Aged Care – Part 4
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Aged Care – Part 4 Aged Care Costs
It is crucial to understand that aged care is a complex and evolving area, subject to specific laws, regulations, and practices that may vary over time. Therefore, any information provided should be considered as educational in nature and not a substitute for proper professional advice. Services Australia’s Financial Information Service (FIS) is a free service available to everyone and can help you to understand the financial implications of aged care.
While we offer educational insights, it is essential to verify any information provided with professionals before making any significant decisions or taking actions related to aged care.
We end our series on Aged Care on the topic of costs, in particular, accommodation costs. We hope this series has shed some light on the complexities of aged care and that you come away more informed.
Means Assessment (Income & Assets) – Assistance eligibility
The purpose of the means assessment is to find out if you are eligible for assistance with care fees and accommodation costs. The calculation involves separately calculating your assessable Income and Assets to identify your Means Tested Amount.
Means Tested Amount (MTA) =
(Income tested fee component + Asset tested fee component) / 364
If your MTA is below the Maximum accommodation supplement (MAS) of $65.49, this generally classifies you as ‘low means’, and makes you eligible for assistance. Your status as ‘low means’ or ‘not low means’ at the time you enter aged care does not change while you remain after entry, even if your financial circumstances change. If you move to a new aged care home however, will you need to be re-assessed. You can find more information by clicking here.
Basic Aged Care Home Costs
These are the costs that you will come across when applying for an aged care home. Each home will set their own prices, within a prescribed limit. How much you pay will depend on the place you choose and an assessment of your income and assets.
· Basic daily fee: An amount that everyone pays for the day-to-day services they receive at the aged care home. The maximum is currently $58.98 per day, which is 85% of the single person rate of the basic age pension.
· Means tested care fee: A contribution that some people pay toward the costs of their care, determined by a means assessment. The maximum is currently $400.08 per day. *Annual and lifetime caps apply for this fee, at the time you reach them, currently $31,706.83 per year or $76,096.50 in a lifetime.
· Accommodation Costs: See below.
· Other costs: Theses fees are not set by the Government, meaning if you agree to them, you will need to pay the full cost yourself. Some facilities have a set package of additional services, others are pay for what you use.
Accommodation Costs
This is an amount that you may pay to contribute towards, or cover the full costs of your room, depending on your means assessment. Prior to entering aged care, you will need to agree on a room price in writing with the provider (which is negotiable).
If you are not eligible for Government assistance, you will pay the room price you agreed to with your aged care home as an ‘accommodation payment’.
If you are eligible for Government assistance, the Government will pay some or all your accommodation costs to your provider and you will pay a ‘accommodation contribution’ on the difference the government pays. This amount is worked out by Services Australia based on your income and assets.
How much do I pay and how much does the Government contribute?
Your means assessment determines what you will pay, however as a general guide:
If you have income below $31,504.20 and assets below $57,000, the government will pay your accommodation costs.
If you have income above $79,180.92 or assets above $193,219.20 you will need to pay for the full cost of your accommodation as agreed to with the aged care home. (You may still need to pay the full cost of your accommodation if your assets/income are less than thee amounts.)
If you do need to pay for your accommodation, Services Australia or the Department of Veterans＊ Affairs (DVA) will determine your contribution amount based on your means assessment, with the Government paying the rest. The MyAgedCare website has a handy Fee estimator.
What are the Accommodation Payment Options?
There are three options:
1. A refundable lump sum amount
There are two types of lump sum, depending on the outcome of your means assessment:
Refundable accommodation deposit (RAD): This is where you pay the full amount you agreed with your provider yourself.
Refundable accommodation contribution (RAC): This is where the Government helps with the costs, worked out by the provider based on the daily accommodation contribution (DAC) determined by Services Australia.
The balance is refunded when you permanently leave the aged care home.
2. Non-refundable daily payment
There are two types of daily payments, depending on the outcome of your means assessment:
Daily accommodation payment (DAP): This is where you pay the full amount you agreed with your provider yourself.
Daily accommodation contribution (DAC): This is where the Government helps with the costs, with the amount determined by Services Australia based on your means assessment.
These payments work like rent payments – they are not refunded when you leave the aged care home.
3. A combination of both
This is when you combine the two types to meet your costs, which can be split into any amount you choose. Some worked examples are available here.
Once you have decided
You have 28 days from the day you move in to decide how you would like to structure your payments. Until you decide, you will need to pay by default as non-refundable daily payments.
If you choose to pay by lump sum, your provider must give you at least six months to pay from the date of entry. You can also choose to pay as a lump sum any time while you are in care, or pay more towards a part lump sum.
I’ve chosen Lump Sum
There is the option to draw down from the lump sum to meet other aged care costs or accommodation costs. Your provider may also request that you maintain the agreed accommodation payment. Which means you may need to top up your lump sum or pay additional or higher DAP/DAC.
I’ve chosen Daily Payments
Daily accommodation payment (DAP): This is calculated by applying the Maximum Permissible Interest Rate (MPIR)* to your agreed room price and dividing by 365. The below examples are from the MyAgedCare website.
**Example: Agreed room price of $500,000
DAP = (Room Price X MPIR) / 365
= ($500,000 X 7.46%) / 365
= $102.19 per day
For Daily accommodation contribution (DAC), Services Australia will inform your provider of the amount you are eligible to pay. This amount is only applied if you choose to pay for your accommodation entirely by daily payments. If you intend to split between RAC and DAP, your provider will calculate the reduced DAC amount for you.
**Example: Services Australia advised you are eligible to pay $16 DAC per day, and you choose to pay part RAC of $20,000
Reduced DAC= (DAC advised by Services Australia – ((Balance of RAD paid x MPIR) / 365)
= $16 – (($20,000 x 7.46%) / 365)
= $11.91 per day
**Examples are sourced from the MyAgedCare website under ‘I’ve chosen daily payments’ – how are my costs worked out?＊
*Maximum Permissible Interest Rate (MPIR)
This is the Government-set interest rate used to calculate daily accommodation payment based on your agreed room price. The MPIR that applies when working out your daily payment is fixed at the date you agree to a room price with your provider. Any subsequent increases or decreases to the MPIR will not affect the rate that applied to you.
Short term Care
The Australian Government subsidises short-term care providers directly to make care more affordable. How much you may pay varies depending on the type and level of care and services you will receive.
The maximum amount you could be asked to pay is:
$12.14 per day, if you receive care while living at home (17.5% of the single aged pension).
$58.98 per day, if you receive care while living in a residential setting (85% of the single aged pension).