Changes to income and asset testing

Social Security (Long-term Residential Care) Amendment Act 2006

The Social Security (Long-term Residential Care) Amendment Act 2006 came into effect on 22 November 2006.

The Act clarified existing policy around the maximum contribution, made some technical amendments and changes to:

• the way overseas private pensions and annuities are treated;
• backdating of financial eligibility for the Residential Care Subsidy; and
• eligibility for the Disability Allowance.

The changes made by the Act are designed to ensure that all older people assessed as requiring long-term residential care are treated fairly

The main changes in the Social Security (Long-term Residential Care) Amendment Act 2006 are as follows:

Private pensions

All overseas private pensions and annuities will now be treated the same as New Zealand private pensions and annuities, when older people are being financially means assessed for eligibility for the Residential Care Subsidy.

Residential Care Subsidy

Those who are eligible for a Residential Care Subsidy may have their eligibility backdated up to a maximum of 90 days (rather than 28 days), before the date their means assessment application was received (if their assets fell below the asset level before the date of means assessment).

Disability Allowance

People receiving disability-related care through the Disability Support Subsidy can receive the Disability Allowance on the same basis as others in the community; residents in long-term residential care are unable to receive Disability Allowance while living in long-term residential care.

The government promotes a legislative and fiscal environment that encourages aged-residential care services that enhance the lives of older people. This includes fair treatment if an older person is assessed as needing long-term residential care indefinitely.

The clarification of the maximum contribution in this Act means that all older people in an aged residential care facility that has a contract with a district health board for Government funding, will pay the same price in that region for the same basic package of services set out in the contract, (contracted care services).

These are positive changes that a fairer policy for residents in long-term residential care.

On 1 July 2005 the Social Security (Long-Term Residential Care) Amendment Act 2004 came into force. This Act amended the Social Security Act 1964. There are a number of changes to income and asset testing of people who require long-term aged residential care. The new policy applies to people who were already in DHB contracted care facilities and to all people who entered such facilities from 1 July 2005. 

Social Security (Long-term Residential Care) Amendment Act 2004

The Social Security (Long-term Residential Care) Amendment Act 2004 came into effect on 1 July 2005. It ensured that older people can retain more of their assets while still qualifying for a Government subsidy to help meet the costs of care in a rest home or continuing care hospital.

Questions and Answers on Residential Care and Income and Asset Testing where developed to provide information on the significant changes to income and asset testing for older people requiring long-term residential care indefinitely as well as general information about entering long-term residential care.

What are the asset thresholds?

Asset thresholds are the level at which the value of your assets need to be equal or below in order to qualify for government funding through the Residential Care Subsidy.

Asset thresholds increase by $10,000 on 1 July of each year.

Schedule 27 Means assessment under Part 4 Social Security (Long-term Residential Care) Amendment Act 2004

Applicable Asset Thresholds

The table below sets out the applicable asset thresholds that apply annually from 1 July 2005.

Column A applies to every resident assessed as requiring care:

• Who has no spouse; or
• Whose spouse is also a resident assessed as requiring care; or
• Whose spouse is not a resident assessed as requiring care but who has elected to have Column A apply to him or her rather than Column B

Column B applies to every resident assessed as requiring care:

• Whose spouse is not a resident assessed as requiring care; and
• Who has not elected to have Column A apply to him or her.

Does the income test still apply?

Yes. The Government considers that it is reasonable to expect older people to contribute towards expenses they would have to pay for in their own home.

Income from any assets are included in the income test except for:

• the first $854 for a single person
• the first $1707 for a couple with both are in care
• the first $2560 for a couple with one partner in the community
• for a couple with one partner in care, any income from paid employment of the partner living in the community is also excluded.

Does income and asset testing apply to people aged 50–64?

From 1 July 2005, asset testing was removed for needs assessed people aged 50–64 who are single with no dependent children and reside in DHB-contracted residential-care facilities. They are still income tested to determine how much they can contribute to their care costs.

They will become subject to asset and income testing under the Act at the age of 65. A financial means assessment will determine whether the person is eligible for Government funding and establish the amount they need to contribute towards the cost of their contracted care services. The person will be liable to pay the cost of any services that are not contracted care services that they agree to pay under an admission agreement or private contract with the rest home or hospital provider.

For more information, go to Residential care questions and answers.

What if a person’s assets are worth less than the applicable asset threshold?

If a financial means assessment has determined that a person has assets equal to or below the applicable asset threshold in the Act and thus qualifies for Government funding (the Residential Care Subsidy), the person will not be asset tested again unless their circumstances change and/or they apply for a reassessment.

Refer also to ‘What are the asset thresholds?’ above and Residential care questions and answers for more information.

What happens if a person’s assets are worth more than the applicable asset threshold?

If a person’s assets exceed the applicable asset threshold in the Act, they will have to personally pay the relevant maximum contribution towards the cost of their care until their total assets as determined by the financial means assessment reduce to the relevant applicable asset threshold.

People whose assets are over the applicable asset threshold in the Act, (because they own their former home) may apply for a residential care loan. Whether the person is eligible for a residential care loan depends on whether the person meets the loan criteria.

Under the loan scheme, the Crown funds the loan recipient’s residential care costs directly to the rest home or hospital as interest-free advances which are repayable on certain events. The loan is secured by a caveat over the loan recipient’s house. When the house is sold or the estate is wound up, or other events occur as set out in the loan agreement, the loan is repaid to the Crown.