Finance: Addressing Malaysia’s long-term care needs

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This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on April 11 - 17, 2016.

 

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Malaysia’s growing ageing population has created an urgency to address the need for adequate long-term care. This includes services that help meet the medical and non-medical needs of individuals with chronic illnesses or disabilities who are not able to care for themselves over an extended period of time. 

According to the government’s website on the Healthcare National Key Economic Area, Malaysians are getting older, with those above 60 expected to make up 10% of the population by 2020 and 15% by 2030. 

While nursing facilities and in-house nursing services have been catering for the rising demand in the country, there are also adult day care programmes and assisted living services available, which many may not be aware of. 

“We do have specific care centres for Alzheimer’s or Parkinson’s disease. Private sector players and non-governmental organisations are operating some of the facilities or care centres throughout the nation,” says Managedcare Sdn Bhd CEO Carol Yip.

She says there are 244 registered care centres under the Care Centre Act 1993 and 16 registered nursing homes under the Private Healthcare Facilities & Services Act 1998, in addition to the services that are initiated by the Social Welfare Department, such as Home Help Services, Rumah Sri Kenangan, Rumah Ehsan, Pusat Jagaan Harian Warga Emas, and activity centres for senior citizens. 

Yip says that to meet the growing need, the government has proposed the creation of more facilities and services for the ageing population and has encouraged the private sector to look at the business opportunities.

 

Setting aside money for care

In Malaysia, most people refer to long-term care as medical care and equip themselves with medical insurance to cover any large, unexpected medical treatments and hospitalisation costs. However, they neglect to prepare themselves for the daily living expenses as well, which may take a huge toll on their finances.

“We [still] have to pay for services such as daily living activities (feeding, toileting, grooming) and instrumental activities of daily living (managing finances, handling transport, preparing meals, shopping), which are recognised as non-medical care needs. This is because our medical insurance will not pay for these costs and this will potentially eat into our retirement savings,” says Yip. 

Many Malaysians depend on their Employees Provident Fund savings or families for their post-retirement care, she adds, as the country is not a welfare state and private sector retirees do not receive a government pension.

Recognising the need for sustainable retirement care, Managedcare introduced CareTRUST, a living trust that allows individuals to set aside money for their long-term retirement care or healthcare. The framework is the first of its kind in the country. 

“It is a known fact that many Malaysians have insufficient money [for retirement] due to uncalculated risks such as longevity risk, medical inflation and high cost of living, which can make retirement life tough. Hence, the need for financing options that allow Malaysians to put aside money for long-term care,” says Yip. 

The living trust framework is a collaboration between Managedcare, Kenanga Investment Bank Bhd and Rockwills Trustee Bhd. Customers can open a CareTRUST account with a minimum of RM30,000. The sum will be invested in Kenanga Wealth Management’s (KenWealth) Kenanga Principal Protected Income Fund (KPPI) — a diverse portfolio of short-term money market and deposit-based instruments that are not subjected to market valuation risks. The portfolio is fully managed by KenWealth.

The fund does not promise a guaranteed return but it provides a high level of liquidity as it is a money market fund. If the account holders prefer their funds to be invested more aggressively, they are allowed to direct the trustee to switch to the existing 280 unit trust and Private Retirement Scheme funds offered by KenWealth at no cost. 

As the independent trustee, Rockwills is given the custodial rights to manage the funds, safeguarding the account holder’s interests by monitoring and disseminating the monies for care according to their instructions when care is needed. 

The accumulated money will be used to pay for long-term care if needed. In the event that the account holder’s balance falls below the minimum threshold of RM25,000, Rockwills and Managedcare will send a written notice to the account holders to top up the money in their account. Upon falling below the minimum threshold and the death of the settlor, the CareTRUST account is automatically dissolved and the balance paid to the beneficiaries. 

The account holder will be charged a RM1,500 set-up fee (excluding Goods and Services Tax and stamp duty), an annual fee of 1% of the gross value of their trust assets, payable on a quarterly basis, and a monthly care administration fee of RM300 (excluding GST) upon commencement of the care services. 

Account holders are allowed to revoke their accounts at any time, with a dissolution fee of RM2,500 (excluding GST). If they do not top up the money in their account after receiving notices from Rockwills and Managedcare, the accounts will be dissolved. 

There are three phases in having a CareTRUST account — the savings phase, care phase and exit phase. After opening an account, the account holder will top up money on a regular basis in the savings phase. When they reach the age where they need care, they enter the care phase and receive long-term care services administered by Managedcare, where the trustee will use the money from their trust to pay for their needs. The account holder enters the exit phase once he or she decides to revoke the trust.

“There is no specific duration between each phase, which means you can save more money and top up even when you are in the care phase. [There is] no big difference between opening an account at age 30 versus age 50. However, there is a possibility that the 50-year-old will enter the care phase before the 30-year-old,” says Yip.

As the care administrator, Managedcare coordinates, monitors and oversees healthcare service providers for the account holders. Yip says there are several categories of long-term care services for the account holders to consider. 

“Typically, these services need to be tailored to suit each individual’s needs and level of support. There is no one-size-fits-all solution. Instead, a combination of care services are often put together after a thorough assessment of an individual’s needs,” she adds.

To cater for account holders with special conditions and disabilities, for example, Specialised Care Services are offered for those with Alzheimer’s disease, dementia, Parkinson’s disease, Down syndrome, autism and learning disabilities, among others.

While in the care phase, Managedcare conducts a care assessment to design a care plan for the account holders. It will review and update the account holders’ care needs periodically. Managedcare also manages the account holders’ care records and generates care reports as a means of monitoring the account holder’s progress and to inform the family of his or her condition.