5 THE WEALTH SHIELD: A MICROSIMULATION OF INEQUALITIES, INHERITANCE AND THE IRISH FAIR DEAL

Abstract

Abstract Background The article analyses the inequalities resulting from the long-term funding scheme in Ireland with a unique focus on intergenerational obligations. With the Fair Deal scheme of 2009, officially the Nursing Homes Support Scheme (NHSS), Ireland introduced a unique inheritance clawback clause. The state covers long term care costs for those in need up-front and claims the costs back from the estate after the older person deceases. The article focusses on the emerging income and wealth inequalities and intergenerational redistributive effects. Methods We estimate micro simulations to show the distributional effects based on income and housing wealth. The simulations are based on aggregate data from the Central Statistics Office, Nursing Homes Ireland, Eurostat and the European Central Bank. Each simulation estimates the individual contributions based on 50, 100, 150 and 200 percent of average income and wealth, while keeping either income or wealth constant at the average. Based on average nursing home fees, the simulations show the relative contributions from the state, income and wealth. These simulations are contrasted to the funding gaps of the old subvention scheme in place until 2009. Results The Fair Deal has expanded eligibility to the middle class and shields property wealth after three years. Nursing home residents with above average pension income and housing wealth benefit disproportionately from the reform and can pass on more relative wealth to their kin. Overall, the wealth distribution of the Fair Deal scheme is regressive, despite the inclusion of the middle class. Conclusion The increased eligibility of the fair deal has the benefit of increased legitimacy for the welfare state. However, considerable inequalities of risks exposure remain as less than 50 percent of older people will need nursing home care. Estimations for a long-term care insurance scheme at 3 percent social contributions would reduce the lifetime wealth contribution of nursing home residents by about 35 percent.