Special Report 110 - Nursing Homes Support Scheme (Fair Deal)

Published on 10 August 2020 

The Nursing Homes Support Scheme — generally referred to as ‘Fair Deal’ — was established in 2009 to provide financial support to eligible residents towards the cost of their nursing home care.1 Residents are required to make a contribution towards the care costs, depending on their means, with the HSE contributing the balance.

By 2018, the HSE was providing financial support in respect of just over 23,300 individuals. The HSE reported that this support amounted to €969 million in 2018, including some €51 million in the form of loans to residents to assist them in paying their contributions. The HSE estimates that an additional €343 million was paid directly to nursing homes in 2018, in the form of residents’ contributions.

Almost 550 nursing homes are involved in providing care within the Scheme. Four out of five homes are privately run or are operated by voluntary bodies. The remainder are public nursing homes, operated by or on behalf of the HSE.

In practice, operation of the Scheme is complex and involves activities and functions carried out by a range of State agencies. This examination was carried out to provide an overview of the Scheme after its first ten years of operation.

This report was largely complete when the COVID-19 outbreak occurred. Therefore, it does not consider the risks and uncertainties associated with this global public health issue or their likely significant impact on the nursing home sector.


1 The Scheme was established under the Nursing Homes Support Scheme Act 2009.  

Scope of care subvented

In 2009, the Department of Health and the HSE detailed the list of goods and services that would constitute nursing home care for the purposes of the Scheme. These — known as the ‘cost components’ — comprise accommodation, bedding, food, nursing and personal care, laundry and standard aids and appliances to assist with day-to-day living. Although the standards and regulations surrounding the provision of nursing home care have been revised since the Scheme commenced, no review of these components has taken place.

Both public and private nursing homes arrange for or provide a range of goods and services not covered by the Scheme rate, for example, access to social programmes. The examination team noted that, within a sample of contracts of care in private nursing homes, the level of detail provided on additional fees charged to Scheme residents varied. It appears that residents of private nursing homes are more likely than those in public nursing homes to incur charges for additional services. The Department of Health and the HSE established a project team in 2018 to review the additional charges in place in nursing homes.

Calculation of weekly charge rates

The 2009 Act requires that the charges for care services to be provided to an individual supported by the Scheme are expressed in terms of a weekly rate. An individual weekly rate is calculated for each nursing home participating within the Scheme. The weekly rate calculated is the same for each resident within the nursing home, regardless of the level of dependency, age, or any other factor.

In 2018, the average charge rate for public nursing homes was €1,564 a week. The agreed average maximum price chargeable for private or voluntary homes was €968 a week. The difference was 62%. However, because the methods used to determine the weekly rates are different for each sector, a meaningful comparison of the charge rates is difficult. The Department of Health is currently carrying out a value for money review comparing the costs of care across the nursing home sector.

Weekly cost of care in public nursing homes

Section 33 of the 2009 Act provides the HSE with the authority to charge for the provision of long-term residential care services, but stipulates that the charge should not exceed the cost to the HSE of providing the service. The weekly charge rate for public nursing homes is derived from prior period Scheme costs adjusted for the number of scheme beds available and on the assumption of 95% occupancy. However, as the HSE does not have a single integrated financial system, the process of identifying and isolating the historic costs relevant to the Scheme is not straightforward. This creates risks around the completeness and accuracy of the cost of care based charge rates calculated and published by the HSE.

Budgets are allocated to public nursing homes based on the calculated weekly charge rate. Funding shortfalls may arise for those nursing homes where the occupancy rate is less than expected, or the current operating costs of the nursing home are higher than the prior period costs. For 2018, additional funding of €23 million was required from other Exchequer resources to meet such deficits.

The HSE committed in 2015 to publishing the weekly cost of care based charge rates for public nursing homes. Charge rates were published for 2016 but not for 2017. Furthermore, the charge rates published in February 2018 were not revised to reflect the application of pay adjustments. As a result, the internal weekly rates used for HSE funding and accounting purposes in 2018 were on average 3% higher than the published rates. However, this had no implications on most Scheme beneficiaries, since their contributions were related to their means, and not to the weekly cost of care rate.

Weekly agreed maximum price in private nursing homes

Section 40 of the 2009 Act provides for price arrangements to be made for the provision of long-term residential care by negotiation with private and voluntary nursing homes. The National Treatment Purchase Fund (NTPF) is the body designated by the Minister for Health to manage the negotiation process and to enter into pricing agreements with those nursing homes.

When the Scheme was first introduced in 2009, the NTPF offered each nursing home the average weekly price that it had been receiving on the open market. The objective of doing so was to avoid any delays or capacity shortfalls that could otherwise have arisen in the short-term. In many cases, these initial charge rates have influenced subsequent negotiations.

Prior to entering into negotiations with a nursing home, the NTPF carries out a financial analysis of information submitted by the nursing home. This typically includes an analysis of room occupancy rates, a calculation of the nursing home’s weekly unit cost and other information on the nursing home’s turnover, profit before interest and tax, and finance costs.

The NTPF advised that the following criteria are also considered

  • costs reasonably and prudently incurred by the nursing home and evidence of value for money
  • price(s) previously charged
  • the local market price
  • budgetary constraints and the obligation on the State to use resources responsibly.

While the average dependency level of residents is not formally recognised as a criterion, the examination noted that there is some evidence that general dependency levels in the nursing home are discussed during price negotiations. However, the NTPF has not provided a model explaining how the various criteria are weighed and combined, stating that all the criteria are considered in the aggregate. Consequently, it is unclear how these criteria influence the negotiation of the price that is agreed with the nursing home.

A Department of Health review of the Scheme in 2015 recommended that the NTPF review the present price negotiation system with a view to

  • ensuring that there is adequate capacity for those who require complex care
  • ensuring value and economy, with the lowest possible administrative cost
  • increasing the transparency of the pricing mechanism so that existing and potential investors in nursing homes can make informed decisions

This review has been completed but has not yet been published.

While negotiation by its nature involves the exercise of judgement, it is important that sufficient documentary evidence is retained by the NTPF to enable evaluation of the key decisions made during the negotiation process. The examination found that the NTPF does not have internal written procedures or a guidance manual for its staff involved in the negotiation process.

Where a negotiation fails to reach an agreement, the nursing home can seek a review by the CEO of the NTPF. Pending the outcome of a negotiation or a review, the NTPF may offer a nursing home an extension to their deed of agreement, at the current price, for a period of up to three months, or longer where the negotiation becomes protracted. The NTPF does not generate management information on the factors giving rise to protracted negotiations, or the number and frequency of contract extensions.

The legislation specifies that the price agreed between the NTPF and the nursing home is the maximum price that can be charged in respect of the ‘within scope’ care components for an individual resident supported under the Scheme. However, the examination found that, in practice, there is no deviation from this price. The agreed maximum price becomes the set price charged by the nursing home for each resident over the term of the agreement.

Demand for the Scheme

The Scheme is cash-limited which means that the HSE must restrict access to the Scheme benefits if there is an expectation that the available funding for a specified period will be exhausted. The risks in such circumstances are that persons who medically require long term residential care do not receive it in a timely way and/or that costs are borne instead by other parts of the health service, or by applicants and their families.

While the number of persons in receipt of support under the Scheme fluctuates over time, the annual number of applications for support under the Scheme is relatively constant at around 10,000 a year. The cash limited nature of the Scheme budget impacts on the time applicants approved for support spend on the national placement list while they await funding approval. The HSE has set a target that the maximum time on the placement list should not exceed four weeks averaged over a year. The target has generally been met but by September 2019, the maximum waiting time had increased to eight and a half weeks, and just over 1,200 people were on the national placement list.

In 2018, the majority of applicants took up their places in a nursing home within four weeks of receiving funding approval. However, at the end of 2018, there were 848 people who had been approved for funding but had yet to be admitted to a nursing home. In 20% of these cases (166 cases) funding approval had been in place for more than six months.

The HSE has put in place short-term transitional care arrangements to facilitate the discharge of older persons from an acute hospital to a long-term residential care setting pending approval of Scheme funding. Costs associated with transitional care are not met from the Scheme budget but are met from other Exchequer resources. Payments to private or voluntary nursing homes in respect of transitional care increased from €7.2 million in 2015 to just under €12 million in 2018 — an increase of 67%. The cost of the provision of transitional care for Scheme applicants in public nursing homes is not known. Furthermore, residents’ contributions are not collected while transitional care is being provided.

Assessment of residents' contributions

Through their contributions, residents of nursing homes supported by the Scheme cover around 30% of the cost of the standard nursing home care they receive.

A resident’s contribution to their cost of care is calculated in a financial assessment process, based on

  • a maximum of 80% of their weekly income
  • 7.5% of the value of their home (and in certain circumstances, farm or business assets), subject to a three-year cap, and
  • 7.5% of the value of their other assets per year.1

An individual’s principal residence (and qualifying farm or business) is only included in the financial assessment for the first three years (referred to as the ‘three-year-cap’) regardless of the length of time spent in nursing home care. The 7.5% contribution on the value of such assets is disregarded in the case of individuals receiving and paying for nursing home care privately for three years prior to applying to the Scheme.2


1 Includes farm and business assets that do not meet the criteria to qualify for a three-year cap.

2 Or commensurately for part of a three year period.

When an individual makes an application to the Scheme, s/he is required to provide the HSE with details of her/his income and assets, and supporting documentary evidence. In contrast to the medical card scheme, the examination found that the HSE does not specify the nature of the documentary evidence required for many types of income and assets, or how recent that evidence should be.

By law, the HSE must receive a schedule of assets on the death of a resident. This does not happen in all cases. Where schedules of assets were received, reviews did not identify additional liabilities in nine out of ten cases. Additional liabilities were identified in 10% of cases. Where they had been quantified, the average value of the additional liability was €16,100.

Lending to nursing home residents

An optional loan element is part of the Scheme. This is designed to ensure that an individual does not have to sell their home or property assets in order to pay for long-term residential care. The loan can be repaid at any time, but normally falls due for repayment upon the individual’s death, or on the sale/transfer of the property. The HSE formally registers a charge on the property in question.

Just over 10,600 individuals had availed of the loan element of the Scheme up to December 2018. The total amount of loan funding advanced at that date was €239 million.

By the end of December 2018, Revenue had been notified of 5,650 loans worth €114.1 million where it was appropriate to commence recoupment. By the end of February 2020, Revenue had recovered €105.7 million or 93% in full settlement. A further €1.6 million had been received in partial settlement cases. The remaining loans, to the value of €6.8 million, were overdue for repayment.

The Scheme legislation allows 12 months from the date of death or six months in the case of the sale or transfer of the property to repay the loan. After the due date, interest becomes payable on any outstanding loans (or outstanding balances). The examination noted some delays in the time taken for the HSE in notifying Revenue and the accountable person of the amount to be recouped following the relevant event. This reduces the time available for recovery before interest may be levied.

By the end of February 2020, Revenue had collected late-payment interest to the value of €1.65 million on loans notified up to the end of 2018. Interest to the estimated value of a further €1.7 million had not been applied or had been waived in other cases finalised. Revenue has stated that its general approach is not to apply interest, or to waive it, where delays in settling estates were due to processing delays by other State bodies.