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When it comes time to investigate residential aged care for yourself, your partner, parent or relative, the search for a facility and how to pay for it can seem daunting. The system is complex, and decisions are often made in the midst of a health crisis.
Factors such as location to family and friends, reputation for care or general appeal are just as important as the sometimes-high price of a room and other fees in residential aged care.
Don’t leave it too late to have an honest conversation about aged care options with your loved ones. Learn how to start the conversation about aged care here.
Accommodation charges
The first thing to be aware of when researching your residential aged care options is that there are separate costs for the accommodation and the care provided by the facility.
The accommodation payment essentially covers your right to occupy a room. You can pay this accommodation fee as a lump sum called the Refundable Accommodation Deposit (RAD), or a daily rate similar to rent, or a combination of both.
The daily rate is known as the Daily Accommodation Payment or DAP and is effectively a daily interest rate set by the government. The current daily rate is 4.04 per cent. If the RAD is $550,000 then the equivalent DAP is $60.87 a day ($550,000 x 4.04%, divided by 365 days).
A resident can pay as much or as little towards the RAD as they choose, but any outstanding amount is charged as a DAP.
The RAD is fully refundable to the estate unless it is used to pay any of the aged care costs such as the DAP.
Daily fees
As well as an accommodation costs there are daily resident fees that cover living and care costs. There is a basic daily fee that everyone pays and is set at 85 per cent of the basic single Age Pension. The current rate is $52.71 a day and covers the essentials such as food, laundry, utilities and basic care.
Then there is a means-tested care fee which is determined by Services Australia or Veteran’s Affairs. This figure can range from $0 to about $256 a day depending on a person’s income and assets. The figure has an indexed annual and lifetime cap – currently set at $28,339 a year or $68,013 over a lifetime.
Some facilities offer extra services, where a compulsory extra services fee is paid. It has nothing to do with care but may include extras like special outings, a choice of meals, wine with meals and daily newspaper delivery. It can range from $20-$100 a day.
A means assessment determines if you need to pay the means-tested care fee and if the government will contribute to your accommodation costs. Before moving in, everyone who moves into an aged care home is quoted a room price. The means assessment then determines if you will have to pay the agreed room price, or RAD, or contribute towards it.
Find out how Financial Planner, Theo Hollard was able to support Beth’s aged care decisions here.
How means testing works
A means-tested amount above a certain threshold is used to determine whether you pay the quoted RAD and how much the government will contribute towards the means-tested care fee.
A person on the full Age Pension and with property and assets below about $37,155 would have all their costs met by the government, except the $52.71 a day basic daily fee.
A person on the full Age Pension with a home and a protected person, such as their spouse, living in it and assets between $37,155 and $173,075 may be asked to contribute towards their accommodation and care.
To be classified as a low means resident there would be assessable assets below $173,075.20 (indexed). It is also subject to an income test.
A low means resident may pay a Daily Accommodation Contribution (DAC) instead of a DAP which can then be converted to a Refundable Accommodation Contribution (RAC). They may also pay a small means-tested care fee.
Payment strategies
The fees you may pay for residential care and how you pay them requires careful consideration. For example, selling assets such as the former home to pay for your residential care can affect your aged care fees and Age Pension entitlements.
If you would like to discuss aged care payment options and how to ensure you find the right residential care at a cost you or your loved one can afford, give us a call.
What you need to know
This information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.
