Updated: 30 Aug 2011

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Introduction

Some medical alarm companies aren't playing fair.

Medical alarms can help older people to live independently – and provide peace of mind for friends and relatives.  But we found wide variation in contracts used by suppliers, with some including terms and conditions we think are unfair.

We compare the contracts and prices of the main "approved" suppliers and look at what you should consider before signing up.

Unfair terms

Frances and George Griffin signed-up for a Signature Security medical alarm in late 2009. But when they decided to cancel, they struck a problem. The company said they had a 36-month contract. If they wanted to end it, Frances and George would have to "buy out" the remaining 17 months. The bill: $1700.

Frances was shocked. She thought they'd be able to cancel at any time. It was only when she read the fine print that she discovered they were locked in for 3 years. She got in touch with us to find out what her rights were. We contacted ADT Security, the new owners of Signature, and the company agreed to waive the $1700.

The Griffins were pleased with ADT’s response. But we think they got a raw deal to begin with – there's no reason why medical alarm suppliers should tie customers to 3-year terms.

To add salt to the wound, it's often the taxpayer who foots the bill for these lengthy contracts. The majority of medical alarms are funded by the Ministry of Social Development through disability allowances. The ministry pays out almost $50 million a year for alarm subsidies (see Work and Income allowance).

Suppliers are required to have ministry approval if they're providing medical alarms to people eligible for a disability allowance. We think companies that put unfair terms in their contracts shouldn’t be on the ministry’s “approved” list.

Price and policies

Over 40 "approved" medical alarm suppliers compete for customers. Many companies are relatively small players. Ministry of Social Development figures show the bulk of the market is served by just 5 providers: St John, Bupa Care Services, Signature Security, Safe Link and Kiwi Concern.

We asked these providers plus 4 other “largish” players for information on their prices and contract terms (see Suppliers compared).

We found surprisingly little difference in price. Costs for a monitored alarm ranged from $39.80 to $40.80 a fortnight – around $1000 a year.

But there were big differences in cancellation policies.

At one extreme is the minimum 36-month term required by suppliers such as Signature Security: you can’t cancel in the first 36 months unless you move into care or your disability allowance stops. If you want to cancel because you no longer want the service – like Frances and George Griffin (see Unfair terms) – you're stuck.

The same cancellation policy is used by Signature Security's owner, ADT. It’s also used by Homeguard Medical Alarms, which is linked to ADT's alarm-monitoring service and says it signs up customers to ADT's standard terms and conditions.

The Signature Security contract Frances and George were given also had a clause stating you can't terminate the agreement during the 36-month minimum term if you want to change to another provider. We think that’s unfair and also a breach of the Code of Professional Conduct for Approved Suppliers of Monitored Medical Alarms.

This code, developed by the ministry, demands that suppliers adhere to the "highest standards of honesty, accuracy, integrity and decency". One of its requirements is to facilitate customers' requests to change suppliers. The ministry told us it was following up Signature's potential breach.

Most of the other companies we contacted also required customers to sign up for a minimum period – although not as long as 36 months.

• Bupa Care Services stipulates a 24-month minimum term. If you cancel before time's up, you'll get stung with a $100 early-termination fee.
• St John has a 3-month minimum term, although it offers a 1-month free trial period.
• Freedom Medical Alarms (a service jointly run by Wellington Free Ambulance and Healthcare of New Zealand) has a 30-day minimum term but extends this to 3 months if you want to change supplier.
• Kiwi Concern and Safe Link told us they didn't have a minimum specified term. Kiwi Concern said customers could cancel at any time by giving written notice.
• Safe Link told us customers could cancel by giving 1 month’s notice if they no longer want the service. However, it requires 3 months’ notice if you want to switch supplier.
• Chubb was the only other company that said it didn't require customers to sign up for a minimum term.

Suppliers compared

Guide to the table

Suppliers were surveyed by phone in July 2011. Price/fortnight is the price quoted for one base unit and one pendant/wristband.

• A = provides ADT Security services.
• B = owned by ADT Security.
• C = ADT states it's reviewing the length of its minimum term. 
• D = 3 months if you want to change supplier.

 

Ministry review

The Government announced this year that it wanted to "achieve better value for money" from its spending on medical alarms. The ministry is consulting on changes and a revamped system is expected to be in place by March 2012.

The government intends to "leverage" its position as the main funder of alarms to negotiate cheaper prices with suppliers. A paper presented to Cabinet estimates up to $9 million in savings a year, although the costs of managing the new system may partially offset these gains.

Under the proposed changes, “approved” suppliers will have to sign an agreement with the ministry setting out their costs and service standards. Individual consumers will still have their own contract with the supplier; and funding (in the form of a disability allowance) will continue to be paid directly to the consumer.

Merv Dacre, Senior Services General Manager at the Ministry of Social Development, said suppliers' contracts would also be assessed as part of the new process. We think that should be a priority.

We'd also like to see suppliers required to have consumer safeguards in their contracts. At the very least, there should be fair cancellation policies – consumers shouldn’t have to sign up for lengthy periods or get stung with cancellation fees. And contracts should contain details of the supplier's performance standards (what it commits to do and when) and its complaints process.

Prompted by impending changes, the industry has recently developed its own code of practice and code of ethics. The codes contain some useful provisions but we think they're unclear about consumer rights – particularly the right to cancel.

Buying advice

Changes resulting from the ministry's review won't happen until 2012 at the earliest. So if you're thinking about getting a medical alarm, check the contract carefully:

• Before you sign up, get the contract looked at by a family member or friend you trust.
• Don't be pushed into signing on the spot. Ask the salesperson to leave the contract with you while you think it over. If they refuse, don't do business with them.
• Pay particular attention to your cancellation rights. If you no longer need or want the service, you should be able to cancel by giving reasonable notice. A contract that requires more than 30 days’ notice isn't reasonable – less would be better.
• If you feel you're being pushed into a contract or have concerns about the supplier, contact the Ministry of Social Development. Suppliers who provide medical alarms to people receiving a disability allowance must comply with the ministry's code of professional conduct.

Merv Dacre, Senior Services Manager at the Ministry of Social Development, says the ministry will "thoroughly investigate and, if necessary, impose consequences" on suppliers who breach the code. "People who need medical alarms are vulnerable. It is abhorrent that providers would think it is okay to take advantage of them," he told us.

The industry body, Telecare Services Association of New Zealand (TSANZ), has also developed a complaints process. However, TSANZ only gets involved if the supplier is one of its members and you haven't been able to sort out the problem directly with that supplier.

We say

• We found wide variation in consumer contracts used by medical alarm suppliers. Some contracts include terms and conditions that we think are unfair.
• The Ministry of Social Development's review provides an opportunity to raise standards. We want to see fair contracts used by all suppliers. Companies that fail to do this should be removed from the ministry’s “approved supplier" list.
   

How they work

A monitored medical alarm consists of a base unit and a pendant or wrist band. If you need help, you press the "trigger" button on the pendant or wrist band and the base unit sends a call to the monitoring company. Pressing the button on the base unit has the same result.

Then it's up to the monitoring service. The service calls you to find out the nature of the problem. If there's no answer (because you're incapacitated), it arranges for an ambulance to be dispatched. Most dial 111 on your behalf. Organisations that also provide ambulance services (such as St John and Freedom Medical Alarms) will arrange dispatch directly.

Some medical alarm systems let you programme the number to be called when you press the trigger (for example, that of a nearby relative or friend).

The range of a medical alarm “trigger” is similar to that of a cordless phone. You can usually use it around the home and garden.

The pendant or wrist band contains batteries that need replacing from time to time. The base unit, installed in a telephone jackpoint, should also have a battery backup in case the power fails.

Mobile option

A mobile phone can provide a relatively inexpensive alarm system. It has the advantage that it can be used further afield – not just at home. The phone can be set up with a speed-dial key to call 111, or to call a neighbour or nearby family member. Prices for basic mobile phones start at under $100.

Telephone add-on services

Telecom offers a service called Hotline – if your phone's receiver is removed from the hook (or you press the "call" button on a cordless phone) and no number is dialled, a pre-arranged number is automatically called.

TelstraClear offers a similar service called Auto dialling. If the receiver is left off the hook for more than 8 seconds, your phone will automatically ring a preset number.

Work and Income allowance

Watch out for companies that try to market their alarms as "free". It sounds like a gift but it isn't. The sales pitch disguises the fact you need to apply for a disability allowance from Work and Income (now part of the Ministry of Social Development) to cover the costs of the alarm – and not everyone is eligible for the allowance.

Work and Income covers rental and monitoring costs as long as the alarm is:

• necessary for normal daily living – without it, your life or health is at risk or your disability aggravated
• an ongoing cost directly related to your disability
• supplied by an “approved” medical alarm company (alarms provided by non-approved companies may be funded in some circumstances).

You also have to meet Work and Income's means test:

• a single adult’s income must be no more than $575.48 gross per week
• a married couple’s income must be no more than $851.83 gross per week.

As well, your doctor has to provide a medical alarm certificate confirming the alarm is needed.

More help

• Work and Income list of approved suppliers and Code of Professional Conduct: www.workandincome.govt.nz
• Ministry of Social Development: www.msd.govt.nz 0800 552 002 (senior services freephone)

 

Report by Jessica Wilson.