Social welfare quagmire: A decade of inefficiencies & rising costs

The cost of welfare and the number of people seeking financial help from the Cayman Islands government have risen sharply over the past decade. Approximately $50 million per year is now spent on various public programs providing direct assistance to people in need, out of central government’s annual revenue of about $600 million.

Stipends and benefits to seamen and veterans account for more than half of the $50 million expenditure, with rising medical costs responsible for the most significant spending increases in the last 10 years.

Precisely comparable statistics for every government aid program are not available, but key programs analyzed by the Cayman Compass show major increases in the annual costs for rental assistance and poor relief vouchers, and other areas.

An auditor general’s analysis published last month suggests government has made little progress in implementing a coherent and coordinated welfare system that represents value for the money spent.

The auditor’s remarks follow its 2015 report on government welfare programs. That report showed spending had risen from $40 million in 2011 and 2012 to $50 million, a 25 percent increase, within three years.

Spending on welfare programs remains at around the $50 million per year mark in the current government budget, which spans an 18-month period to December 2017.

Premier Alden McLaughlin, outlining his government’s priorities to the Legislative Assembly in a statement last week, said reforming the failing system is a key priority.

“Some of the programs we have put in place to support vulnerable people fail them,” he said. “Our social services and welfare programs are inefficient, and the programs, as well as the agencies that deliver them, need reform.”

Not all of the figures available to the auditors are publicly accessible. However, an analysis of key government welfare programs by the Compass shows that over the past 10 years:

  • Money spent on providing rental assistance to those in need has quadrupled to $2 million a year
  • The number of people receiving “permanent” poor relief has increased to more than 1,000 – an additional cost of $1.5 million
  • Money spent on poor relief vouchers for food and clothes has tripled to $1.5 million

The cost of health insurance to seamen and veterans has doubled to around $8 million.

The number of ex-servicemen claiming the government stipend has gone down over the past decade, with the cost of this program cut in half from $2.25 million to just over $1 million.

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However, the Veterans Association has said it is aware of only a handful of living war veterans who would qualify for the payment, compared with 150-160 listed in the government budget as receiving the stipend.

Lola Dilbert, left, and Roslyn Palmer Jones dish up meals for the elderly and housebound at the Meals on Wheels kitchen in George Town on Thursday. – PHOTO: TANEOS RAMSAY

Charitable sector

Despite the increases in government spending on welfare, nonprofits say they are also facing an increasing demand for their services, and multiple legislators have said they are frequently asked to dig into their own pockets to assist constituents.

Michael Myles, formerly the government’s at-risk youth officer, now one of the leaders of the nonprofit Youth Anti-Crime Trust, said growing dependence on welfare is an issue that multiple governments have failed to address.

He believes rising teen pregnancy and an increase in unemployment and under-employment over the last decade are fueling increasing demands on the welfare system that will become unsustainable without reform.

He believes handouts need to be more directly linked to programs aimed at lifting people out of poverty. He said government should start by radically revising the Poor Relief Law.

“Currently there are no strings attached,” he said. “If you are able-bodied and unemployed, we should be requiring that you are volunteering 20 hours a week, that you are involved in education or vocational programs. You can no longer just sit home and say you are looking for a job.”

He said multiple programs, including parenting classes, vocational training and household finances, had been proposed in various reports over the years but never implemented.

He also believes people need to take more personal accountability.

“If you can afford cable television, if you can afford internet, you shouldn’t be coming for a food voucher. I have had people come to me for assistance and they are paying $100 a month for cable television. Where are we teaching people financial planning and accountability?”

Tara Nielsen, director of Acts of Random Kindness, said the charity is increasingly helping to pay rent for single mothers waiting to be approved for assistance by the Needs Assessment Unit.

She said the charity is often called to step in when women needed immediate help while waiting to be processed by the unit.

“There is a time-lag for the approval process, so a lot of these women can’t get help when they need it most.”

At one stage the charity was paying for tents as a short-term measure for people with nowhere else to stay. She said the NAU has gotten quicker at processing requests for rental assistance but does not pay deposits, and the charity sector is often required to help out.

She said inefficiencies in the unit, including a failure to pay rent on time, as well as an $800-a-month cap on assistance make it difficult for women with children to find somewhere to live, even when they have been approved for assistance.

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Though she acknowledges that many of the women seeking support are young single mothers who may have made poor choices as teenagers, without proper and timely support, it is their children who suffer.

Needs Assessment Unit

The central hub for those seeking support and a focal point for some of the frustration around social assistance is the Needs Assessment Unit.

On any given day, scores of Caymanians filter through the nondescript office behind Guy Harvey’s restaurant in George Town.

The NAU is responsible for assessing applications and administering payments for poor relief, rental assistance and food vouchers, among other programs.

Director Tamara Hurlston said the unit’s allocations have increased as the cost of living has gone up in Cayman and to meet demand. The rental assistance cap was raised this year to $1,200 a month for a family of five, though it remains at $800 for smaller families.

Staffing levels at the NAU have also increased from 16 in 2014 to 24 today, still short of the 40 positions the unit says it needs to manage and monitor the various programs for those in need.

Ms. Hurlston said a new appointments process has eliminated the large crowds that used to gather outside the door before opening hours, though she acknowledged that staff shortages still prevent it from processing rental assistance applications as swiftly as some of the clients would like.

“Unfortunately, without sufficient staff to assess cases, review cases and process payments, these delays will continue. The assessment process entails interviewing the client and gathering all supporting and verifying documents and information to ensure they meet the criteria.”

The unit requires re-submission of documents every three months for those on temporary assistance, though those on permanent poor relief are not currently reassessed, again because of staffing issues.

Ms. Hurlston says the unit does provide budgeting advice and refers clients to employment programs and social workers where necessary. But, she said, the Poor Relief Law is archaic, and amended legislation is needed to compel people to take part in programs aimed at making them self-sufficient.

Among the unit’s recommendations for a fairer and more efficient welfare system are:

  • A program to incentivize able-bodied recipients to carry out volunteer work or training
  • An expansion of child care coverage to allow single mothers access to jobs that require shift work
  • Development of social programs to address family violence, substance abuse and parenting

A nationally defined poverty line to get a better understanding of the minimum income needed for the basic necessities in life.

Auditor’s report

The comprehensive 2015 auditor’s report found that Cayman’s various welfare programs had developed in an ad hoc manner over several decades, lacked an overall strategy and in some cases lacked underpinning legislative authority.

There were no measures in place to track the impacts of the programs or to reassess long-term recipients of government aid to determine if their circumstances had changed. There were no clear policies for officials to follow, and staff were left with significant discretion on granting poor relief, the report warned.

A follow-up review of government’s response to the audit and its recommendations, published last month, found that little had been done to rectify the situation.

Dorine Whittaker, chief officer in the Ministry of Community Affairs, said the solutions lie in a soon-to-be-released outline business case for the modernization of social assistance programs.

She said the aim is to implement the new system by 2020.

Appearing before the Public Accounts Committee on Aug. 16, Ms. Whittaker said the new system would bring financial aid, currently spanning multiple ministries and departments – including the government insurance company CINICO, the Health Services Authority, the Needs Assessment Unit and the Department of Children and Family Services – under one dedicated welfare unit.

“Right now, clients are going through three and four doors. The outline business case talks about clients having to go through one door.”

She acknowledged that the ministry currently does not have a clear and complete record of who is receiving what services.

“We are double- and triple-counting clients between us, the health services and CINICO,” she said.

The auditor general’s office in its report had warned that some people may be falling through the cracks, while others were likely being paid unnecessarily because of this duplication.

Ms. Whittaker said a new database would be created to keep track of all clients who receive any form of government aid and ensure they have access to any other services they need – from mental health support to assistance in finding work.

She said the ministry has already begun to implement some of the outline business case report’s recommendations, including integrating social workers into the Needs Assessment Unit. She said this would help clients get social and mental health needs, as well as financial needs, dealt with in one place. The unit is also coordinating with the National Workforce Development Agency about getting able-bodied clients back to work.

However, in her legislative testimony, Ms. Whittaker suggested that much of the money spent on welfare is for the elderly, the disabled and the mentally ill.

She said these needs are not likely to lessen over time, but the business case creates the basis for a policy that would help better meet the needs of the community through more efficient use of the same resources.

Rising healthcare costs

Healthcare is by far the largest cost in government’s welfare budget.

In 2006/2007, around $4 million was allocated for health insurance through CINICO for seamen and veterans. Just over $6 million was spent on medical care for “indigents” and on healthcare for the uninsured and under-insured.

By 2015/16, those expenses had increased threefold to just over $30 million.

Jeanette Verhoeven, vice president of Aon Risk Solutions, said global factors, such as rising healthcare costs in Cayman and overseas, would have contributed to the increase. An aging population and enhanced technology have also meant greater expenses on healthcare generally. The commitment to cover overseas care for seamen and veterans has likely contributed to rising expenditures as well.

“Since most seafarers and veterans are getting up in their years, the simple aging of the population will contribute to costs, especially as those who had private insurance retire and start using their seafarer coverage more. The old insurance adage that ‘you spend 80 percent of your total medical costs in your last 20 percent of life’ is often true.”

Amid rising insurance costs, Ms. Verhoeven believes that more consumers feel financially compelled to choose cheaper plans, which may leave members under-insured and/or possibly reliant on the state after a medical emergency or an extended illness uses up available benefit allowances.

“I think another factor contributing to persons applying for indigent care is that as premiums rise, many persons and some employers are deciding to downgrade their health coverage to include plans which may have annual caps on services, such as prescription drugs or the annual catastrophic maximum which simply may run out when the person has an unfortunate health event. We encourage our clients – on an employer group and on an individual-choice basis – to try to maintain the best coverage they can afford at all times, since health status can change quickly for persons of all ages,” she said.

Political solutions

During his Strategic Policy Statement, Premier McLaughlin highlighted welfare reform as a priority of this administration.

“We will address the concerns of the effectiveness of the Needs Assessment Unit, as well as improve the speed at which landlords and others who provide services to our social services agencies receive payment. Both of these are major areas of complaint and we will correct them,” he said.

Mr. McLaughlin also promised to increase the stipends for poor relief, for veterans and seamen, and for retired civil servants.

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