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Residential Aged Care: Costs Explained

on Monday, October 5, 2015

Figuring out the costs of placing a loved one into residential aged care can be a daunting and sometime off-putting task. 

The Australian Government regulates the maximum costs you’ll be required to pay and in some circumstances, subsidises the costs of many aged care services. However, if your financial situation allows, you will be required to contribute a set amount to the cost of your care.

Basic Daily Fee:

A basic daily fee helps to cover the costs of day-to-day living including meals, cleaning, laundry, heating and cooling.

The maximum basic daily fee for new residents entering aged care (including respite) is $47.86. This rate increases on March 20th and September 20th every year to coincide with changes to the Age Pension.

The maximum daily fee rate is 85% of the single person basic Age Pension.

When you move into a residential aged care facility, the Department of Human Services will send you a letter confirming your maximum Basic Daily Fee.

Means-Tested Care Fee:

The Means-Tested Care Fee is an additional contribution towards the cost of aged care that you may need to pay.

The Department of Human Services will conduct an assessment of your income and assets and will then advise you of the amount.

There are caps that will apply to your means-tested care fee – both yearly and lifetime. Once you have reached these caps, you are not required to pay anymore means-tested care fees.

If you have been receiving Home Care services and paying means-tested care fees prior to moving into residential aged care, this will also contribute to your yearly and lifetime caps.

Aged Care Accommodation Payment:

The Accommodation Payment is used to cover the cost of your accommodation in the aged care home. In some cases, the Australian Government will cover all or part of your aged care accommodation costs. If you do not qualify for any Australian Government subsidies, you will be required to pay the accommodation price agreed with the aged care service provider.

If you are a member of a couple, half of your combined income and assets will be considered when determining your eligibility for Government assistance.  

The Accommodation Payment is quoted by an aged care service provider as a:

  • RAD (Refundable Accommodation Deposit)
    and a
  • DAP (Daily Accommodation Payment)

When searching Aged Care Online for an aged care home, you will notice that many aged care providers have a range of prices depending on the room type and quality of accommodation. For example, a single bedroom with a private ensuite bathroom will most often require a higher accommodation payment than a shared bedroom with shared bathroom.

It is common to see accommodation payments ranging from $250’000 to $550’000 around Australia, however you don’t need to be alarmed by seeing these high costs.  

Your Residential Agreement will specify the accommodation payment as both a lump sum (RAD – Refundable Accommodation Payment) and the equivalent daily accommodation payment (DAP).

You can choose to pay the RAD in full, the full DAP or a combination of the two. If you pay a combination of both, the DAP will be reduced. The conversion of a RAD into a DAP is based on an interest rate set by the Government.

Below, you can see the RAD for this room is set at $300’000 and the full DAP is $52.27.

If you choose to pay half of the RAD ($150'000), the DAP is then reduced to just $26.14 per day. If you full the RAD in full, the DAP will be reduced to zero. 

To view the RAD and DAP costs on Aged Care Online, simply click the Vacancies tab on any listing and then click the Calculate Your DAP link. Click here to see an example

From the date you are admitted into residential aged care, you will start paying the full DAP payment unless otherwise specified. You have 28 days from admission to decide how you wish to pay for your accommodation.

If you choose to pay for your accommodation as a refundable accommodation payment (RAD) this money will be paid back to you (or your estate) if you leave or pass away.

The aged care service provider holds the RAD in trust for you which is fully refundable. In some ways, the RAD is like an interest-free loan to the aged care provided which is not repayable until you leave.

There is no risk with getting your RAD back, as repayment is guaranteed by the Government - provided you have paid the RAD to a service accredited by the Commonwealth Government.

Extra Services Fees:

Some aged care providers will provide extra services that are not covered in the Basic Daily Fee or Accommodation payment. Some extra services may include hairdressing, Foxtel, daily newspaper delivery, more meal choices and a higher standard of accommodation.

Extra Service fees are not regulated and are agreed upon between you and your chosen aged care provider.

If all of that sounds a little overwhelming, don’t worry. There are services available to you to assist in navigating the world of residential aged care. Visit Millennium Aged Care Placement Consultants to find out more.

Some more helpful tips:

  • You can use Aged Care Online to check accommodation payments (some residential aged care providers may charge the same rate for all rooms while others may charge different rates)
  • When you put your name down on the waiting list, make sure that the room you’re applying for is within your price range
  • Review all of your finances – don’t implement strategies just to reduce fees
  • If you’re feeling overwhelmed, seek professional advice
  • Don’t hide any of your assets – if you can’t pay the accommodation payment (because you claim not to have enough assets) you may not be offered a place
  • Hiding assets could mean that you’re unable to move into the aged care home of your choice

Disclaimer: this information is general advice only and does not take into account your particular circumstances or objectives. Before taking any action you should seek advice from professional financial planners. 

 

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