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on Monday, October 9, 2023
As we age, the need for care and attention can become a pressing concern for both individuals and their families. In Australia, nursing homes, more recently referred to as aged care homes or residential aged care facilities, provide a valuable solution for older Australians seeking the support they need to achieve their well-being goals. However, understanding the financial aspects of residential aged care can be daunting.
In this article, we'll unravel the complex web of fees and charges associated with residential aged care to help you make informed decisions.
The first piece of the financial puzzle is the Basic Daily Care Fee, and it applies to all aged care residents, regardless of their income or assets. This fee covers essential daily living costs such as meals, cleaning, facilities management, and laundry. Unlike other fees, the Basic Daily Care Fee is not means-tested. At present, this fee is set at 85% of the standard full aged pension, which translates to approximately $60.86 per day (as of October 2023). Residents typically pay this fee directly to the aged care facility, usually on a monthly or fortnightly basis.
The means-tested fee is the second component of residential aged care fees. It is calculated based on an individual's income and assets, including their home, if they own one. If your annual income exceeds $32,331 or your assets are valued at more than $58,500, you will be required to pay a means-tested fee. This fee contributes to the cost of your personal and clinical care. The assessment for means-tested fees is conducted by either Centrelink or the Department of Veteran Affairs.
The third element is the Refundable Accommodation Deposit, a lump sum payment made to cover the cost of your room within the aged care facility. The RAD is negotiable between the resident and the facility and can vary widely depending on factors such as location and the facility's features. On average, the RAD in Australia is around $470,000. However, if your income is below $32,331 and your assets fall below $58,500, the Australian Government will cover the RAD for your accommodation.
For those whose income and assets exceed the threshold for government support or who prefer not to pay a RAD upfront, the option of a Daily Accommodation Payment (DAP) is available. The DAP covers the cost of your room, which you haven't paid for as a lump sum RAD. This fee is calculated based on the amount of the RAD for your chosen room, multiplied by 365 days, and the Maximum Permissible Interest Rate (MPIR) set by the Australian Government. As of October 2023, the MPIR stands at 8.15%. Residents can also choose a combination of RAD and DAP to pay for their room.
Many aged care facilities offer extra services like hairdressing, pay TV, special menus, or customised fittings and furnishings. These additional services come with extra fees that residents need to negotiate directly with the facility. It's important to note that these additional and extra fees are not subsidised by the government.
Several factors can influence the overall cost of residential aged care in Australia, including the type of facility, the resident's assets, savings, and income, funding eligibility, additional services, the resident's age, and the level of care required. Because of these variables, it's challenging to pinpoint an exact cost for nursing homes in Australia.
To get an estimate of what you might pay for residential aged care, the My Aged Care website offers a fee estimator tool. This tool takes into account your relationship status, home ownership status, income, superannuation, and debts to provide a ballpark figure for basic daily care fees, means-tested fees, and accommodation contributions.
Your basic daily care fee may be covered by a portion of your pension, depending on your financial circumstances. The basic daily care fee is currently set at 85% of the standard aged pension. However, it's important to know that the family home is considered an asset for aged care, except in specific cases where a 'protected person' resides in it as their primary residence.
Regardless of your financial situation, all Australians can access aged care services. If you're concerned about affording residential aged care, it's advisable to consult a financial advisor before making a decision. You can also access free financial information through Services Australia's Financial Information Service (FIS) or explore the financial support and advice resources provided by My Aged Care. In some cases, you may be eligible for financial hardship assistance to cover the cost of aged care.
Understanding the fees and charges associated with residential aged care is essential for making informed choices. By breaking down the financial aspects, we hope this article has provided you with a clearer picture of what to expect and how to estimate your potential costs.
Remember, there are options and support available for those who may be concerned about affordability, ensuring that quality aged care is accessible to all Australians.
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