When a move into a care home is considered, financial concerns are often a worry. Will you have to pay for your care? If so, how much? If you have a spouse or partner what about the implications for them?
You are responsible for paying for your care and where this is not possible a set of rules and regulations determine what financial assistance you might be eligible for. This article gives a brief overview of these with particular emphasis on the Residential Care Subsidy (RCS) and Residential Care Loan (RCL).
As individual circumstances vary widely, and details shown here may change, make sure you get up-to-date information/advice/brochures from Work and Income who manages this process. The Residential Subsidy Unit is freephone 0800 999 727. Seniorline 0800 725 463 can also advise. You must return signed RCS application forms to Work and Income within 90 days of the date you want payment to start.
To determine how much you will pay or whether you might be eligible for a RCS you must be firstly considered to be a qualifying person or a special case person.
You are a qualifying person if:
- you are aged 65 or over; and,
- you are eligible for publically funded health and disability services, and;
- you have been assessed as requiring long-term residential care indefinitely (i.e. all levels of care – rest home, hospital, dementia, psychogeriatric), and;
- you are entitled to apply for a means assessment.
Four basic rules apply to a qualifying person.
These rules outline key principles for determination of payment:
- A qualifying person will not have to pay more than the Maximum Contribution. (Each year the cost of care is negotiated between DHB and providers after-which price changes are published.)
- A qualifying person whose assets are above the asset threshold must contribute the Maximum Contribution (i.e. they must self-pay as long as their assets remain above the asset threshold.)
- A qualifying person whose assets are equal to or below the asset threshold must pay a contribution based on their income (i.e. when income testing applies).
- The funder (e.g. DHB) must pay the difference between the qualifying person’s contribution and the cost of long term residential contracted care.
You are a special case person if you are:
- aged 50 to 64 , single and have no dependent children, or;
- an exempt person or;
- an ‘elderly victim of crime’.
Your rule differ to a ‘qualifying person’ e.g. if you are aged 50 to 64, single and have no dependent children you will not have a means assessment of assets howeber a means assessment of income will be done. See MSD or Work and Income for additional details.
Means Assessment of Assets (Qualifying Person)
The first part of this process involves determining whether you reach the ‘cut-off point’ where you will not have to contribute to your care and may be eligible for a RCS. This is known as the threshold It equals the dollar value of assets that you are able to retain. Each year on 1 July the threshold is adjusted by the Consumer Price Index (CPI). The following shows the asset threshold for single peoples and couples:
You are eligible if you have assets equal to or below the allowable threshold of $227,125 as a 1 July 2018.
Couple with both in long-term care
You are eligible if you have combined assets equal to or below the allowable threshold of the $227,125 as at 1 July 2018.
Couple where one partner is in long-term care
Those who have a partner who is in care have two threshold options
- Combined assets of $124,379 as at 1 July 2018, not including the value their home and car, or;
- Combined assets of $227,125 as at 1 July 2018, Which does include the value of the home and car.
It is expected that you will want to retain as much of your asset base as possible. The following examples help illustrate the differences:
- Couple A may choose the higher threshold $227,125 (as at 1 July 2018). they do not own their own home and have total assets of $185,000 so are under the asset threshold
- Couple B may choose the lower threshold $124,379 (as at July 2018). They own their own home worth $500,000 and a car worth $18,000. The house and care are exempt from the assessment of assets. (the house is only exempt from the assessment when it’s the main place where your partner, who is not in care, or a dependent child lives.)
What are assets?
Assets generally include but are not limited to:
- Cash or savings
- Bonus Bonds.
- Term deposits, investments, shares or bond.
- Loans you have made to others.
- Property (e.g. house, if single or a couple and both in care, or if the higher threshold is elected by those with a partner at home).
- Most life insurance policies.
The following are generally not counted in the assessment (not a complete list):
- Household furniture and effects.
- Personal belongings, e.g. clothes and jewellery.
- Prepaid funeral fund up to the value of $10,000 each (in a recognised plan).
For many people who own property the reality is that their total assets will be worth more than the current threshold.
Gifting (as related to the RCS)
If you give away assets they may also be counted in your asset assessment.
- Within the ‘gifting period’ (i.e. five years prior to application for a RCS) there is an allowable level of ‘general’ gifting of up to $6,500 per year.
- Gifts made in ‘recognition of care’ (for which there is strict criteria) must not exceed $32,500 during the ‘gifting period’.
- Before the five year ‘gifting period’ gifts of more than $27,000 a year, for each application, may be included int he assessment.
Note: The IRD gifting rules are different to the RCS rules.
Outcome of the means assessment for those over 65:
If your assets are above the asset threshold and you have been assessed as requiring residential care, you will have to pay privately for your care. As your assets decrease you may become eligible for the RCS. Make sure you know when this time is approaching so that you can make an application if you want to.
If your assets are found to be equal to or below the asset threshold and you meet the other eligibility criteria mentioned earlier, you may be eligible for a RCS. You will still need to have an income assessment.
Means Assessment of Income
While it is easy to focus on asset testing do not forget about the significance of income testing. Income testing can be rigorous. As mentioned earlier, although you , as a qualifying person, may be eligible for a RCS you will still need to contribute towards the cost of your care from income you recieve (as will a special case person aged 50 to 64). This amount is determined by the income assessment. It is a matter between you and Work and Income, not the service provider. You should contact Work and Income if you have any questions.
What is income?
Income includes but is not limited to:
- NZ Super, Veteran’s Pension or any other benefit.
- 50% of private superannuation payments.
- 50% of life insurance annuities.
- overseas Government pensions.
- contributions from relatives.
- earning from interest/bank accounts, investments, business or employment.
- income or payment from a trust or estate.
Income does not include and is not limited to:
- any money from your partner’s employment
- income from assets when the income is under: $992 a year for single people, &1,983 a year for a couple when both are assessed as needing care, $2,975 a year for a couple where one of them has been assessed as needing care.
- a War Disablement Pension from New Zealand or any Commonwealth country.
Points to note:
- If you receive a RCS you will keep a personal allowance of $45.28 a week, and a clothing allowance of $283.97 a year (as at 1 April 2019)
- If you are eligible for a RCS and have a partner living at home, the partner retains the use of the home and care (which may be included in the asset test).
- If you are eligible for a RCS and have a partner living at home they may be eligible for a weekly Special Disability Allowance (to help with extra costs) of $40.10 (as at 1 April 2019) and may be eligible to receive NZ Superannuation at the Living Alone rate and other support. Contact Work and Income for further advice.
- People who do not have New Zealand residency are advised to contact their preferred care provider directly to negotiate the cost of care.
- Private payers may be eligible for Work and Income assistance, e.g. Disability Allowance, if they meet financial and other criteria. Subsidised residents are not eligible for a Disability Allowance as this is factored into the RCS.
- You can ask for a review of your means assessment (e.g. your circumstances may have changed) or for a financial means assessment at any time.
Residential Care Loans
I the value of your home puts you over the asset limit to get a RCS and you don’t want to sell it to pay for your are,t hen you may be able to take out a Residential Care Loan to cover your fees. Important: Your application must fit within the Loan Scheme criteria. Not all applications are approved.
You may be able to get a Residential Care Loan if: you own the home you lived in before entering residential care and you have limited other assets (up to $15,000 for a single client). You will need to pay privately for your care while this is being processed. There will be costs in regard to the loan application (e.g. lawyers fees); you are responsible for paying these. They are not included in the loan.
If successful, a [‘charge’, e.g. caveat, is registered against the title of the house/property. The loan is generally repayable after your death or if the house is sold or otherwise disposed of (whichever is earlier). The loan stops when a RCS is approved. Application forms are included int he RCS application document. Alternatively, contact Work and Income 0800 999 727 for the forms.
The Ministry of Health will make payments to the rest home once all the paperwork is completed.