Australia’s residential aged care system is set to change significantly with the introduction of new rules for residents entering care on or after 1 July 2014. Anyone considering a move to care is currently presented with a wonderful opportunity to assess whether there are financial benefits in moving into a facility before or after 1 July 2014 (1 July). Some of the proposed changes are as follows:
Residents were previously classified as high-level or low-level care based on a needs analysis, moving forward an assessment will continue to be required to determine that “any” form of care is required. All residents will be subject to the same fee after 1 July where previously multiple levels of fees applied based on the care required.
Upfront accommodation costs to change
Currently new residents pay either an accommodation bond or an accommodation charge and these costs are determined by a residents’ level of assets only. Moving forward residents will have a choice to either pay a lump sum refundable accommodation deposit (RAD), a daily accommodation payment (daily payment) or a combination of both the RAD and daily payment. Importantly the upfront costs post 1 July will be determined based on a resident’s assessable assets and assessable income.
Ongoing care fees to also change
Currently all residents pay a basic daily care fee that equates to about 85% of the annual rate for the basic single Centrelink Age Pension. Residents may also be asked to pay an income tested fee which is determined by their assessable income only and an extra service fee in certain facilities for services above the minimum prescribed level of care.
Changes to the assessment of the home
Currently the value of the home is not assessed when calculating the income tested fee where the value of the home will be assessed for the means-tested care fee up to a cap of $144,500 post 1 July.
Case study: the real cost of residential care
In this scenario; Jane is aged 85, lives alone, is a non-home owner and has investments totalling $500,000, we compare the cost of Jayne entering a care facility prior to 1 July and after 1 July. The facility currently chooses to charge an accommodation bond of $200,000 and we assume the facility charges a RAD of $200,000 post 1 July and Jayne pays the upfront costs in full under each scenario. The differences in the costs are estimated as follows:
Kevin is single, age 88, home owner and has investments of $300,000, we assume High Care with Extra Service. The facility currently chooses to charge an accommodation bond of $200,000 and we assume the facility charges a RAD of $200,000 post 1 July. Kevin chooses to maintain the family home and it is rented for $300 per week. Our advice to Kevin would be to pay $195,000 of the Accommodation Bond by lump sum and the remaining $5,000 by periodic payment:
Many individuals that require permanent care delay the decision making process as moving into care can be a daunting experience. However, the upcoming reforms provide you with an opportunity to determine whether there are financial benefits in moving into a facility before 1 July 2014.
There are several steps involved when moving into residential aged care and residents will only be grandfathered under the current rules if they move in before 1 July. It is extremely important to start those discussions soon to allow enough time to be assessed for aged care, find an appropriate facility, organise your finances and move in to the new accommodation. Seeking professional advice before 1 July might be worth a lot to anyone thinking about a move into care.
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