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. To save you that trouble, in summary, there are 4 components to the costs and those components are:
1. daily care fees which every resident pays. These are pegged at 85% of the full aged pension, currently $50.16 per day and revised every March and September;
2. means tested care fee which, as the name suggests, are calculated using a very complicated formula on the resident’s income and assets. The formula is not only complicated because of the convoluted definitions of the various elements of the formula but also because of the rules around what is included and excluded from each of the elements of the formula. They vary from $0 per day to around $245 per day;
3. 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 or other items that can usually be purchased independently of the facility. If you are considering a facility with these charges, you should ask what the resident gets for those charges and work out whether you think it is worth the cost;
4. 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 5.77% 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 a aged care specialist financial adviser. Pensions can be affected by the way that aged care is funded and paid for and the way the resident organises the funding of aged care can be to the financial detriment of the resident. Seek advice from a specialist in aged care. We can assist.
So, if you do not already have a financial planner, given the current bad press around financial planning, how do you choose the right one? As aged care is seen as a growing source of revenue, a lot of planners will tell you they have the requisite knowledge when they do not. Here are some tips (although not foolproof):
– you can google ‘aged care financial advice’;
– screen the results for those who, on their website, focus on financial planning for aged care;
– ring around those firms and find out the cost of the advice. The cost varies from around $500 to over $3,000. Cost does not indicate quality. The cost is generally a function of the manner in which they deliver the advice; and
– choose one that charges a fixed fee for that advice.
Or you can call us.
Until next time.
Sara and Margaret
*All figures in this article are correct as at 1 June, 2018. The figures are reviewed quarterly.