Confusion as families hit with extra rest home surcharges despite subsidies

Source: Radio New Zealand

Families trying to find rest homes for their elderly relatives have been shocked to discover that they must pay anything from $10 to $85 a day for care, even when they qualify for the government subsidy.

That is because rest homes are permitted to charge surcharges any time a room is not “standard” – and many providers are no longer building or offering standard rooms.

Tracey Martin, chief executive at the Aged Care Association, said it was a known problem and reflected the fact that government funding did not cover the cost of building, maintaining and upgrading facilities.

“As cost pressures have grown and funding has not kept pace, providers have had limited options to sustain operations and maintain quality environments. This has led to a greater dependence on premium charges to cross-subsidise the cost of care and infrastructure.”

People were seeking care when they were in a more frail state than in previous generations, she said, and requiring more assistance.

“Across New Zealand we are seeing a reduction in care beds, at rest home, hospital level, dementia and even psychogeriatic. We are seeing a reduction in care beds that are able to be provided for just the amount of money that the state has said they should get.”

“For a hospital level bed that’s on average $353 a day. That’s what they are allowed to charge for care because that’s what the state has decreed.”

“But they are allowed to put a premium charge on top of that if the accommodation has something different or extra, and that’s what the premium charges are for.”

Who pays what?

People who are going into a rest home can access a government subsidy for care, if they meet the asset test. This requires that single people needing care have assets below $291,825, or a couple with only one person needing care has assets of $291,825 or $159,810 plus their home and car.

The government then takes all of the pension except from about $57 a week, then tops up the difference, to $352 a day for hospital level care.

Not-for-profit providers offer about 60 percent of the country’s rest home care and tend to charge lower premium rates, or, in some cases, standard rooms. But they were facing large costs and many were having to add large premiums to break even, Martin said.

“It’s really impacting on New Zealand families. They just cannot find a place for their loved one to be. It’s also backing up emergency departments. We’ve got seniors in hospital who need to come into residential care and they can’t find a residential care bed so they can’t discharge them from hospital, so they can’t put people out of ED up into the wards.”

No standard rooms being built

Good Shepherd community financial well-being advocate Bruce Smith said he had recently been through the process for his mother.

“Anybody will need to pay for what is known as a premium room and that is a room with ensuite or attached bathroom. Cost seems to start around $25 per day for the added luxury. If they don’t have a standard room available and the family can’t afford to pay for the premium room then they will need to shop around at other rest homes.

“We were very fortunate in Timaru to use Glenwood which is a charitable trust-owned home where a jack and jill bathroom was considered standard and no additional cost.”

But another woman, who sought care for her father in Wellington, said it had seemed almost impossible to find a room that did not have a surcharge. Her father had had to move out for renovations and was told that after that happened there would be no rooms that met the standard rate requirements.

Another said she had been quoted $35 to $85 a day on top of the subsidy, depending on whether it was a shared room.

Ryman said in many newer or redeveloped villages, all rooms would exceed the minimum standard. Metlifecare said it, too, did not offer standard care rooms.

Logan Mudge, head of communications at Summerset, said it had been converting standard rooms into premium rooms or care occupation right agreements since 2024.

“Situations where a resident’s family could pay may happen, however if family were unable to assist, they would need to look for availability of a standard room with another aged care provider, which would more likely be a facility in the not-for-profit sector.”

Karen Billings-Jensen, chief executive at Age Concern, said in some smaller centres around the country there could be more standard rooms available because the sites might be older.

Government acknowledges reform needed

The Ministry of Health said aged residential care providers could charge residents more when they offered things like an ensuite, more space or garden access.

“Aged residential care providers are required to admit a person without charging them a premium if the person requests a standard bed and there are no standard beds at the right care level available within a 10km radius, and that facility is their preferred choice.

“This requirement applies regardless of what type of rooms providers are building.”

The spokesperson said the Government recognised that there needed to be a more sustainable system.

“While New Zealanders generally have good access to a range of aged care services, reviews have identified a range of challenges, including that the way services are funded is outdated and that access to the right services can be inconsistent and inequitable.

“The Government has established the Aged Care Ministerial Advisory Group to provide expert advice on long-term reform of the system.”

The scope of that work would include includes reviewing funding models and mechanisms to support sustainable services, including a sustainable supply of standard aged care beds.

“It is also looking at how costs are shared between those receiving care and the Government.”

The spokesperson said the group was expected to provide advice and recommendations by mid-2026.

It said the government was also increasing funding by 4 percent for aged residential care and had included a a $44 million increase for home and community support services in Budget 2025, plus a $24 million allocation for regional initiatives to support timely transfers from hospitals to other forms of care.

Martin said her association wanted a shift to a split funding model similar to Australia’s.

“Our argument is that the clinical care that this individual has been assessed as needing is the responsibility of the government.

“Because whether you’re 90 or 19, if you need some clinical care, you can go to hospital and get it for free.

“So why are 90-year-olds in this country having to pay, in the first instance, for their clinical care? And then we want the accommodation split out and the living expenses split out because New Zealanders know they’ve always had to pay for their accommodation, either through mortgage or rates or rent, right?

“And New Zealanders have always understood that they’ve had to pay for their food, their power, their toothpaste, all of that.

“So we want to see a more transparent approach to a funding model so that New Zealanders can see what they are paying for and the government can be shown up for what they are paying for.”

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand