If you or a loved one are at a stage in your life that living at home independently is no longer safe or appropriate, you may be ready to transition into residential aged care. It is important to understand what is involved when entering this next level of care. Attwood Marshall Lawyers Wills and Estates Senior Associate and Accredited Aged Care Professional, Debbie Sage, discusses why it is so important to make an informed choice and the costs you need to consider when choosing a residential aged care facility.
Residential aged care is that next step where, for a variety of reasons, you can no longer live at home. Generally, this option is known to be for people who need that additional level of care. The services offered at residential aged care facilities cover personal care, accommodation, laundry and meals, nursing, and a variety of allied health services.
In order to make the move into an approved residential aged care facility, an ACAT assessment will be required to determine your eligibility. This can be organised by contacting My Aged Care.
The Australian Government pays subsidies and supplements to approved providers for each resident depending on their level of care needs, and residents are expected to also contribute toward the cost of their care and accommodation if they can afford to do so. The fee structures of residential aged care can be extremely complex and confusing. It is important to discuss your financial circumstances with an accredited aged care professional who can review your financial situation and determine the most affordable way for you to transition to that next level of care.
What kind of costs are involved when entering residential aged care?
There are a number of costs associated with aged care homes and what fees you may be expected to pay will depend on not only your financial position but also the type of facility you may choose to go into.
Basic Daily Fee
Everyone that enters residential aged care, whether it is on a permanent or respite basis, is required to pay the basic daily fee.
This fee helps pay for your day-to-day services you will receive such as meals, cleaning, laundry and the ongoing management costs of the facility.
The basic daily fee works out to be 85% of the single person rate of the basic age pension. The government sets this fee each year on 20 March and 20 September and it changes in line with the increases to the age pension.
This fee is paid directly to the aged care provider on a fortnightly or monthly basis and applies for every day you are a resident, including days that you may be away (such as if you were in hospital or on a holiday).
Means Tested Care Fee (MTCF)
Depending on your level of income and assets, a Means Tested Care Fee (MTCF) may be applicable. This is an additional amount that some people may have to pay toward the cost of their day-to-day personal and clinical care which is determined through the completion of a means assessment with My Aged Care.
The Means Tested Care Fee can range from $0.00 to $256.44 per day.
The services that the Means Tested Care Fee goes toward includes:
- Personal care such as assistance with bathing, dressing, grooming and other personal care assistance; and
- Clinical care such as specialised nursing stations, medication assistance and catheter care.
The Means Tested Care Fee is subject to annual and lifetime caps which means once you reach the annual cap you do not pay the Means Tested Care Fee again until the anniversary of when you first started receiving aged care services (this is called your “anniversary date”) and will continue to be annually capped until you reach your lifetime cap.
Once you reach your lifetime cap, you do not have to pay the Means Tested Care Fee any further, regardless of your income and assets.
The Anniversary Date
It is important to be aware that if you are transitioning from living at home and using a home care package into an aged care facility, any “income-tested fee” that you may have paid while you were receiving aged care services at home is counted towards your annual and lifetime caps when you move into a facility. Your anniversary date will be the date you first started to receive aged care services in the home, not the date you first entered into care. It is important to be aware of this date to ensure that you do not pay the Means Tested Care Fee beyond what you are expected to (that is, beyond the annual and lifetime caps).
Accommodation costs may be applicable depending on your level of income and assets. If you can afford it, you are expected to pay for your own room, or alternatively pay a contribution towards the full payment if you cannot afford the entire amount.
Accommodation costs vary depending on the facility and the type of room you choose. Your options may consist of:-
- choosing between a single or shared room;
- the choice of a larger or smaller room;
- choosing a room in a certain location in the facility that attracts a higher or lesser charge depending on its geographical location (e.g. a room with ocean views or views overlooking a golf course or courtyard etc.).
Whether you are eligible to receive Government assistance with some or all your accommodation costs is determined by completion of an income and/or means assessment.
What is a “means assessment” and how does it impact what you have to pay?
Working out how much you will pay for residential aged care is a key step in deciding what kind of aged care services are going to be right for you. Each facility sets its own pricing and the amount you pay for your accommodation will depend on your eligibility for government assistance through completion of a means assessment.
Not everyone needs to complete the assessment. There is a quick multiple-choice Q&A on the MyAgedCare website which helps you work out if you need to complete an assessment.
It is important to understand that if you do not complete the means assessment then you will be asked to pay the maximum Means Tested Care Fee until you reach the annual and lifetime caps as well as the agreed room price.
As a general guide (as at the date of this blog), if you have income below $27,840 AND assets below $50,500 then the Australian Government will pay your accommodation costs.
However, if you have income above $70,320 OR assets above $171,535.20, you will need to pay the full cost of your accommodation. You are entitled to negotiate with the facility and hopefully come to a mutual agreement as to how much you will pay for the price of your room.
If you are not eligible for government assistance, then the amount you will pay will depend on the type of room you choose and any negotiations you make with the aged care facility.
Can residents have a say about how they pay their accommodation costs?
Incoming residents have a number of different choices available as to how they pay for their accommodation costs, however, it does initially depend on whether you are eligible for government assistance through completing the means assessment.
If you are deemed not eligible for assistance with accommodation costs, or you have decided not to complete the means assessment, then you will be required to pay the agreed room price as an accommodation payment by way of a Refundable Accommodation Deposit, a Daily Accommodation Payment or a combination of the two.
Refundable Accommodation Deposit (RAD)
You can pay your accommodation costs as a refundable lump sum amount which will be repaid to you, or your estate once you leave the facility (commonly referred to as a Refundable Accommodation Deposit or RAD).
Daily Accommodation Payment (DAP)
Alternatively, you can pay for your accommodation by way of a rental-style daily payment (commonly referred to as a Daily Accommodation Deposit or DAP) which is worked out by converting the Refundable Accommodation Deposit (RAD) into a daily amount.
If you are assessed as being fully or partially supported by the government, then a different charge is payable when entering into a facility for your room costs. Your contribution amount will be based on your asset assessment with My Aged Care and you can choose to pay your contribution as a lump sum (referred to as a Refundable Accommodation Contribution), daily payment (called a Daily Accommodation Contribution) or a combination of the two.
Refundable Accommodation Contribution (RAC)
This charge is similar to the Refundable Accommodation Deposit, however because you are fully or partially supported by the government then this means the lump sum you elect to pay after your assets are assessed is called a Refundable Accommodation Contribution (RAC). As the name suggests, this is refundable to you, or your estate, upon leaving the facility.
Daily Accommodation Contribution (DAC)
For those who do not, or cannot, pay the Refundable Accommodation Contribution (RAC) as a lump sum payment, you can pay a rental-style daily payment instead. This is called a Daily Accommodation Contribution (DAC). This is the lump sum amount broken up into periodic payments with an interest rate set by the Department of Social Services at the date of entry.
Seeking trusted and proper financial advice is crucial to this process. A financial adviser will be able to do the calculations for you and assist you with the completion of the forms whilst also providing you with advice on which accommodation costs are going to be applicable to you.
Do you need to decide how you are going to pay before you move in?
An incoming resident has 28 days from the day they move into a facility, to decide how they would like to structure their payments. Until you make that decision, you will need to pay rental-style daily payments.
If you choose to pay by a lump sum, then your provider must give you at least 6 months’ notice from date of entry to pay the lump sum amount. Once again, until you make the lump sum payment, you will be expected to pay rental-style daily payments to cover your expenses.
Other costs people need to be aware of
Extra Services Fee (ESF)
Some facilities offer extra service rooms and can charge another daily fee for a bundle of upgraded higher standard hotel-type services. These services can include specialised menus or alcoholic beverages with meals, amongst other options.
The extra service status can apply to the whole facility or to individual rooms. Facilities with this status can charge a regular extra service fee which pays for a bundle of extra services whether you use them or not and is covered in what’s called an “Extra Services Agreement”.
This fee is not subsidised by the government which means you will have to pay the full costs if it is applicable to the facility or room you choose.
You should ask the facility during your negotiations if they have this status and if they intend to charge this fee and find out what it covers.
Additional Service Fees
An Additional Service Fee covers services that go beyond the minimum care and service requirements. This is usually where the facility offers additional hotel-type services such as a preferred brand of toiletries, access to paid TV services, and more.
Some facilities allow you to pick and choose what additional services you would like to receive so you only pay for what you will use.
Others may have a package of additional services they provide and some of them must be agreed to as a condition of living in the facility.
The facility will be able to provide you with information on the additional services they offer, the associated fees and whether they are mandatory services that come with living at the facility or if they are services you can opt in to utilise.
Helping you understand your options and the costs involved
As you can see, there are many different fees and charges that people need to be aware of when entering into a residential aged care facility, which vary depending on your personal circumstances and the facility you choose. We understand that it can be very overwhelming and confusing when exploring your aged care options. We aim to provide you with clear guidance and advice to help you make an informed choice that you are comfortable with.
It is recommended that you seek legal and financial advice from accredited aged care professionals before commencing negotiations with an aged care facility.
A financial planner who is an accredited aged care professional can use a number of strategies and payment options available to help you negotiate a suitable plan that best suits your financial situation. They will be able to help you determine the right way to structure your assets prior to transitioning into aged care. In addition to the financial advice you will need, it is important to also seek guidance from an experienced legal practitioner who understands the complexity of the aged care industry and how transitioning to aged care impacts your overall estate plan. Your solicitor can run through all of the terms and conditions of the contract from your chosen facility to ensure they meet your needs and you understand your obligations. At the same time, your solicitor will keep in mind your estate planning objectives and what may need to be revised to ensure your intentions remain intact.
If you make the wrong choice in regard to which facility you move into and how you decide to cover the costs of your aged care, it can be detrimental to your income and assets over the long term. Aged care financial planning is a specialised area that involves careful consideration into the projection of your cash flow and assets to ensure it will work for you over time rather than just in the short term.
At Attwood Marshall Lawyers, we have unfortunately seen many people jump to conclusions that they have to sell their home to fund their way into care when that is not always necessary. In fact, selling your home may end up putting you in a worse financial situation because it may result in you having to pay more fees and potentially losing some, or all, of your pension. It is for these reasons, and more, that it is so important to seek legal and financial advice at the earliest opportunity so that you can properly plan for your transition to care.