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How much will you pay for residential aged care?

The cost of care could depend on how much you tell the government you have.

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When you are considering a move into an aged care home for permanent residential care, it’s important to understand what fees you may have to pay.

Also, you need to know whether you are eligible for government assistance with your accommodation costs.

The types of fees and how much you pay will depend on:

  • Your income and assets, as assessed in your aged care means assessment.

  • The level of care you require.

  • The home you choose.

The amount the government contributes is based on an assessment of your ongoing care needs once you have entered care. If your means assessment shows you have less capacity to pay, the government will contribute more.

Fees you might have to pay

Care and accommodation costs: 

  • Basic daily fee. An amount that everyone pays for the day-to-day services they receive at the aged care home.

  • Means tested care. A contribution that some people pay toward the cost of their care, determined by a means assessment.

  • Accommodation costs. An amount that some people pay to contribute towards or cover the full costs of their room, depending on their means assessment.

Other costs: 

Depending on which aged care home you choose and what you agree to with your provider, there are additional things you may be charged for.

Unlike your care and accommodation costs, these fees are not set by the government. This means if you agree to them, you will need to pay the full cost yourself.

  • Additional service fees. Fees for services that go beyond the minimum care and service requirements.
  • Extra service fees. Some aged care homes offer extra service rooms and can charge for the bundle of upgraded hotel-type services provided.

Your aged care provider must record all these fees in your resident agreement, your accommodation agreement and, if needed, your extra services agreement. Your accommodation and extra services agreements may be merged into your resident agreement. 

Fees in aged care are means-tested. So, how much you pay for residential aged care may depend on your finances. 

The Australian Government uses income assessments or means (income + assets) assessments to work this out. 

  • If you’re applying for a Home Care Package, you may have to pay an income-tested care fee. An income assessment determines if you need to pay this fee. 

  • If you're moving into an aged care home, you may have to pay a means-tested care fee and accommodation costs. A means assessment determines if you need to pay the means-tested care fee and if the Australian Government will contribute to your accommodation costs.

Everyone who moves into an aged care home negotiates a room price before moving in. The means assessment determines if you will have to pay the agreed room price.

Means assessments

Do you need to complete an income or means assessment? 

Not everyone needs to do an assessment. You can find out more about this here

Do self-funded retirees need to complete an assessment? 

Services Australia won’t know your financial situation so you will be asked to fill in the SA457 (“Residential Aged Care Calculation of your cost of care”) form to disclose all personal and financial details.

It can be complicated and time-consuming, and some self-funded retirees don’t want to go through the bother of doing it or of disclosing their finances to the government.

If you don’t disclose, you will be asked to pay your daily cost of care – currently up to $358 per day. Most people fall into a range between $180 and $320 per day. You pay this in addition to the fees for accommodation, basic daily care and additional services.

How it works 

Writing in the Australian Financial Review, Director of Aged Care Steps, Louise Bita, said the decision to disclose or not to is not straightforward. She explained this through a fictional character, Brad, who is a self-funded retiree who doesn’t want to disclose his finances.

Ms Bita says that six to eight weeks after entering care, Brad’s Australian Funding A (AN-ACC) assessment determines his cost of care at $225 per day. Services Australia advises he will need to pay this amount as a means-tested fee. 

By not disclosing, Brad kept his privacy and removed the complexity involved with filling in the forms – but he increased his fees by $45 per day.

Annual cap

Regardless of how wealthy you are, you won’t pay a means-tested fee more than the annual cap, which is currently $31,707 per year. There is also an overall lifetime cap, and both caps apply even if you choose not to disclose.

In Brad’s case, it will only take about 141 days of paying a means-tested fee at $225 to reach the annual cap. His means-tested fee then stops for the rest of the year and the government pays his cost of care. He pays a total of $31,707 (indexed) in means-tested fees over the year.

If Brad had disclosed his finances, he would still have reached the annual cap and only paid $31,707 over the year, but he would have paid a lower amount each day ($180) and taken longer to reach the cap.

Although not disclosing didn’t cost Brad extra over the full year, it did put more pressure on his cash flow earlier in the year.

“In Brad’s last year of care, it may cost him more depending on when he passes away or leaves care,” Ms Bita said.

She concluded, “In other situations where the calculated means-tested fee is higher than the cost of care, there may be no advantage or disadvantage in disclosing finances. The same daily fee is payable and the annual cap applies.”

Related reading: My Aged Care, Australian Financial Review 

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