Old Age Savings (Part 2)

By Jim McVeagh 07/10/2009


The NZ Nurses’ Organisation tells us that rest home neglect is “all too common”. While this is certainly true, I don’t accept their reasoning when it come to causes:

“These two cases are a powerful illustration of the conflict between caring and profit.”

No. These cases illustrate the problem of state funding of a private institution.

Nursing homes cost money to build. It is understandable, then, that the owners of the Nursing Home wish to make a profit. Unfortunately, when one couples this perfectly legitimate desire to make a profit with the natural desire of the state to purchase rest-home beds as cheaply as possible, there comes a point of conflict, especially for the larger nursing homes that rely extensively on government funding. Because the government is, essentially, a monopoly purchaser, nursing homes have no real choice but to accept the government’s purchase price, regardless of profitability. In order to provide beds at the government’s price and still make some sort of return on investment, the nursing homes attempt to reduce their largest cost, staff. They do this mostly by reducing the skill-set of their staff, employing enrolled nurses and aids because they are cheaper. Numbers are also often reduced. It is rare for a nursing home to reduce the quality or maintenance of the facility, but this does happen.

Of course, there are some owners of nursing homes that cut an excessive amount of corners, leading to generally poor care of the elderly in their homes. In a normal commercial environment, these owners would eventually be found out and their business would be destroyed. In New Zealand, they get a general rap on the knuckles from the HDC and told not to do it again. The penalty is hopelessly inadequate and there is no real disincentive not to try to cut corners again. Sure, the nursing home will be inspected regularly for a while, but the government does not fund the inspectors adequately either and there are simply too few to keep an eye on every nursing home.

The answer to this is not to keep piling on regulations for Nursing Homes to follow, further cutting into their profitability by insisting on large amounts of bureaucracy and non-functional standards. The answer is to free up the industry, preferably by specifying only a baseline of important standards and allowing nursing homes to charge a part-charge for better, more modern facilities.