Establishment Of Eldercare Fund

17 Jan 2000

INTRODUCTION

The Government has decided to set up a new endowment fund, to be called ElderCare Fund. The interest income from the Fund will be used to finance operating subsidies to nursing homes run by Voluntary Welfare Organisations (VWOs).

Currently subsidies to VWO nursing homes are paid for directly out of the Government's budget. Starting this year, the Government will build up ElderCare Fund, with an initial capital injection of $200m. Further capital injections will be made when budget surpluses are available. Only the interest income of the ElderCare Fund will be used to fund the operating subsidies to the VWO nursing homes. In the initial years, subsidies to VWO nursing homes will be partially paid for from the interest income of the Fund, and partially paid direct from the Government's budget. The goal is for ElderCare Fund to reach a capital sum of $1 billion by the year 2010. By then, the capital sum should be sufficient for operating subsidies to VWO nursing homes to be fully financed from the interest income of the Fund.

ELDERCARE FUND WILL NOT REPLACE COMMUNITY SUPPORT

The ElderCare Fund approach will help to secure the future affordability of nursing home care for households of low- and lower-middle income. With our rapidly ageing population, demand for nursing home care will increase. On the other hand, an ageing population means a shrinking tax base where a smaller working population will find it harder and harder to pay for health care subsidies consumed by a larger retired population. In an increasingly globalised economy, countries will find it more and more difficult to raise taxes, and it would be difficult to preserve our economic competitiveness if we continually rely on taxpayers to pay for the subsidies to our nursing homes. By anticipating future needs and putting aside funds now while we can still afford it, our subsidies to the elderly future can be secured upon a more robust financial footing.

For a start, ElderCare Fund will provide subsidies only to VWO nursing homes. Extension to other kinds of step-down care services can be considered when ElderCare Fund has more resources.

ELDERCARE FUND WILL NOT REPLACE COMMUNITY SUPPORT

The introduction of ElderCare Fund will not displace the role of community donations in financing step-down care for those of low and lower-middle income, as this is part and parcel of the community support structure. Hence, VWOs should continue to raise funds from the community and do their part in helping the needy and indigent patients foot their share of the charges using the donations raised.

REPEAL AND RE-ENACTMENT OF MEDICAL AND ELDERLY CARE ENDOWMENT SCHEMES ACT

The Medical Endowment Scheme Act will be repealed and re-enacted as the Medical and Elderly Care Endowment Schemes Act, to set up this new endowment fund.

The administration of Medifund will not be affected.