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on Friday, July 12, 2024
Navigating the complexities of aged care funding can be daunting, but understanding key concepts like the Refundable Accommodation Deposit (RAD) and Daily Accommodation Payment (DAP) is essential for making informed decisions about residential care options.
Below, you'll find a summary of the accommodation pricing for residential aged care in Australia. We recommend that you seek independent financial advice to decide on the payment option that works best for you and your family.
When you begin researching residential aged care, you will come across four acronyms relating to the price of residential aged care, that are essential to understand.
The Refundable Accommodation Deposit (RAD) is a standard room price set by the respective aged care home and is paid by a refundable lump sum.
The Refundable Accommodation Contribution (RAC) is when the government assists with the costs of your care. The provider works out the cost of the RAC based on the DAC (determined by Services Australia and based on your means assessment).
The Daily Accommodation Payment (DAP) is the RAD equivalent paid periodically. The DAP amount is calculated by applying the maximum permissible interest rate (MPIR) to the room price and dividing the amount by 365.
The Daily Accommodation Contribution (DAC) is when the government assists with the cost of your care. The DAC is determined by Services Australia and based on your means assessment.
If you agree to a room price of $500,000, your DAP will be worked out as follows:
DAP = (room price × MPIR) / 365
= ($500,000 × 4.07%) / 365
= $55.75
For the same room price of $500,000, you could choose to pay a part RAD of $200,000 and a DAP based on the remaining $300,000. For this combination payment, your reduced DAP would be worked out as follows:
Reduced DAP = (agreed room price - RAD paid x MPIR) / 365
= ($500,000 - $200,000) × 4.07%) / 365
= ($300,000) × 4.07%) / 365
= $33.45
Please note that the MPIR used above (4.07%) is an example only.
You can find current and previous MPIRs on the Department of Health and Aged Care website.
From the day of entering their care, the new resident has 28 days to work out whether they want to pay the facility a lump sum, daily payment, or some combination of the two. If you choose to pay by RAD (lump sum), your aged care provider must give you six (6) months from your move in date to pay the full lump sum.
The RAD and DAP is determined on the quality, location and features of the accommodation and can vary from bed to bed.
If a facility wants to charge more than $550,000 for their RAD, they need to seek approval from the Aged Care Pricing Commissioner.
Providers must advertise their accommodation prices in both RAD and DAP figures prior to charging their clients.
Under the Living Longer, Living Better reforms, the resident must be left with a minimum asset value of 2.25 times the basic age pension at the time of entry.
Alongside the RAD and DAP, a means test measuring a combination of assets and income will determine how much the government will contribute to a person’s accommodation and how much each person/family will also have to contribute.
The means-tested care fee will be different for each resident, and not everyone has to pay it.
Click here to view the current Schedule of Fees and Charges for Residential Aged Care
Everyone, regardless of whether they are liable to pay for accommodation, must pay the daily care fee, which is 85 per cent of the single pension. You will pay this fee directly to your aged care home on a fortnightly or monthly basis.
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