Should the Fair Deal scheme be social insurance, rather than means-tested social assistance?

[Protocol]

I was speaking to a man who was involved at an academic level in the design of the Fair Deal scheme.

An original proposal was that it would be social insurance, based on PRSI contributions.

In reality, this did not happen, and it is means-tested social assistance.

This means that if you never work, you can qualify for the same care and nursing home as somebody who worked and paid income tax for 45 years.


Question: do people think long-term (or parts of it) care should be social insurance, like the contributory State Pension?



The German scheme is, unsurprisingly for the birthplace of social insurance, based on making PRSI contributions:

• Long-term care insurance: 3.05% (3.4% for childless individuals, beginning with age 23), up to an income ceiling of EUR 58,050 annually. The contribution is borne 1.525% by the employer and 1.525% (1.875% for childless individuals, beginning with age 23) by the employee.

So German workers pay a max of (1.525%)*(58,050) = €885 annual insurance contribution towards possible future LT care.

 

[TomEdison]

Unless your proposal is that people who never worked should be left to die in the gutter (and I'm sure it isn't) if they need residential care but aren't able to pay for it privately (and most of them won't be able to) they are going to have to get it at public expense. So, one way or another, means-tested support for residential care looks inevitable.

So the consequence of providing a second, social insurance-based scheme for funding residential care is that people who, currently, don't get support (because they don't satisfy the means test) will get it. That will have to be paid for, either through higher taxes or higher social insurance contributions (or a bit of both). If we assume that the German contributions are set at a level high enough to actually finance the residential care (which is not necessarily the case)and that a similar level of contribution would finance residential care in Ireland you're looking at an extra 3-3.5% on social insurance contributions or tax rates (or maybe a bit less, because we don't have a ceiling for assessable earnings).

Most people would pay, directly or indirectly, this extra contribtuion all their working lives and get no benefit ffrom it (because only a minority of people ever move into residential care). They'd be doing this so that other people, who don't satisfy a means test and therefore could afford to pay for themselves, wouldn't have to. They might not think that that was a great deal.

I could see this being controversial, to be honest.

 

[Protocol]

Unemployed workers in Germany are covered by the same LTC insurance. A premium is paid for them while they are unemployed. This applies to workers receiving JSB for up to a year.

The long-term unemployed in Germany are also covered by LTC insurance, if they were previosly receiving JSB.

Similarly, I suspect (but have not confirmed) that spouses of insured workers are also covered by LTC insurance.

 

[Purple]

Question: do people think long-term (or parts of it) care should be social insurance, like the contributory State Pension?

No, we already tax work far too much and wealth far too little. This would just be more of the same. I think the current system is too generous but far better than another tax on work.

 

[Peanuts20]

This means that if you never work, you can qualify for the same care and nursing home as somebody who worked and paid income tax for 45 years.

Define work?

My mother was a farmer's wife on a small farm. She probably worked a 70 hr week when I look back on it without ever formally paying PRSI. There are many women who would now becoming into the nursing home cohort who legally had to give up paid employment when they got married. Are you saying that as they don't have the stamps, they are not covered?

There is a case for perhaps increasing PRSI to cover for this in the future but it would be complex to work through the impact against an 18 year old first jobber and someone in their 50s but it could be worked out. Having said that, young people would say I cant afford to buy a house and now you want me to pay for a nursing home in 60 years time.

 

[Marsupial]

This means that if you never work, you can qualify for the same care and nursing home as somebody who worked and paid income tax for 45 years.

What's even worse is that when both of you die, God will welcome both of you to heaven, irrespective of how hard you may have worked or not worked during those 45 years! And bear in mind that God is specifically mentioned in both the preamble to Bunreacht na hEireann and in Article 6. Perhaps we, the people, need to invent a more fiscally conscious deity?

 

[Annieindublin]

There are a lot of unfair aspects to the current social support systems.

Not just the fair deal scheme.

One aspect that does not sit well with me is that you get support (?) to go to a nursing home but not to stay in your own home. With 2 parents who want to stay at home and we are doing our best to support them.
The HSE provides a certain amount of assistance, via service companies with TBH varying levels of quality. I dread to think of what the state is actually paying for the minimum wage staff that we see some of whom need a lot of supervision. Fortunately mum is still able to do the supervision.

We’ve paid for ramps, handrails, accessible bathrooms, new beds that can be raised and a lot of other stuff. We got vat back on some of it. Great, especially for the 10k ramp! But in the end it’ll empty my parents’ bank account and make a dent in ours before too much longer. Luckily they had a few kids and most of us are comfortable financially. Nursing home for the 2 of them will be far more expensive but only at that stage can we get any assistance. (Aside from the few hours home help.). And doing the maths they’ll have an empty bank account and a mortgage on their house after a few years in a home if it comes to that.

My granny did better, was a SAHM, no workplace pension from grandad, lived in a rented house and eventually moved to a lovely home where she lived for a decade. She did live with my parents for a few years until her care was too much for them. No bank account to empty, no house to sell.

 

[Dr Strangelove]

The Fair Deal is better thought of as a tax on being old, infirm, and wealthy.

I am not saying this is a good or a bad thing. But it is basically a pure tax on wealth.

 

[Protocol]

One aspect that does not sit well with me is that you get support (?) to go to a nursing home but not to stay in your own home. With 2 parents who want to stay at home and we are doing our best to support them.

This is a good point.

The German social insurance scheme pays for home care, as well as residential care.

Note that tax relief is available here if employing a carer.

 

[Purple]

The Fair Deal is better thought of as a tax on being old, infirm, and wealthy.

I am not saying this is a good or a bad thing. But it is basically a pure tax on wealth.

Yes, it requires wealthy people to pay towards their own care rather than it being fully paid for by poorer people so that those wealthy people can pass on their wealth to their children.
I think the current system is, if anything, overly generous.

 

[Annieindublin]

I’d forgotten that you can get tax relief on a home carer. We have a private paid carer, I’m fairly certain that the cash she gets is not recorded on her tax return. And she would rather not have her name and details on a tax return. She charges the same as the agency but their staff leave a lot to desired sometimes.
And her qualifications are that she gets on well with them and is pretty reliable rather than formal qualifications.

 

[Steven Barrett]

The Fair Deal is better thought of as a tax on being old, infirm, and wealthy.

I am not saying this is a good or a bad thing. But it is basically a pure tax on wealth.

How?

If you have enough money, you won't qualify for the Fair Deal at all and you will pay for your own care...or do you think that paying for your own care is a tax?

And if you think the State should pay for it, what resources should be cut so we can pay for nursing home costs for everyone that needs it, even the wealthy? Or should we increase taxes on those who are currently working, who are also paying large mortgages and paying for childcare, so the elderly can be looked after even more than they currently are?

 

[Annieindublin]

I gather from most of my friends that the scheme really only helps when you have a long long period in a home.

A friend’s mum was in one from age 65 to 83… not many families have that much money. Her pension didn’t make much of a dent in the €2k a week. Her house was worth maybe 500k so even that was a small amount in the overall cost. And given her young age is admission her kids were not able to help much, 30 somethings with young families.

I’m not sure what the cut off is.

 

[Dr Strangelove]

or do you think that paying for your own care is a tax?

Yes! If equivalent care is given to people without means free of charge, which it is.

Simply it’s a tax on being wealthy and unable to care for yourself because if you’re poor and unable to care for yourself you don’t pay.

 

[TomEdison]

The Fair Deal is better thought of as a tax on being old, infirm, and wealthy.

I am not saying this is a good or a bad thing. But it is basically a pure tax on wealth.

It's hardly a tax. It's entirely optional — you don't have to avail of it at all unless it's to your financial advantge, so everybody in it is presumptively making money from being in it. How is that a tax?\

Yes! If equivalent care is given to people without means free of charge, which it is.

Do you consider all means-tested transfer payments to be a tax on the wealthy?

 

[Peanuts20]

We’ve paid for ramps, handrails, accessible bathrooms, new beds that can be raised and a lot of other stuff

Have you engaged with you local Health nurse on this?. In the case of my Mam, we got the bed, commode and ongoing supplies for this through the HSE for free, they came and took the bed away after she died and the rest got binned. My F in Law is going through this at the minute, bathroom and rails etc had to be paid for but things like the wheelchair came via the HSE.

 

[Dr Strangelove]

It's hardly a tax. It's entirely optional

It’s not optional if you have zero wealth. And you still get the care for free.

Do you consider all means-tested transfer payments to be a tax on the wealthy?

Not to the extent that such a test only concerns actual income.

For a test on imputed income from assets yes indeed it is a de facto tax on wealth.

 

[Annieindublin]

We have had great commentary from the PHN but delay after delay. Parents were pretty much unable to get out of the house so we got the ramp sorted. We are still waiting for the OT to come inspect to see if the house is suitable etc. So that’s been over a year. Not her fault, but I’m pretty sure there is a note on the file “don’t worry, family will sort it”

We aren’t great at preventative medicine in this country generally and this is kinda the same territory. Let’s stop the oldies breaking their hips and ending up in hospital wards for months on end?

 

[Annieindublin]

There’s no means test to avail of a public hospital bed, so should there be one for a long terms care facility? If you have 3 months in hospital you get a bill of a few hundred euro. They don’t take your pension and a lien on your house.

And it makes no difference if you’ve worked all your life or not.

Although if you haven’t chances are you will have a medical card so won’t even get the bill of a few hundred euro

 

[TomEdison]

For a test on imputed income from assets yes indeed it is a de facto tax on wealth.

Means-tested transfers generally involve a means test that has both an income component and an asset component.

But I still think there's a fundamental confusion here. Your assets may play a role in determining whether you qualify to receive the benefit or not, but they play very little role in determining whether you pay tax to fund it. They are funded out of (a) social insurance contributions, which are entirely income-based, and (b) general taxation, which is largely income-based. We've often noted on this Board that Ireland has very little in the way of wealth taxes.

If you argue that a benefit which those with assets do not get is a tax on the wealthy, then you'd have to accept that public expenditure on health care is a tax on the healthy, old-age pensions are a tax on those who die young, etc. I think this is stretching the concept of "tax" beyond anything that is useful.

Let's keep the the concept of "tax" for sums that people may pay to the state, and not apply it to sums that people may receive from the state.

There’s no means test to avail of a public hospital bed, so should there be one for a long terms care facility? If you have 3 months in hospital you get a bill of a few hundred euro. They don’t take your pension and a lien on your house.

I think the logic of this is that the state should provide public aged care places to those who are infirm enough to require them in the same way that it provides public hospital places to those who are ill enough to require them. Maybe. Would you be happy to see income tax raised to pay for such a scheme?