Nursing Homes
Nursing Home Fees
The old Trivago ad captured that feeling brilliantly when it portrayed two women at a hotel reception….one being charged more than the other for the same room. That look of incredulity on the Woman’s face when she handed over her credit card to pay the inflated price!
It reminded me of Nursing Home accommodation where the price of a room is fixed by the National Treatment Purchase Fund (NTPF), but where every resident pays a different amount.
And, whilst there is no Trivago search engine to scour the market to find you the best deal, with a little knowledge and some forward planning, everyone has the potential to significantly reduce costs.
The purpose of this article is to answer three questions;
How much do Nursing Homes cost?
Factors they consider when agreeing the rate include the costs incurred by the Nursing Home, the previous price charged, local market prices and obviously budgetary constraints and value for money etc.
Here are some cost examples:
1. Deerpark Nursing Home, Bantry: €980 per week
2. St. Lukes Nurshing Home, Mahon: €1,295 per week
3. St. Eunans Nursing Home, Ramelton: €960 per week
4. Altadore Nursing Home, Glenageary: €1,270 per week
5. Marlay Nursing Home, Rathfarnham: €1,312 per week
So, as you can see, the cost per room varies from approximately €50,000 to €70,000 per annum.
The real question however is not what the cost is, but how much does each resident pay?
How much do Nursing Homes cost you?
The Nursing Home Support Scheme
Known as the Fair Deal Scheme, the Nursing Home Support Scheme was introduced in 2009 to assist those who can’t afford to pay the full cost of care personally.
The ‘fairness’ of the scheme is that the State/HSE will pay the full cost of an individual’s care i.e. the full €50,000 to €70,000 cost outlined above, for those who can’t afford to pay anything.
The HSE liaise with each Fair Deal applicant to determining the level of contribution they must make based on their financial circumstances, and that contribution can range from zero to the full cost of care.
The Financial Assessment
There are two parts to the assessment as follows;
⇒ Income
You will pay 80% (40% in the case of a couple with one remaining home) of your assessable income.
So, for example, a single person with an assessable income of €30,000 and €200,000 in assets would make an annual contribution of €36,300 towards the cost of care.
Workings;
Income |
€30k x 80% |
€24,000 |
Assets |
(€200k – €36k) x 7.5% |
€12,300 |
Total |
|
€36,300 |
Taking another example, a married person with €30,000 combined income and €650,000 in combined assets would make a contribution of €33,675 towards the cost of care.
Workings;
Income |
€30k x 40% |
€12,000 |
Assets |
(€650k – €72k) x 3.75% |
€21,675 |
Total |
|
€33,675 |
N.B. The family home is considered an asset for the purposes of calculating the contribution to care, but the 7.5% (3.75%) deduction stops after 3 years in nursing home care. So, assuming the €650k asset in the second example is the family home, then the €33,675 contribution will reduce to €12,000 after three years in care.
So, we have looked briefly at how much Nursing Homes cost and how the contribution to that cost is calculated. Now we are going to examine how costs can be reduced.
How can you reduce the cost?
And, as per the examples above, the level of ‘Fair Deal’ contribution for individuals/families with relatively modest levels of income and assets can be very significant.
Every family’s circumstances are different, but here are just a few generic examples of how savings can be made;
A. Gifting while alive
Because individuals with little or no assets and income are required to contribute only a very small percentage of the total cost of care, the ideal scenario is to have nothingat the point of applying for Nursing Home support.
Gifting assets while alive rather than waiting till after your death makes sense but unfortunately it’s not that straight forward. There are often practical reasons why itmay not be possible or prudent, but you must also remember the five year rule. Assets disposed of within 5 years of applying for support are deemed to be still owned, and are included in the contribution calculation.
Forward planning is required years in advance of needing care and, because nobody knows for certain whether they will need care, this is an issue that should be discussed with every family.
Section 469 of the Taxes Consolidation Act 1997 allows anyone who is paying the costs of either their own or another person’s healthcare to claim it as an expense against tax.
Many Nursing Home residents are “asset rich and cash poor” so their income levels are modest. It often makes sense therefore for family members with higher income and tax levels to pay the fees and claim the tax relief.
C. Selling the family home
Selling any non-cash asset, but particularly the family home is a serious error but one that is made regularly.
As explained above, the portion of the contribution that relates to the value of the family home ceases after three years in care. If the home is sold either during or after that period it becomes a cash asset, and the 7.5% or 3.75% contribution continues indefinitely.
D. Ancillary Support Scheme
Known as the “Nursing Home Loan” this scheme allows individuals to apply for a loan against all their non-cash assets. It is subject to an inflation adjustment but is interest free once repaid within specific time limits.
One could apply for a loan on the contributions attaching to the family home for example, and once repaid within a year of the resident’s death, no interest is payable.
Given that in many cases, the family home is the main asset, it is very important from a cashflow perspective to apply for this loan and have approval prior to becoming a resident.
In Summary:
• The Fair Deal Scheme is there to assist those who can’t afford to pay the full cost of care personally, but there are important decisions that can and need to be made around it.
• In particular, families need to discuss the advantage of gifting assets while alive. Where that is not practical or where it’s too late, then decisions need to be taken around the payment of nursing home fees, and whether it makes sense financially and practically for family members to make those payments on the resident’s behalf.
• Very often families believe the Fair Deal Scheme isn’t for them because they are “too wealthy” i.e. that the level of their assets and income mean they will have to make the full fee payment. It is important to remember the availability of the Ancillary Support Scheme however, and the valuable cash flow benefits it offers. Particularly where the main asset is the family home and/or non-cash assets
Moving to full time care involves making many complex and emotional decisions, and thepurpose of this article is to focus on just the financial ones. It is a very brief summary ofsome of the factors that need to be considered by every family with a member either in care or approaching that point in their lives.
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Fair Deal Scheme
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The Application Process
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