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Payment Options

Paying For Aged Care: Trends & Challenges

Flip open the newspaper and you will likely find an article related to seniors – the care required, their living condition, struggles, healthcare, etc. Recently, The Star published an article on the need for laws that protect the rights of seniors in Malaysia as various social dilemmas – such as abandonment – have arisen from the lack of it. These social tensions are signs that our aged care system is being stretched by the growing needs of an ageing population.

Malaysia need laws that not only covers senior citizen’s rights, but also define the roles of stakeholders; from the state, the community, family members and service providers – such as long term residential and care homes, day care centres, housing developments, transportation, commercial outlets, etc. – alike. This requires all parties to be on the same page. It is clear our aged care system cannot sustain our needs. Hence, we must understand current aged care trends to determine what types of care services are needed and how to sustainably deliver it.

Trends & Payment Modes
As we age, the possibility of needing some form of long-term care is evident. Beyond the initial stages of care during hospitalisation, long-term care (also known as LTC) comprises a variety of services with the purpose of meeting both medical and non-medical needs of people with chronic illnesses/disabilities and are unable to care for themselves for long periods of time. It can be provided at home, in the community and in assisted living facilities like nursing homes and care centres.

As far as trends go, there is an increasing need for expertise by professionals to address multiple chronic conditions often associated with seniors in the provision of long-term care. Likewise, the need for non-medical care such as Activities of Daily Living (or ADL) – which involves activities such as feeding, bathing, dressing and handling of ‘nature call’ issues – is increasing. However, unlike medical care, funding options for non-medical care is not easily available.

In Malaysia, the care that is needed and provided to seniors are delivered through government welfare homes, private nursing homes & day-care centres, voluntary aged-care centres, or by families at home. Naturally, this mix of delivery channels and agents would result in each option having very different funding bases.

The finance options available to seniors to pay for long-term care services include: the individual’s own savings, their Employees Provident Fund (EPF) accounts, pension scheme, investments, government welfare and other sources of income like investments and business income. However, unlike developed countries such as Japan, there are no risk-pooling arrangements such as social insurance and tax-based funding for long-term care available in Malaysia.

As can be inferred by the nature of our available options (apart from government welfare), Malaysians generally make out-of-pocket payments to finance their own or a family member’s long-term care needs.

As a result of financing their care support, there is a noticeable trend in the growth of self-directed (or consumer-directed) services. Despite the obvious challenges inherent with an aged care system largely reliant on individuals making self-funded payments for care, the results of self-directed services grants seniors greater independence and control over their lifestyle choices.

However, while the trend of these self-directed purchases of services are believed to improve the quality of care while simultaneously being cost effective due to the supply and demand economic model, we need to work out the kinks and flaws in Malaysia’s aged care infrastructure – namely our payment options – to fully capitalise on its strengths and minus the weaknesses. The specific challenges inherent in our payment options lie in these four areas:

1. Lack of Representation When Impaired
The benefits of the self-directed payment approach are appealing. It not only provides consumers with greater lifestyle choices and higher accountability in the services supplied, it’s also attractive to some governments due to its links with market-oriented mechanisms.

However, the drawbacks lie in monitoring and purchasing of services, which hinges on the purchaser’s health and mental condition. If the purchaser is frail or mentally impaired and without family support, their bargaining power relative to service providers is compromised and may risk exploitation by service providers as well. Furthermore, this approach does not offer a guaranteed care provision “until end of life” for all individuals.

2. Education & Employment
One of the main factors affecting our Malaysian seniors’ financial resources is due to the low educational attainment, which impacts their ability to save for old age. It is compounded further when their chances of improving their economic conditions become increasingly limited as they get older and their capacity to work diminishes.


3. Insufficient Savings & The Sandwich Generation

Constant reports from the EPF stated that Malaysians aren’t saving enough for retirement and old age. When funds from their EPF accounts are exhausted, family members often become the main welfare provider – both financially and in providing social support to the senior.

Furthermore, the “Sandwich Generation” trend are also linked with the senior’s inability to accumulate sufficient savings or for the savings to last throughout retirement. Due to changes in family size and economic conditions such as higher cost of living (e.g. high prices for housing), Adult children find themselves taking care of their aged parents expenses in addition to raising their own children. In some cases, the senior parents also providing financial support to adult children.

4. Too New To Collect Results
In 2012, the Malaysian government introduced the Private Retirement Scheme (PRS). The objective was to improve living standards for retired Malaysians through additional fund savings. However, as the PRS was implemented six years ago, the effectiveness of this initiative is still too early to assess as an avenue of long-term care funding for elderly Malaysians.

What Lies Beneath
Regardless of overcoming the abovementioned challenges, developing better payment options would be mooted if the practice of inappropriate allocation of care is not addressed. As a senior’s care needs intensifies as they age and medical inflation rises, the appropriate placement of seniors is all the more paramount. When they are accorded the right level of care – which meets the minimum standards required by the regulators – the senior’s financial resources are more likely to be utilised optimally.

This is especially important in managing long-term care costs as it can be difficult to measure due to the nature of the care required by the senior. When costs are not properly managed, the quality of long-term care services may be significantly affected. Additionally, inefficient delivery of long-term care may also affect the price of services delivered and this could lead to the senior being unable to pay for the care needed on a sustained basis.

In Taiwan for example, it is found that care at home was cost-effective for people with “medium” physical disability, but became expensive for people with higher levels of disability when compared with nursing home care. Such findings raise issues about the relationship link between needs and actual care received.

Conclusion
Ultimately, the changing climate in Malaysia’s ageing needs dictates that our current infrastructure and practices cannot remain at status quo. New payment options for long-term care (or at the very least, a revision of our old ones) and the environment required for these options to flourish needs to be investigated, deliberated and developed.

Much of the efforts by the Malaysian government to implement avenues for retirement, and by extension aged care, are still relatively new and time will tell if these efforts are effective. However, for the foreseeable future the challenges that lies ahead for Malaysia is firstly a pension reform. We need a review of social protection for the purpose of preventing poverty for our ageing population and develop a plan that provides adequate benefits that includes long-term care.

This is because a full replacement of income for retirement cannot be obtained purely from one single source or scheme but different tiers must be incorporated so that full replacement can be achieved.

Secondly, we need a total structural adjustment of the economy to cater to Malaysia’s ageing needs. As industry players, we need to ensure that future developments in ageing policies should include the provision of better care services with more uptake to enable cost-effectiveness.

Finally, greater efforts to evenly distribute aged care services and facilities between cities and country areas to ensure no one is neglected.

 


 

Source: Smart Investor, July 2017

Written By: Aged Care Group

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