Since the Living Longer Living Better changes to aged care fees and charges came into effect on 1 July 2014, the costs of aged care have become very complicated and confusing. It is easy to find information about the costs of residential aged care by just doing a google search or going on to the myagedcare.gov.au website. But understanding those costs is a different matter altogether. To save you that trouble, in summary, here are the 4 components to the costs of aged care:
- Daily care fees which every resident pays. These are pegged at 85% of the full aged pension, currently $52.25 per day and revised every March and September;
- Means tested care fee which, as the name suggests, are calculated using a complicated formula on the resident’s income and assets. The formula complicated due to the convoluted definitions of the various elements and the rules around what is included and excluded from each of the elements. They vary from $0 per day to around $260 per day;
- Extra services or additional services fees which some facilities (but not all facilities) charge. These fees have no bearing on the care provided; they are just extra or additional services such as wine with meals or newspapers. These items can usually be purchased independently of the facility. If you are considering a facility with these charges, ask what the resident gets for those charges and work out whether it is worth the cost.
- Accommodation Payment (what used to be called the bond). This can be paid to the facility in whole or in part as either cash which is called a Refundable Accommodation Deposit (RAD) or as a Daily Accommodation Payment (DAP). The DAP is calculated as an interest payment on the amount of Accommodation Payment that is not paid as a RAD. The interest rate is fixed by the Government, currently 4.1% per annum, and paid on any part of the Accommodation Payment that is not paid as a RAD for each day in care. The RAD is guaranteed by the federal government and refunded when the resident leaves the facility.
You pay some or all of these charges, depending on the resident’s means and whether the facility charges extra services or additional services fees. The aged care residential facility, in conjunction with Centrelink, will work out the payments for you if you want them to or if you do not take control. Residents will most likely but not always need to complete the Centrelink assessment form and aged care residential facilities now often hand them out during a tour of the facility and want them filled out before the resident is admitted. However, it is not their job to optimise these costs. There are numerous ways to ensure that you are not paying more than you should for aged care and every situation is different. It is nigh impossible to work out how to do it unless you are an aged care specialist financial adviser.Pensions are affected by how aged care is funded and paid for. How the resident organises the funding of aged care can be to their financial detriment. Seek advice from a specialist in aged care. We are experts and we can assist.
Until next time
Margaret Harrison