The new legislation
As a result of The Aged Care (Living Longer Living Better) Act 2013, major changes occurred in residential aged care:
- accommodation payments – including changes to the maximum amount of accommodation payments that can be charged, the accommodation supplements that the government pays and the payment options available to residents for accommodation charges.
- administrative changes – including the introduction of an Aged Care Pricing Commissioner and the establishment of a My Aged Care website.
Residential aged care – RADs and DAPs
Entering into residential aged care may require the payment of:
- a refundable accommodation deposit (RAD); or
- a daily accommodation payment (DAP), or
- a combination of both; plus
- a daily care fee (which may be subsidised by the government, based on a income test and an assets test).
RAD & DAP – how much do providers charge?
The RAD is an amount set by the particular aged care provider.
The maximum RAD that a provider can charge is $550,000 unless approval has been obtained from the Aged Care Pricing Commissioner.
The DAP is the RAD equivalent paid periodically and is calculated by multiplying the RAD by the current government interest rate and dividing by the number of days in a year.
Both RAD and DAP figures for all providers are available on the My Aged Care website.
Importantly the decision as to whether to pay a RAD or a DAP or a combination of them does not need to be made before entry into residential aged care. The new resident has 28 days to make a decision on whether to pay a lump sum RAD, a daily DAP or some combination of them.
How much daily care fee is payable?
Currently the process applies an income test and an asset test.
A calculator is provided on the My Aged Care website, or your local aged care provider can generally assist in explaining the calculation.
The daily care fee calculation is quite complicated. The process involves a formula to determine a person’s actual means tested daily care fee, but in summary:
- where a person’s total means tested amount is zero they will pay no means tested care fees (and no RAD).
- persons with a means tested amount greater than $18,200 will be required to pay a means tested care fee (and may be required to pay a RAD or a DAP).
- persons with a means tested amount between zero and $18,200 will be required to pay a means tested care fee based on their means tested amount less the maximum government accommodation supplement.The family home
The family home remains excluded from the assets test where that home is being occupied by a spouse, former spouse or other protected person and where that exemption does not apply the family home is included in the assets test but currently capped at an amount of $144,500.
Making the transition to residential aged care and dealing with the financial implications when the proposed resident and family members are under stress and decisions are required quickly can be extremely stressful. Funding arrangements remain complex and often confusing.
Recommendations to reduce this concern and anxiety include:
- investigate and make arrangements for future residential aged care early, so that family decisions have been made regarding the preferred approach for the particular individual;
- explore www.myagedcare.gov.au and make contact with aged care providers in your local area to investigate the range of options available and the various combinations of RADs and DAPs;
- early preparation will mean that you will better understand the process and make more informed choices leading to a smoother transition.Roger Downs is an Accredited Specialist in Business Law and Property Law and is the Deputy Chair of a large not-for-profit aged care provider.