LTC model is about reducing cost through denying care
The current long-term care model is designed to squeeze costs using a private delivery process while creating an incentive for private capital to invest and own the assets. However, it is the state that sets the terms of spending and care delivery. The private system is being used to limit costs through obscuring the state’s role in under-funding the service.
The private sector simply manages the service within these funding constraints. Private firms operate in this system is part of the problem, but it is the state that is subsidizing its continued role and would likely not invest in LTC without this subsidy. All the government has to do is stop the market subsidy to end the private sector’s role. The politically difficult decision is to then introduce the spending necessary on providing long-term care public services and build public senior housing.
The squeezing of public expenses becomes clear when you compare private services with public municipal long-term care. The only major difference between the models is on the care side where the municipalities are providing their own subsidy (upwards of 30+% above private delivery). Municipalities make funding decisions based on a model that prioritizes the public good so instead of seeing the provincial government minimum regulation and base funding as the end, it can seek to use municipal tax revenues to increase quality and standards of care. Essentially, a public model as opposed to a private model.
The funding structure provided by the provincial government is about limiting costs, not about providing adequate care. The model of cost containment is not a complex one. It uses the limits of private market to limit public costs.
For long-term care, and many other marketized services, it is the provincial state that is acting as the “invisible hand”. This hand is operating only on the model of cost reduction. As such, it is using the private sector to simply reduce costs resulting in exactly the outcome you would expect in such a scenario: not enough money to provide quality services.
For long-term care in Ontario the government subsidy is on revenue, not profit specifically. The revenue subsidy is part of a private LTC market creation strategy.
The purpose of the government subsidy is to artificially increase ongoing yields (and decrease asset building costs) to a comparable level of other competing infrastructure investments such as office buildings or other types of housing. This is market creation subsidy, not a direct profit subsidy as seen in Public-Private Partnership (P3) style of investments. The government is creating a market for private investment in long-term care that allows firms to make choices/decisions base on their own calculations of costs and return on investment. It is up to the firm to operate effectively in that market to make a profit – which it is able to do given the level of subsidy and ownership of the LTC assets.
Rent and subsidies are fixed by the government. Luxury additions have profit mark-up. Provincial support sets the care amount and regulations set the necessary care levels.
The parts at play for an investment firm come down to:
- Property investment decisions of a firm based on costs, revenue, and profits.
- Profit generation for shareholder of the firm.
- Property market values and appreciation.
- Additional services residents are willing to pay for such as a private room and luxury additions.
- Government regulated rents.
- Building subsidies (money, reduced debt costs, reduced tax costs).
- Asset ownership and value appreciation.
- Base rent (somewhat market derived).
- Yield subsidy (subsidized by government) on rent.
- Luxury additions.
- Asset management
- Care employment
- Social services employment
- Management of asset (employment)
- Management of employment
- Investment decisions and management
- Product purchasing (non-medical)
- Product purchasing (medical, including drug and patient transport)
- Regulatory costs
- Regular/ongoing operation service costs (electricity, heat, water, etc.)
A public solution
The main solution to all this is a public system of senior housing that includes long-term care.
Splitting assets from care is a necessary first step in solving the crisis in long-term care.
Public ownership and investment
State investment and ownership in new public housing is necessary. The private market will never be able to be subsidized enough into achieving universal access to LTC as a public good at a fair price.
The LTC asset should be looked at as public housing for the elderly. These are the homes – specialized to be sure – for the elderly who need care. They live there, they are not visiting from a home somewhere else.
The building of new homes, upgrades of older beds, and ownership of older long-term care homes can be financed from the public infrastructure bank, provincial government infrastructure organizations, and muncipalities and financed through organizations like Canada Mortgage and Housing Corporation as it does now in some retirement housing and other types of public housing and infrastructure.
Care supports must be through public employment
Care should be provided through public employees, recruited, trained, hired, and paid centrally. This should be done for many reasons, but as has been outlined in many previous reports and policy papers on this topic:
- It is easier to fund employment properly if the employment is at the provincial/municipal level.
- It is easier to see who is at fault for low levels of care and thus easier to fix (i.e., it is more democratic).
- Employment conditions should be standardized across the province since the provinces is paying for it.
- Health and social services are already provided by the state and employment structures already exist.
- Achieving equitable employment standards for workers in this sector who come from poor and marginalized communities.
Active independent regulation
The regulation of a service like long-term care is necessary. In a distributed system like long-term care where family advocates cannot be on site at all times, public oversight and quality standards are essential.
This oversight must be independent from the other parts of the system and must be funded appropriately.
We cannot allow the state to continue to hide behind private operators in their limiting of expenses to long-term care. The private system is not well suited to deal with the level of care and housing our seniors deserve.