Understand the costs of residential aged care

Understand the costs of residential aged care

 

There are three sets of fees payable: costs of accommodation, costs of care, and costs of extra services.

 

1.  Costs of Accommodation

The accommodation payment will be quoted as a lump sum called a Refundable Accommodation Deposit (RAD). This pays for the accommodation part of the service only. It covers things like the grounds, construction of the buildings, running costs and maintenance, costs of repairs, and costs of furnishing, laundry, room, and access to amenities within the home.

 

The size (or amount) of the RAD is set by the aged care provider and will be based on a range of commercial factors. The size of RAD can vary. It is lower in regional and remote areas, whilst it is not unusual to see RADS of $350,000 to $550,000 in metropolitan areas. Some facilities charge RAD of well over $1,000,000. All residential aged care facilities are required to publish their maximum RAD on the My Aged Care Website http://www.myagedcare.gov.au/service-finder?tab=aged-care-homes. Facilities may not charge an accommodation payment that exceeds the advertised price, but may accept a lower RAD.

 

Whilst the accommodation price is quoted as a lump sum, the resident is given the option of paying the accommodation fee (or part of it) as a periodic payment called a Daily Accommodation Payment (DAP). If you pay all or part of the RAD as a DAP, you will be charged a daily interest rate on the outstanding RAD. In a way, this is like paying interest on an unpaid loan. The government sets the interest rate applied to convert the lump sum to a DAP.

 

The accommodation payment can be structured as a lump sum, a periodic payment, or a combination of both.

 

The resident is given 28 days from entry to permanent care (known as the effective date) to advise the aged care facility on how they intend to structure the payment and are given up to six months to pay the RAD. The resident will be charged the full DAP, until the RAD or part of it is paid.

 

If a resident leaves care the facility must refund the RAD within 14 days to the resident. If the resident passes away the facility must refund the RAD within 14 days of receiving probate, and the refund must be paid to the estate of the deceased. RADs are government-guaranteed for accredited facilities. So, if a facility gets into financial difficulty, the government will refund the RAD on their behalf.

 

Accommodation Fees

 

2.  Costs of Care

Over and above the accommodation fees, residents must pay fees for care. These fees cover provision of care, including bathing, showering, hygiene, toileting, grooming, continence, medication, cleaning, and nursing care. Care fees include a Basic Daily Care fee and a Means Tested Care fee.

 

2.a. Basic Daily Care Fee: is paid by all residents and is not subsidised. It is set at 85% of the single age pension.

 

2.b. Means Tested Care Fee: some residents will be asked to make another payment toward their care. Whether they are asked to pay this will depend on an assessment of the combined value of their income and assets. The means tested care fee is subject to annual and lifetime caps.

 

The basic daily care fee and, where relevant, the means tested care fee will be invoiced to the resident (or his or her representative) on a monthly basis

 

 

3.  Costs of Extra Services

Extra services fees pay for non-care related services. Think of them as lifestyle costs or resort style costs. They could include a choice of meals, daily newspaper, choice of wine or beer with meals, hairdressing, physiotherapy, air-conditioning, flat screen TV, artwork, and an in-house cinema. These services are provided on a packaged basis. If an aged care facility charges extra service fees, they must publish the extra service fees on the My Aged Care Website.

 

In some facilities resident can access additional services for a fee on an itemised basis – the resident selects the additional services they want and are billed an additional fee monthly for these services.

Follow Chris Nothling:

Aged Care Financial Adviser

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