and where) in a private or public institution. The public nursing homes, run by the Health Service Executive, charge the higher fees.

Until the Fair Deal subsidy programme was launched, the nursing care subvention rules meant that only those people with little or no means would be able to claim a suitable state subsidy for their care. Everyone else had to pay out of their own resources and this often involved selling the family home, using all their pension income or even tapping into funds made available by their families.

Last week, it was revealed that public nursing homes, run by the HSE are charging fees as high as €2,139 a week, about twice the rate charged by private facilities. The average Fair Deal subvention is about €650 a week and it is estimated that there are as many as 500 new net entrants to the scheme each month (replacing those who leave the scheme or die.)

As we know, public service costs are often much higher than those of the private sector – it is the price we pay for a government providing services that the private sector usually provides more efficiently.

It comes as no surprise then to hear that the €1 billion budget that the HSE allowed for the Fair Deal scheme has already run out for 2011. It isn’t just because of the way costs are dealt with, but also because of the inevitable high demand for a service that passes the bulk of a cost away from the patient and over to the taxpayer.

The 22,000 patients already in the system will be unaffected by the money running out, but all the new applicants will have to go onto a waiting list until the scheme gets another injection of cash.

The penny about the Ponzi-like nature of this scheme has certainly dropped so far as the new Minister for Health is concerned.

He understands now that a programme that isn’t property funded – with real money going into a real investment fund and being allowed to grow for many years to produce a large enough sum to start drawing down (like the now diminished National Pension Reserve Fund)– is never going to be sustainable.

The New Deal scheme was always going to have to compete against all the programme that are paid from general taxation.

So what can elderly people or their families do if they are desperate to fund a nursing home place?

Those people in immediate need will be accommodated in acute hospitals, said the HSE spokesperson said last week. The government will try to find a new source of funding.

The collapse of the property market means it will be difficult to sell the older person’s family home, if they have one, at anything but a fire sale price. Since renting it out will not generate enough cash to pay even a €4,000 a month nursing home fee, the fire sale may have to be considered.

Equity release loans against the value of the family home from the likes of Seniors Money are not available if the person is entering a nursing home; in today’s lending climate, it may also be difficult for family members who want to help, to raise a mortgage on their own home, even if they will inherit the property.

However, any payments made by a third party to meet someone else’s nursing costs are tax-deductible at the benefactor’s top rate of income tax.

Collectively, siblings may be in a position to meet the nursing home costs from their own income with the help of the income tax relief.

This is one of those ‘something will have to be done’ moments. Since ‘nanny’ – as in ‘nanny state’ - has run out of other people’s money, the families and friends of the older person in need of sheltered and secure nursing care may have to act. Ask your tax advisor and solicitor along to the meeting.

Get better healthcare for less in Offaly. Call Aviva at 057 86 95300

jill@jillkerby.ie