Social Security (Long-term Residential Care)Amendment Bill

I move, That the Social Security (Long-term Residential Care) Amendment Bill be now read a first time. At the appropriate time I will propose that the bill be referred to the Health Committee. The bill fulfils the Government’s commitment to introduce legislation to remove asset testing. The current legislation regarding the income and asset testing of older people in residential care is, quite frankly, unfair. Older people are required to use up their assets to contribute to their care costs, whereas other users of health and disability services do not have to do so. In deciding the best way to change the current policy, the Government had the difficult task of balancing considerations of fairness for older people against the significant cost of changing the current asset-testing provisions and the demands of other priorities for social spending. This bill correctly balances those considerations.

The asset-testing policy is very complex. The current legislation is the result of many legislative amendments and additional regulations over many years. We now have the opportunity to set out the changes in plain language in a straightforward bill that contains all the related provisions. That will help everyone’s understanding of the requirements. As the proposed changes to asset testing are significant, the Government wants to encourage people to make submissions on the legislation, and to allow full examination and debate at the select committee stage.

The key proposed changes in the legislation are as follows. From 1 July 2005, people aged 65 and over who require residential care indefinitely will retain significantly more of their assets than under the current regime. Currently, single people in care can retain $15,000. Couples where both partners are in care can retain $30,000. That figure will increase to $150,000 from 1 July next year. Couples where one partner is in care can currently retain $45,000 plus their home and car. That figure will rise to $55,000 in 2005, with the retention of the home and car as exempted. The amount that both single people and couples can retain will increase by $10,000 every year after that.

We consider that it is legitimate to expect people to contribute towards some of the cost of their care, because those costs would need to be met if the person was living at home. As such, the income test will be retained. At the moment, the partner of a person in care is required to contribute up to $636 per week towards the cost of the partner’s care. That is considered unfair, and it creates significant disincentives to working. Therefore, from 1 July next year, the partners of older people in residential care will not have to contribute from their personal earnings from paid employment towards the cost of their partners’ care services.

People will be able to retain a substantially increased amount of assets. Income from those assets, such as rent, will be included in the income test. The first $780 of income from assets per person, per year will be exempt from income testing. That is broadly equivalent to the interest generated by $15,000 in the bank. The bill also states that people who are needs-assessed as requiring care have to contribute a maximum of $636 a week towards the cost of their care only if they have assets above the exemption thresholds. From 1 July 2005, that amount will be adjusted in line with inflation.

The bill sets out the residential care subsidy scheme in a clear and comprehensive manner, including the obligations to pay for care and the processes of needs-assessment and financial means - assessment. Those changes will make further progress towards fair and affordable policies for older people who need long-term care. At the same time, there is an appropriate mechanism for older people to contribute to the costs of care that they would expect to pay for if living in their own homes.

The changes are forecast to cost $110 million in the first year of implementation. That figure will rise significantly over time, reflecting the $10,000 annual increase in the exemption threshold and the growing number of older people in our population. The Government has made separate provision for the additional funding needed to pay for these changes. That funding will not reduce the amount allocated to current health and disability services.

At the same time that the progressive removal of asset testing is implemented, non-residential services are to be improved to support people to remain living safely in their own homes and their communities. That recognises that in contrast to earlier decades, people are choosing to stay in the community longer, and are now entering residential care at an older age and for a shorter period when they are frailer, have complex needs, and require a high level of care. That is consistent with the objectives of the positive ageing strategy and the Health of Older People Strategy. They promote the development of flexible and coordinated community-based services to enable older people to stay at home, if that is their choice. Improving services to support older people in the community is the key to developing a successful integrated continuum of care, whereby older people can access the services they need at the right time, in the right place, and from the right providers.

The new $150,000 threshold substantially increases the assets that people can keep. Single and widowed people will be $135,000 better off than at present, and married couples where both partners are in care will be $120,000 better off. For many people, their houses will be immediately exempt. People who have sold their houses will be able to keep a significantly increased level of saving. All assets will be eligible for exemption, including people’s home, holiday home, car, shares, bonds, and savings. That supports our objective of encouraging retirement savings.

It is estimated that 31,000, or 7 percent of, older New Zealanders are currently in long-term residential care. The new policy will benefit people already in care who are not currently eligible for a residential care subsidy, and all new people who are assessed as needing long-term residential care from 1 July 2005. The new policy means that 5,600 additional people will be eligible for the subsidy from that date, taking the proportion of those in care who receive the subsidy to 70 percent.

To conclude, the progressive removal of asset testing for older people in residential care recognises that older people have the same rights as all other New Zealand citizens, and acknowledges their important contribution to our communities. I commend the progress of this bill to the House.

I think Ruth Dyson will feel really bad when she faces up to Grey Power with this half-hearted, lukewarm response that tries to keep a promise. Here we are in the depth of the night, bringing in this bill. It has been brought in at this time to minimise its impact, because Ruth Dyson knows very well that the Social Security (Long-term Residential Care) Amendment Bill has been a long time coming. It was promised through two elections that this Labour Government would remove income and asset testing. Well, has it?

💬 Simon Power: Have they?

No. Has this Government removed asset testing? Absolutely not! Has it removed income testing? Absolutely not! Not only is that the case, but what it has done is to put some clauses in this bill that will probably bring the rest home industry in this country to its knees.

For two elections this Labour Government has dangled the carrot of the removal of income and asset testing for residential aged care before the noses of Grey Power and older voters. Finally tonight we see the bill. Why do we see it at this time? Why has it been rushed on to the Order Paper? Simply and utterly so no one will hear what is going on. Yes, I think Grey Power and most of New Zealand expected more than this bill from Ruth Dyson. But they have got very little, because the Government has not removed income testing or asset testing.

Let me quote from new section 145(1) of the Social Security Act, which is proposed to be inserted by clause 4: “An eligible person who has been needs assessed as requiring long-term residential care services indefinitely”—now that raises the question of what will happen, because we do not always know whether someone will need care indefinitely, so that will be interesting—“may apply at any time for a means assessment.” A means assessment! New section 146(1) then states: “The first stage of a means assessment is a means test as to assets”, and new section 147(1) states: “The second stage of a means assessment is a means assessment as to income”.

Income and asset testing remain. All that has happened is that the threshold has been lifted. Guess who did that, back in 1998? National lifted the threshold then. This bill makes no changes to the actual regime of income and asset testing. It does not remove it. This Government is simply increasing the amount of assets that a person can keep. In 1998—or it might have been 1997—the then National Government did the same thing. It increased the amount that a single person could keep from $6,000 to $15,000, and increased the amount for a couple from $15,000 to $30,000. A married person with one person in care keeps the house, the car, and $45,000 in assets. That is what the threshold was raised to then.

Now, under this bill, which does not come into force until 1 July 2005, a single person or married couple can keep $150,000 in assets. The amount does go up by $10,000 per year, but that in no way removes asset testing. Members can just think about what a house was worth 10 years ago. Most houses have doubled in value over that time, and some have risen in value a great deal more than that. So we can think about house prices now, and expect them to double over the next 10 years. But, assuming that the average price of a New Zealand house now is $230,000 and that under this regime someone can keep $250,000 in 10 years, we know the house is likely to be worth a great deal more than that then. So, to say that this bill removes asset testing is simply and utterly a con. All that it does is increase the amount of assets a person can keep.

There is one very socialistic part of this bill where the Government has decided that there will be a maximum contribution that an individual can pay for any type of care: rest home, hospital, or dementia care. That maximum contribution will be $636 per week. Any top-up of that will be down to the Government. At the moment if someone wants to go into hospital care that is the case, and that has been so since the mid-1990s. But that provision is now to be applied to rest home care. It means that if people want to pay more than the maximum—because they happen to have the money to do that, they choose to live somewhere that happens to have high property values, they want to be at the home that is down the road, and they can pay for it—they cannot do so. They will not be able to do that under this Government. They will not be able to pay more, because $636 is the maximum that anyone in this country will pay.

What will that measure do to the industry? It will bring people to their knees, in an industry that has developed and provided excellence in aged care. I have travelled through the United States, through Australia, and through Britain, and I know that our aged-care sector has done an excellent job. Where is the freedom of choice in that, and where is the equity? There is none. This Government is deciding the maximum amount that people can pay. What about the price difference between Auckland and Invercargill, and the difference in investment needed to meet the cost of developing a rest home in those areas? The cost is far higher in Auckland, so in Auckland rest homes would want to be able to charge more than in Invercargill. But they will not be able to do so under this Government, which is going to dictate what can be charged above that figure of $636 per week, because the Government will fund it. That will constrain the value of the industry, but the Government does not care about the wages of the people who work in it. We have heard so much about this Government caring about workers, but it does not care about the wages of those people. It is only by the sector being able to make more money that it can pay its care workers more.

This measure is inequitable. This one rate to fit all does not fit New Zealand’s health-care sector, and it will mean that we will see the rest home industry brought to its knees. The level of dependency of people going into rest home care has increased markedly. Someone was telling me just today that when that person’s mum went into care years ago, she drove to the door, and the home needed a certain number of car-parks for the residents. Now they go there in an ambulance, because in the 1990s National put a huge amount of money into what was called Ageing in Place to pay for home care and personal care in people’s own homes. We put a huge amount of money into that.

💬 Hon Rick Barker: Wrong, wrong.

I know that happened because I happened to be a geriatrician—a doctor working in that area—at the time. I think I know a lot more than the member sitting over there on the Government benches, who has probably had nothing to do with the aged-care sector in his whole life. If he wants to say something, why does he not get up and actually take a call?

The fact is that if people want to move into rest home care, they should be able to pay more than the maximum if the services cost more, or if it is in an area of high cost. But this Government does not understand the principles of business, and it does not understand free choice. It believes that everyone should be the same and brought to the lowest common denominator. Rest homes around New Zealand have been struggling, and this measure will kill some of them.

The removal of asset testing for 50 to 64-year-olds will affect a small number of people, and those are people who have things like multiple sclerosis and early-onset Alzheimer’s disease. We have yet to really determine the cost of the legislation—I see that Ruth Dyson said that it would be $110 million in the first year. Older New Zealanders need to realise that if $110 million gets spent under this legislation, it will not be spent on new services for the elderly—not on carer relief, not on increasing home-based care, not on equipment, not on more rehabilitation, and not on more day care for people with Alzheimer’s disease. This is where the money will go, and who will benefit from that? It is not the older person who will benefit but his or her children—it is their inheritance that will be increased. Older people need to realise that. We think that $150,000 is a very high level to raise the asset level to, and we consider that older New Zealanders will get very little from this legislation.

In summary, asset testing remains, but the level has increased for the assets that people can keep. Income testing remains. Older New Zealanders will receive very little in the way of any new services because of this legislation. Wages will not go up in the industry, and the $636 cap all over New Zealand is inequitable and will lead to industry failure. We very reluctantly support this bill going to a select committee, but we will want to see major changes occur in this bill after the submission process before we can support it any further.

I raise a point of order, Madam Speaker. To avoid interrupting her speech, I did not want to raise this point of order while my colleague was speaking. During the Minister’s speech on this bill, she was allowed to conduct her contribution with very little interruption from this side of the House. During the speech made by my colleague Dr Lynda Scott, we on this side of the House had to endure a constant barrage from the Government’s senior whip and from the junior Minister of Customs. I seek from you some guidance with regard to a fair and impartial way of conducting proceedings in this House when members from different sides of the House are making their contributions.

💬 Madam DEPUTY SPEAKER: I thank the member for his contribution. There was interjection on both sides.

I certainly rise to support this bill. I found the speech made by the Opposition’s spokesperson for the older person very sad, because they are now being led by a spokesperson who is carping on about not enough money going into care for older people. She has gone around Grey Power asking: “When is this Government going to keep its commitment to the older person to introduce asset-testing removal legislation?”

Well, here it is, and thank goodness it has come in. When I go out to Grey Power, its members are going to be very pleased to have certainty at last. Grey Power has not known how to manage its affairs when the Government has been saying that it would be bringing in the removal of asset testing. Grey Power members have asked: “When are you going to do it? I need to have certainty about how to manage my affairs in my old age.”

I also found it amazing that the Opposition carps on about this bill, saying that it will bring the residential aged-care sector to its knees. This is not about protection of the residential sector at all; it is about protection and certainty for older people, so that they can have a decent standard of living in their old age, and while they are saving for it.

I am proud to say that I came from a socialist Government where I did not hang on the threads, and from a family who also believed in looking after their old people. I never ever planned what I would do with the legacy my parents would leave behind for me. The legacy they gave me was about decency and looking after them in their old age. I did not give a hoot about an inheritance and, frankly, whatever I inherited was there to look after my parents when they went into aged care. I did not care what crumbs we got at the end of it.

It is an appalling indictment to see the member talking about how we will protect the industry. That is not what this bill is about—this bill is about looking after older people. It is a substantial investment, and the member could not even acknowledge that—a $110 million cost. That has been costed several times, and that is why the removal of asset testing will be implemented progressively, increasing by 10 percent per annum over time, and is inflation adjusted. This legislation is about protection for older people, and about certainty in their old age.

In conclusion, one thing I want to say about certainty in old age is this: let us ask that member in Opposition what her leader is going to do about superannuation for older people. Let us get honest about superannuation for older people, because we know jolly well what will happen there for older people. I will be pleased to go around Grey Power meetings and tell them about the sort of security that that party is proposing for people in their old age. It is becoming manifestly apparent that all that party is interested in is propping up the residential-care sector.

It is delightful to hear the Opposition talking about wages—improved wages for aged-care nurses and care attendants. Before we came into Government—and that member knows, because she received the Nelson petition—the increases that went to nurse and care-attendant salaries over the 9 years National was in Government were absolutely abysmal. Wages were frozen, and we have been having to incrementally increase their salaries, as well as put money into ageing-in-place strategies.We cannot have it all. That is why this is a moderate bill, bringing in the removal of asset testing over time. It has been costed, it is very expensive, and I am very proud to support its coming in today.

New Zealand First supports this bill going to the select committee. We know that this bill has been on the Government’s pledge card for the last two elections, and it is really pleasing to see that it is now at the stage to be debated and heard through the select committee process. The elderly in New Zealand have been waiting for this bill for quite some time and will be pleased to see this change in legislation. We hope they are not disappointed when we go through it in the select committee.

New Zealand First has been pushing for a law change since 1998, when we succeeded in removing asset testing, only to have National renege on the agreement. Our policy is to remove income and asset testing for elderly needing long-stay geriatric hospital care services, and to remove asset testing for those in long-stay geriatric private hospital care.

The current regime needed to be set out in a clearer and more comprehensive manner, because it has been totally unfair to many elderly within New Zealand. Many have saved all of their lives, only to see their houses and most of their assets taken away by the cost of rest home care. The small sum left was barely enough to bury them. Others who had not saved were totally supported by the State. From New Zealand First’s point of view, any policy designed to impoverish our senior population is destructive and short-sighted. Elderly people in New Zealand need certainty in their old age, and, hopefully, this bill will help in that respect.

It was interesting to see in the bill that asset testing will be removed for those aged 50 to 64 in residential care, who are currently required to use all their assets. This is a very small group of people, and in my experience, the larger group in rest homes are in the older age group and therefore do need that certainty. So New Zealand First will be supporting this bill going to the select committee, and we look forward to following it through the process.

The Green Party, like some other parties in this House, has mixed feelings about this bill as presented to the House this evening. On the one hand, we welcome these Government moves to improve the income and asset-testing regime as it applies to older people in long-term residential care. On the other hand, we are disappointed that the bill only moderates the asset-testing regime rather than abolishes it. The Green Party would prefer to see asset testing for residential care abolished altogether. We do not believe that people should be penalised because of their age, and feel at the moment that asset testing is a form of discrimination against our older citizens.

Indeed, the bill as it stands has both human rights and New Zealand Bill of Rights Act implications, in that it continues, although moderates, a means-testing practice that discriminates on the grounds not only of age but also of disability. The initial threshold increases on 1 July this year from $15,000 to $150,000 for a resident who has no spouse, with a whole series of other related increases. The lower threshold for those with spouses not requiring residential care takes into account the fact that any interest in a residential dwelling that is the principal residence is exempted from the asset test. Each of these thresholds progressively increases by $10,000 over each of 20 years till 2025, to eventually reach $350,000 for those in residential care with no spouse, and $255,000 for those with a spouse not in care.

However, the impact of the progressive increase in the asset-test threshold over the 20 years following 1 July next year is largely illusory. The asset threshold increases by just under 7 percent for a person with no spouse, or a spouse in residential care, and by around 18 percent for a person not in care. In the 20th year the respective percentage increases are only around 3 and 4 percent. In many cases the increase in the asset-test threshold will fail to keep pace with the appreciation in value of the assets and/or the invested return on the assets of a person in residential care. As the year 2025 nears, it may not even keep pace with increases in the consumer price index. Although there will be an initial dramatic reduction in those subject to the asset test as of 1 July 2005, a progressively increasing number of people will again be required, under the proposed asset test, to contribute towards the cost of their care over the 20 years between 1 July 2005 and 1 July 2025.

During the course of considering this bill, the Green Party may well be looking at lobbying for certain options, such as considering whether we should work towards an annual consumer price index adjustment of the asset-test threshold in addition to the $10,000 annual increase, and/or a reduction in the period over which the progressive increase in the asset threshold occurs. These options could provide for a much more genuine phase-out of asset testing than that I have described as taking place between 2005 and 2025.

We will also, of course, be interested in hearing what I am sure will be a goodly number of submissions during the select committee process. I am sure there are many interested groups and individuals already gearing up to make fairly powerful submissions right now. This issue has been around for many years.

In conclusion, the Green Party will be supporting this bill because it at least begins the process of improving some of the worst aspects of the current regime. I must congratulate the Government on at least taking these long awaited first steps towards clarifying the situation and improving it for many of our older generation.

I rise on behalf of the ACT party to speak on this bill. I have to inform the Government that our party will not be voting for this bill for a number of different reasons. But to start off with, what is really disturbing is the fact that this bill does not remove income and asset testing as the Labour Party has been promising for two elections. In fact, it lifts the threshold for asset testing. It puts out the spin that Labour is dealing to income and asset testing, when it is actually not. This is just another example of a pre-election bribe by the Labour Party. We are getting used to this sort of legislation passing through the House, because it was not too many weeks ago that we debated the Holidays Bill, which was going to give workers 4 weeks’ holiday a year, to start in the year 2007 for goodness’ sake!

This social security bill does not begin until 1 July 2005. The interesting thing is that before Saturday’s poll by Television New Zealand, the Government probably thought the election would be over by then. Now, there is nothing surer than that it will have to go its full term before it goes to the polls. Instead of the Government being able to use this bill as a bribe at the next election, the commencement date means that the bill will have already become law. Labour will have lost its negotiating power with older New Zealanders, whom it hopes to tempt into voting for Labour. This bill is a bribe aimed at a group of New Zealanders who are very important New Zealanders. There are 450,000 retired Kiwis. They are a significant voting bloc, and it is sad that those people will be misled by a Government that will go around the country telling them that it will remove income and asset testing when it will not. One of the worst aspects of Labour Party politics is that its spin is so big, but in reality what it is doing is often so small.

This bill is about the intergenerational transfer of wealth—taking money from the next generation to pay for the debts of this generation. That is immoral. Why should we expect our children to have to pay for our care, and for the care of this generation? When we actually look at the cost of paying for the baby boomers we see that this amendment to the legislation will end up costing this country billions and billions of dollars. The Minister brushes off the fact that it will cost $110 million in the first year. So in the second year it will be $110 million plus, because the threshold will increase by $10,000 a year, and then on top of that the next lot of $110 million or $115 million. By the third year there will be another lot of retirees coming on.

Remember that every year the number of people retiring goes up. The figures are something like 15,000 retiring this year, and in 30 years’ time it will be about 55,000 people retiring a year. So the cost will become unsustainable for this country. The Labour Government does not care about that, and that is what makes it such an irresponsible socialist Government. All it cares about is power. It does not care about what is good for this country. What is good for this country is what is good for the next generation of this country, and the generation after.

The Minister had the audacity to claim that this bill will encourage people to save for their retirement. What a laugh! If this Government really wanted people to save for their retirement, the first thing it would do would be to reduce taxes so that working New Zealanders could take home more of what they earn and be able to afford to put it into a retirement fund and not have to rely on the Government to look after them in their old age. When I said that taxpayers should be allowed to take home more of what they earn, there was a collective groan from the socialists sitting on the benches opposite. I wonder whether those members have actually stopped to realise that taxation is legalised theft. People have a gun held to their heads, and if they do not pay up they face penalty rates, which just about ruin them. This Government is quite happy to hold the gun at every taxpayer’s head, and take more and more tax.

In the future there is nothing more certain than that tax rates will have to increase to pay for this policy. The Minister did not tell us what the projections are. She was silent on that because she is embarrassed; so are those members sitting opposite. If they are not embarrassed, I challenge any one of them to stand and tell us what the cost of this policy will be in 10 years’, 20 years’, and 30 years’ time when the baby-boomer bubble hits this country, because by that time we will be in a financial crisis, if we are not prudent now.

New Zealanders want to know that their kids will not be ruined by socialists who want to spend more money than the country can afford, just because they want to win the next election. I think it is despicable to bring in a bill like this, for that reason. Ordinary New Zealanders will look at it and think: “Gosh, isn’t that Government being kind.” They will not understand the real implications for this country, as we go forward, of a policy that will be so costly in the future.

I ask the Labour Government to justify why working taxpayers, who are struggling so hard to pay the bills, pay the mortgage—and these days pay off their student loans and all the other debts they have lined up—should have to pay to reap the costs of residential care for millionaire New Zealanders, who can afford to pay for themselves. Where is the justification in that sort of policy? It does not make any sense at all, in my mind.

Good public policy means providing help for those in need, but asking those who can afford to look after themselves, to do so. It means that the small funding that a Government has available should be focused on those who cannot get by without Government support. Why would a Government bring in a bill that provides a blanket lifting of asset-testing levels for New Zealanders, when many of those people do not need the threshold lifted, because they can manage for themselves?

The most honourable thing the Labour Government could do, if it really is concerned about people in their old age, is give people back more of the money they earn so they can save it in a decent retirement fund. When they turn 65 they will not only have the pension but they will have a sizeable income coming into their household. They will be able to afford to pay for any of the bad things that might happen to them or incapacitate them in the future. That is the sort of honourable policy that a Government could bring in, instead of trying to use this bill to buy votes to win the next election. That is what is so despicable.

There is a much-quoted saying: “The measure of a society is how it treats its most vulnerable members.” We often apply this to children, to the sick, to mental health consumers, and to those with disabilities. Maybe it is time we also applied it to the elderly.

At the end of March 2002 we had 463,000 people aged over 65. This number is set to rise to 551,000 by 2010, and to 1 million by 2030. United Future, along with Age Concern, believes that asset testing is an era of social policy best forgotten. But important human rights lessons need to be learnt. In an age when we value the dignity of those with disabilities, and no other group has had to pay for long-term residential care, it is unbelievable that it has taken us 6 years to remove this policy.

Debate interrupted.

The House adjourned at 10 p.m.