As explained last week a new regime of fees for residential aged care comes into effect from 1^st November. Some costs will remain the same but most will increase. The total costs will be much greater for many residents.

Firstly the aged care home will be able to retain two per cent of the Refundable Accommodation Deposit (RAD) each year for five years. So if the RAD is $500,000 then $10,000 per year will be retained.

There is a new Hotelling Supplement Contribution (HSC) to pay for things like cleaning, meals and laundry. It is 7.8 per cent of the value of the resident’s assessable assets over $238,000 with a maximum of $12.55 per day.

So all residents with more than $296,728 of assets will pay the full amount. That is likely to be the majority of residents. That will be a new additional cost of $4,581 per annum.

The Means Tested Care Fee, which contributes to the cost of non-medical care, is being abolished and replaced with a new fee, the Non-Clinical Care Contribution (NCCC). It has a maximum of $101.61 per day. The annual limit is therefore $36,923.

There is no payment after four years in care, or reaching the NCCC lifetime limit of $130,000 of payments.

The NCCC will be calculated as 7.8 per cent of the value of a resident’s assessable assets over $502,981. So if their assets are just over that figure they will pay a small NCCC. The fee will increase as assets increase until they pay the $101.16 per day maximum if assets exceed $976,358.

For those with income over $131,279 per annum 50 per cent of the excess will also be included in the calculation, but that will be very few people.

Therefore aged care residents with less than $238,000 of assessable assets won’t pay any extra care fees, just the basic daily fee. As their assets exceed that they will pay a little extra until at $296,728 they will be paying $12.55 per day. 

Between $296,728 and $502,981 there will be no increase in the $12.55 daily cost. From $502,981 up to $976,358 the extra costs will increase rapidly to the maximum $101.16 of NCCC plus $12.55 of HSC, a total of $113.71 per day.

Consider an aged care resident with $1 million of assessable assets which includes a RAD of $500,000. In total, including a retention amount of 2 per cent of the RAD, this person will pay $74,707 per annum. Under the old rules they would have paid $38,504 per annum. That is an increase of 94 per cent.  

Overall, full pensioners will pay little or no more, part pensioners will pay quite a bit extra, and self-funded retirees will pay far more. Fortunately, those already in care will pay no extra.