Underfunding of rest homes as a result of the Pay Equity Deal has become so severe that unions and employers are joining forces to request Government intervention in the process.

The Care Association of New Zealand, which represents between 90 and 100 rest homes in New Zealand, and E Tū – the union for about 55,000 affected workers in the aged, disability and homecare sectors – confirmed it would be seeking a fresh approach under the new Labour New Zealand First Government.

The CANZ, which generally counts small and standalone homes as its members, and E Tū told Newsroom yesterday the sustainability of too many rest homes – particularly those either in rural areas, or with lower bed numbers – was at risk under the current funding model.

“We want to approach the incoming Government to request a summit with the provider groups, and with the unions, the Ministry of Health and the local district health boards and get to the bottom of this issue,” E Tū assistant national secretary John Ryall said.

The funding model, developed by the Ministry of Health to provide rest homes with additional funding for higher carer wages, is based on the number of occupied beds in a rest home. It accounts for only some types of rest home residents, and does not consider the number of staff a home may have.

Fundamental flaws in the model – which the Ministry has refused to release publicly – appears to have led to some homes being underfunded, while others are overfunded. Providers, which supplied employee information and costs to assist in the model’s development, remain unclear about how bed rates were calculated.

The Ombudsman is also investigating a complaint laid by Newsroom over the Ministry’s refusal to release the model.

“It’s that sort of impact that the people sitting in their Ministry offices doing the numbers just don’t understand.”

– Victoria Brown, CANZ

“We support workers getting paid fairer rates for the work they are doing, but we don’t want smaller employers to go under as a result of this,” Ryall said.

In the nearly four months since new carer rates were implemented, Newsroom is aware of at least four rest home closures. The Aged Care Association, which represents more than 600 rest homes – including the larger corporates – confirmed at least 100 of its members were struggling with financial sustainability.

Both the Aged Care Association and CANZ believe the exclusion of providers from negotiations leading to the May pay equity agreement – as well as consultations regarding further pay rate changes for overseas-qualified carers – have led to the significant funding shortfall.

While a sector-wide assessment calculating just how much rest homes are being short-changed is yet to take place, case-by-case examples show a number lose significant amounts each pay period. One South Island rest home found it needed $51,700 more than its allotted Government funding to meet higher wage obligations in the next 12 months.

Victoria Brown, CANZ committee member, said provider bodies, as well as individual rest homes, had been relentless in attempts to reason with the Ministry of Health and local DHBs over the pay equity process and funding.

“The fundamental thing, whatever anyone says about it, is that it’s not fully funded,” she said of the higher, Government-legislated carer rates.

“I don’t have a problem with paying good wages – certainly I’ve always tried to pay my workers reasonably.

“But, you’ve got to fund it properly.” Brown said.

Her Devonport rest home, Komatua Care Facility, has 13 beds. About a third of those beds are currently occupied by residents who do not qualify for funding under the Ministry’s model due to their classification as “mental health” patients. However, staff, carers and their respective wages remain the same, regardless of whether patients are classified as “mental health” or “aged residential”.

“It’s all the same,” she said.

The funding model did not immediately account for time-and-a-half, days-in-lieu and extra costs, making long weekends particularly difficult, Brown said.

“It’s that sort of impact that the people sitting in their Ministry offices doing the numbers just don’t understand. And the DHBs just don’t seem to have the money [to help out].”

Brown said CANZ had been in contact with E Tū and was looking forward to finding a more practical way forward for the pay equity agreement. 

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