Collecting the Cost of Residential Care – A Fair Deal?

The Fair Deal scheme provides financial support to those who need long term nursing home care. We consider the collection of HSE loans given to nursing home residents as part of this scheme. We also look at a recent Comptroller & Auditor General Report on the operation of the Scheme and the resulting recommendations.

Scheme overview

The Nursing Home Support Scheme also known as “Fair Deal” is operated by the Health Service Executive (HSE). It gives financial support to those who need long term nursing home care. Under the Scheme, the person who needs long term residential care in a nursing home (the Resident) contributes to the cost of their care. The State then pays the balance through the HSE. The cost of care is shared between the Resident and the HSE based on an assessment of their income. This assessment is based on their savings and the value of their residential or other property.

Eligibility

In effect, the State support given to the Resident is the difference between the cost of care and the contribution payable by the Resident. Eligibility to the Scheme is based on two assessments. The first is a care needs assessment to identify whether the Resident needs long term nursing home care. The second assessment looks at the financial resources available to the Resident. This works out what their own contribution to the cost of care will be. If the Resident is part of a couple, the financial assessment will be based on half of the couple’s combined income and assets. Depending on certain conditions, the Scheme broadly provides that the Resident will pay:

• 80% of their income (less certain deductions), and

• 7.5% of the value of any assets, per year. This is dependent on a three year cap on the value of the home, and in certain circumstances, on a farm or business assets.

Ancillary State support

There is also an option for the Resident to get/apply for a loan facility to meet a portion of their contribution to the cost of their care. This is known as ancillary State support. The loan is equal to the Resident’s contribution related to relevant property assets. In practice, the HSE pays the money to the nursing home on the Resident’s behalf and collects it after their death.

This aspect of the Scheme was designed to ensure that an individual would not have to sell their home, or other property assets, to pay for care. Instead, part of the Resident’s contribution is deferred until either their death, or on the sale or transfer of a property. This is usually their primary residence. However, under the Scheme, the HSE will register a charge against the Resident’s property asset. This is to secure the loan facility that the HSE provides to them. In certain circumstances, repayment of the loan facility may be deferred for a longer period e.g. if a Resident’s spouse or partner is still living in the main residence.

Report by the Comptroller and Auditor General

A Special Report was prepared by the Comptroller and Auditor General on the operation of the Scheme in May 2020 (“the Report”). It noted that on average, around 20% of all applicants to the Scheme also availed of the loan facility. The Report looked at the HSE loan facilities to Residents and examined the steps taken by the HSE to ensure that the loans are repaid promptly and in full.

It is worth noting that the Revenue Commissioners is the appointed agent for the HSE in the collection of monies owed under the optional loan element of the Scheme. The loans can be repaid voluntarily at any time by the Resident. However, they specifically become payable when the Resident dies, or another relevant event occurs, like

• Sale or transfer of the property

• The Resident or their spouse/partner become bankrupt, or

• The HSE finds that it has been given false or misleading information relating to the application for the loan

When the above, or the death of the Resident happens, Revenue writes to the accountable person to notify them of the amount owed and the recoupment process. The accountable person is whoever was pre-designated as responsible for repaying the loan.

In the Report, it was noted that by the end of December 2018, Revenue had been notified of some 5,650 loans with balances of €114.1 million. In these instances, it was deemed appropriate to commence communication to the accountable person and in some cases, recoupment action. By the end of 2020, the Report found that Revenue had recovered €105.7 million, or 93% of that December 2018 total in full settlement.

Due date and Interest

The Scheme mandates repayment of a loan facility given within 12 months from the date of death of the Resident, or 6 months in the case of the sale or transfer of the property. After the due date, interest becomes repayable at a daily rate of 0.0219%, or7.99% per annum. There are situations where Revenue will review and possibly reduce or waive interest. This is often the case where any delays arose on the part of a State body, like the probate offices. In the analysis of the December 2018 loans, the Report found that around 60% were repaid in full before the due date.

Enforcement

The Report noted that normal Revenue debt management procedures are available to recover the loan, including the Revenue Sheriff, attachment orders and forced property sale. However, it also noted that these methods are typically not exercised due to the nature of the Scheme and the security provided by the charge, for the loan facility. Interestingly, there does not seem to be any reported case law on enforcement of loan facilities given under the Scheme.

Time Limits

The Scheme bans any action to enforce the loan or recover interest once 12 years have elapsed from the date of death or a relevant event. It is notable that the Report makes two recommendations relating to time limits. It recommends that the HSE should notify Revenue and the accountable person of the amount of the loan in a timely fashion following death or a relevant event. The Report also recommends that Revenue should formalise arrangements for loans being repaid in instalments. This should be done to ensure that loan recovery is maximised before that twelve year recoupment deadline expires.

Comment

The Report noted that one in five applicants, or just over 10,600 individuals had availed of the loan element of the Scheme up to December 2018. It suggested that less than 6% of all monies due at end December 2018 were still outstanding by end February 2020. This showed that repayment of loans advanced under the Scheme operated fairly smoothly. The Report concludes that this is because the charge registered by the HSE on the Resident’s property is a key control. Most creditors, including nursing homes, would always prefer to be secured rather than unsecured, as there is recourse to a valuable property asset, if the person responsible for repayment, defaults.

The Report notes that research for the Department of Health/ESRI suggests that demand for long-term residential care is likely to increase by between 40% and 54% from 2015 to 2030. This will bring additional funding challenges. Accordingly, if the cost of care for those residents is to be met, collections from Residents, or from their estate after their death will have to stay front and centre. This will generally be the case for both the HSE and nursing homes.

For more information, contact a member of our Debt Recovery team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.