OCA - Oceania Group - retirement villages

[minimoke]

But if you want to pay for your care without eating into your capital you need to be very rich. How rich is that? From the fees I have seen charged and the investment returns on capital managed on a conservative basis you need about $4m in capital for one adult.

You keep paying full whack until your capital runs out to a certain level. Once you reach that level the dhb payment kicks in - but you still have to pay for extras. $300k will get you in and you pay until your assets get to $227k or $124k depending on partner status

[artemis]

It would be interesting to know how the number of subsidised care homes is tracking.

There are anecdotes reported about sales to corporates, close downs, adjustments to job descriptions to remove staff from some duties so that the higher rates don't need to be paid, and people staying longer in hospital as care beds are not available.

If fewer care beds are available, what is the cost to the taxpayer of alternatives?

Anecdotes, but the Health and Seniors Ministers must have been briefed on trends, costs, risks and issues. So where is their plan?

[BlackPeter]

In a nutshell....oldies that rely on government funding..they don't have a choice....Bupa...privately owned aged care to be in....but...if oldies have money...they still can get the funding but can pay more with their own money to go to better aged care provider such as oca..arv...where the quality care it is better because the fee is higher....The oldies top up the fee with their money..For extra...hope it makes sense

I think this makes perfect sense ;

And actually - nobody needs $4m (as balance proposes) to just "improve" their age care and only a limited number of people will need age care for a long time anyway.

If I look at my family - all of my grandparents as well as my mother used to live independently up to the last handful of months (which were spent in hospital or care home). Overall care payments have not been material for any of them. My father (age 88) is since 3 years in a (very good, small and private) care home (not in NZ, but in Germany). This is one out of six who did require a care home. His contribution (on top of any state / insurance / social welfare payments) is roughly NZ$5000 per month. Not cheap, but balances $4m per person (even if they would not have any return) would bring him through the next 67 years. Even a less than 2% return would fund his care for ever.

This number ($4m per person required) is absolutely non-sensical.

Obviously - people may live for a long time in retirement homes, but they don't need all of that time 24/7 care. Dr. Google just told me that the average time a person stays in a nursing home for (end of life care) is 14 months (though most people die during the first 6 months ...).

If I take these 14 months (at $5k per month) - paying for them privately would require less than $100k in capital. Not $4m. I'd think many people in NZ could afford this (many even without the need to sell their homes).

And sure - some people will require longer care (that's the thing with average values), but it does not make sense to paint a 1 in 1000 horror scenario and propose everybody needs to be prepared for it or the world ends and care companies go bankrupt.

Care - even above standard care - will stay affordable for the majority of people and companies providing good quality care will do well.

[flyer]

Attended the Browns Bay ANZAC parade this morning, directly across the road from "the Sands". Its a superb complex, be a great place to live, across the road from the beach, great views etc. Due to open next month but still building going on in some areas but nearly there I would say. Be a great asset for OCA.

[Snoopy]

In a nutshell....oldies that rely on government funding..they don't have a choice....Bupa...privately owned aged care to be in....but...if oldies have money...they still can get the funding but can pay more with their own money to go to better aged care provider such as oca..arv...where the quality care it is better because the fee is higher....The oldies top up the fee with their money..For extra...hope it makes sense

Better service...staff ratio per resident...quality food..activity ...etc..bupa is using one RN for 25 to 30 highly dependency residents....privately owned operators around 30 to 40 residents.

King I can't quite reconcile your two posts above. I think when you say that Bupa is privately owned, you mean that you cannot buy Bupa shares on any sharemarket. ARV and OCA are also privately owned by shareholders. But in this case, you can buy shares in those companies. So you are saying there is a difference in care between the likes of Bupa formerly the British United Provident Association) which has a privately owned not for profit structure, and a privately owned company that is beholden to private shareholders like OCA and ARV.

Then you tell us that Bupa has one RN for every 25 to 30 high dependency residents, but the likes of OCA and ARV have a significantly higher number of residents (30 to 40) to be overseen by one RN. Yet despite the worse staff/resident ratio, you claim that the care at OCA and ARV is better! Please explain.

SNOOPY

[couta1]

King I can't quite reconcile your two posts above. I think when you say that Bupa is privately owned, you mean that you cannot buy Bupa shares on any sharemarket. ARV and OCA are also privately owned by shareholders. But in this case, you can buy shares in those companies. So you are saying there is a difference in care between the likes of Bupa formerly the British United Provident Association) which has a privately owned not for profit structure

There certainly is a difference in care, Bupa has had more articles regarding care based complaints in the media than any other company in the sector, you can draw your own conclusions about what that might mean.

[King1212]

Bupa has a lot of oldies funded by government....privately owned aged care such as the lodge that u talking about..owned by a person. OCA is listed company. Hard to explain to u snoopy...best is to go and see their facilities. Or maybe u should get a Filipino nurse to look after.

[Snoopy]

And actually - nobody needs $4m (as Snoopy proposes) to just "improve" their age care and only a limited number of people will need age care for a long time anyway.

If I look at my family - all of my grandparents as well as my mother used to live independently up to the last handful of months (which were spent in hospital or care home). Overall care payments have not been material for any of them. My father (age 88) is since 3 years in a (very good, small and private) care home (not in NZ, but in Germany). This is one out of six who did require a care home. His contribution (on top of any state / insurance / social welfare payments) is roughly NZ$5000 per month. Not cheap, but balances $4m per person (even if they would not have any return) would bring him through the next 67 years. Even a less than 2% return would fund his care for ever.

This number ($4m per person required) is absolutely non-sensical

BP, I never said people need $4m to go into full care. I said if they did not wish to diminish their capital, then they would need the income from $4m, You think that is nonsensical? I don't know what state payment your Dad is entitled to in Germany. But let's say it is the equivalent of $2,000 per month. Add that to his contribution and you get a basic care charge of $7,000 per month. Now lets day he wants a telephone line ($60 per month), Sky TV ($90 per month), effects insurance ($50 per month), health insurance ($200 per month). We are now up to $7,400 per month after tax is paid. At a 30% tax rate you need a before tax income of:

$88,000 / 0.7 = $127,000

If you are in full care a reputable investment advisor will invest your assets conservatively. Say 50% in fixed interest earning 3% (before tax) and in equities earning 5% after tax). But one percentage point will come off both of those for management fees. So average expected portfolio return will be:

Fixed Interest: ( 3%- 1%) x 0.7 = 1.3%
Equities: ( 5% - 1%) = 4%

=> Average Portfolio Return = 2.7%

Based on a $4m balance this equates to $108,000m in after tax income. So it looks like you are $20k ahead. But that isn't the end of your expenses.

Other expenses you might require and not yet covered are dental expenses. Perhaps you wish to retain your car so that visiting relatives can drive you about. Since you have sold your house you will need to rent a garage space to house it, You will also need to pay servicing costs, some fuel costs, vehicle insurance.

Then if you do claim on your medical insurance there is likely to be a large excess you will need to pay.

Next you will require an accountant to process your income tax returns. You will need to hire a lawyer to keep your will up to date.

In today's low interest rate environment, I stand by my claim that you will require $4m of capital to completely fund your full care.

SNOOPY

[Snoopy]

I also am confused about this issue.
I get the fact that DHB placements will be underfunded.
I dont know to what extent Oceania is exposed to this.

More than any other listed operator, because they have the highest proportion of care beds.

The like of small operators such as Parkwood clearly are underfunded and may have no choice but to sell to big corporates who will find ways around funding.

Since funding is on a per resident basis, how do you suppose big corporates will find their way around the funding issue?

The article states that privately funded placements are also price controlled-I suspect this means that DHBs that place clients in rest homes do so at a fee determined by them.The DHB sets the price and the client is means tested and pays all or part of the care fee until they run out of money

It surely cannot mean that people have no choice if they can afford it to pay for more luxurious care

If the government declares there is a person in need who will go into care, then that person takes priority over a private person who is less in need of care but willing to pay more for that same room.

SNOOPY

[minimoke]

In today's low interest rate environment, I stand by my claim that you will require $4m of capital to completely fund your full care.

SNOOPY

If you have $0.00 in capital you can still get full care - that is care that the DHB contracts a provider to provide. Sure, you'll loose most of your govt super and you wont get the "extras" but given you are in a parlous capital state that wil be the least of your worries.

The only time residual capital becomes an issue is when the money grubbing will beneficiaries put their oar in.