One of the subjects creating the most confusion for new residents to aged care is the concept of being a supported resident. It is an important concept because assessment as a supported resident provides a series of benefits as well as potential disadvantages. It is essential for the resident to understand the concept and what the pros and cons are before completing the assessment of income and assets process.
The first thing to understand is that there are three sets of fees for residential aged care; (1) accommodation, (2) care, and (3) luxuries. See our blog More about the costs of residential aged care. The concept of a supported resident applies specifically to the cost of accommodation. Accommodation in a residential aged care facility is quoted as a lump sum called a Refundable Accommodation Deposit (RAD). Can be paid as a lump sum or a recurring payment, known as a Daily Accommodation Payment (or DAP), or a combination of the two.
When a resident enters residential aged care, they are required to complete and submit a document titled Residential Aged Care Request for Asset and Income Assessment. This assessment serves two purposes. In the first instance, it is used to calculate the means tested care fee that the resident will be required to pay towards the cost of their care.
The process of assessment is also used to identify whether a resident is classified as a “low-means resident,” a government expression, referring to someone who is eligible to receive government support towards the cost of their accommodation.
While the MTCF is a construct used to determine the extent of the government’s contribution towards the cost of care, the low means classification is a concept used to determine the extent of the government’s contribution towards the cost of accommodation.
Supported residents are people with less assets and less income than a predefined threshold. The thresholds consist of two criteria. The two criteria are: (1) Assets; and (2) Income. Each criterion has two thresholds – a lower threshold and an upper threshold, and depending on the assessment of the resident’s assets and income they may be classified as fully supported, partially supported, or non-supported.
Fully supported residents: These people have assets less than the minimum asset threshold and income less than the minimum income threshold. At the time of writing the lower asset threshold is $46,000 and the lower income threshold is $25,487 per year. If the resident’s assets are less than $46,000 and their income is less than $25,487 per year they are fully supported and do not pay the Refundable Accommodation Payment or the periodic payment, because the Australian Government fully cover it. Once a person is assessed as fully supported, they cannot be asked to pay an accommodation payment, whilst staying in the same facility, even if their means tested amount subsequently changes.
Partially supported residents: These residents have assets greater than the minimum threshold, but less than the upper threshold ($159,630). The same applies to their income. They are called partially supported residents and will not have to pay a Refundable Accommodation Deposit. Instead, a new accommodation payment is calculated for them, based on their means tested amount. This is payable as a lump sum, called a Refundable Accommodation Contribution (RAC), or a periodic payment, called a Daily Accommodation Contribution (DAC). These amounts are lower than the advertised rate, and the government pays the balance. This amount may change, occasionally, if the resident’s assets or income change and/or if the aged care facility significantly refurbishes the facility. A partially supported resident must pay a contribution to accommodation, but no MTCF would apply.
Non-supported residents: These residents will be required to pay the full advertised accommodation costs at the facility.
The government provides a system of subsidies to aged care facilities based on specific criteria. One piece is the ratio of supported residents to non-supported residents. Put another way, additional funding is provided to facilities that keep a desired number of residents (supported resident ratio), who are financially disadvantaged. To enable this mechanism the government sets desired supported resident ratios across Australia. These ratios vary regionally and range from around 16% in larger cities to around 40% in regional and rural areas. Facilities that meet and maintain these ratios receive more funding from the government. Facilities that don’t meet the ratio lose some of their funding.
Facilities that charge an extra services fee however do not receive any supplement for supported residents. Consequently, very few extra services facilities will be willing to accept a supported resident. The important thing to understand is that whilst there are important financial benefits from being assessed as a supported resident there are also limitations placed on choice.
If you are helping someone enter residential aged care, or you are about to enter care yourself, it is important to consider some of the issues related to being assessed as a supported resident. An accredited aged care financial adviser can help you understand whether you are a supported resident or not. They can also advise if you are close to the assessment thresholds and what actions you can take to fall on either side of the thresholds. They can also help you understand which facilities will be open to accepting supported residents. It is important to check with the aged care facility to determine whether they accept low means residents, and if so, whether they have a vacancy, before implementing strategies to reduce your means tested amount below the maximum accommodation supplement. These strategies should be implemented before the resident moves to aged care and before the SA457 is completed.