Paying for aged care

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Finances are a major factor, and understanding how much it will all cost can be confusing.

The starting question for anyone contemplating residential age care is always: But how much does it cost? Here, Craig Hall from National Seniors’ Financial Information Desk has a rundown of what you could be up for.

Moving into a nursing home can be a stressful and overwhelming experience. It is also a time when decisions are made quickly, impacting not only the individual but also family. Finances are a major factor, and understanding how much it will all cost can be confusing.

There are four types of fees involved. However, depending on the individual’s circumstances, not all may be applicable.

Basic Daily Fee

The Basic Daily Fee contributes towards the resident’s everyday living costs such as meals, laundry services, cleaning and
utilities. Entrants are usually asked to pay this fee.

The current Basic Daily Fee of $47.86* for new residents is based on 85% of the single person basic rate of Age Pension and
increases in line with the Age Pension on 20 March and 20 September each year.

Means-Tested Care Fee (MTCF)

This fee contributes towards the ongoing cost of care. The amount of this fee, if applicable, is determined by the individual’s assets and income and is calculated by the Department of Human Services (DHS). Where the individual is a member of a couple, 50% of the combined assets and income is considered when calculating the fee.

The MTCF is subject to annual and lifetime caps and cease once each cap is reached. Currently the annual cap is $25,731.05 while the lifetime cap is $61,754.55. The caps are indexed and take into account any incometested fees paid in a Home Care Package prior to entering residential aged care.

Fees for extra services or other additional care and services

Some facilities offer a higher standard of accommodation and/or provide certain extra services and therefore may charge this fee to cover those costs.

Examples of extra services can include a wider variety of meals and drinks and larger, better equipped rooms.

Most ‘extra services’ places are regulated and the facilities providing them are required to publish these fees on their website, the ‘My Aged Care’ website as well other marketing material they provide to prospective residents.

Other additional care and extra services and associated fees that are not regulated are agreed between the resident and the aged care facility.

Accommodation costs

An amount may be charged for the accommodation in the facility either as an Accommodation Contribution or an Accommodation Payment. For some people the cost will be met in part or in full by the Federal Government. If met in part, the resident is asked to pay an Accommodation Contribution. Others may be required to pay an amount agreed to by the provider and the individual. This is known as an Accommodation Payment. They are capped at $550,000 although higher amounts may be approved by the Aged Care Pricing Commissioner. A common Accommodation Payment amount isapproximately $400,000 to $450,000.

DHS advise the resident and the facility which, if any, is applicable. It is determined by the amount of the individual’s assets or if partnered, 50% of the combined assessable assets is assessed. A resident cannot be asked to pay both an accommodation contribution and an accommodation payment at the same time.

Paying an Accommodation Payment

There are three ways in which residents can pay an Accommodation Payment. It may be as a lump sum known as a ‘Refundable Accommodation Deposit’ (RAD), by payments on an ongoing basis referred to as a ‘Daily Accommodation Payment’ (DAP) or by using a combination of both. For example the resident may elect to pay 60% of the Accommodation Payment as an RAD with the balance (40%) as a DAP.

Residents who choose to pay all or part of their Accommodation Payment as a DAP do so by making interest only payments on the outstanding RAD. The DAP is non-refundable.

Estimating the fees

The Australian Government ‘My Aged Care’ website has a ‘Residential Care Fee Estimator’ which can provide an estimate of costs based on the assets and income the user inputs. It does not provide an estimate for Extra and Additional Services or the Accommodation Payment amount as those costs can vary according to the aged care facility. Visit www.myagedcare.gov.au.

An itemised monthly statement is issued by the care provider showing all regular fees applicable to the resident. Payments can be made by direct debit, online transfer or other means agreed with by the Care provider. The latest ‘Schedule of Fees and Charges for Residential and Home Care’can be found on the Department of Social Services website www.dss.gov.au in the ‘Ageing and Aged Care’ section.

Along with fees there are a number of options and issues to consider when entering Residential Aged Care which we will look at in future articles. 

*Figures quoted in this article are correct at the time of writing but do increase as a result of regular indexation. National Seniors members can use the free, independent Financial Information Desk (FID) by calling 1300 020 110 or emailing fid@nationalseniors.com.au

For specific income support enquiries call the Department of Human Services on 132300.

This article by Craig Hall originally appeared in the April/May 2016 edition of 50 something magazine. The information in this article does not constitute or imply financial advice. We recommend that you seek professional financial advice and/or seek clarification from any relevant government department or licensed financial services provider before making financial decisions.

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