Aged care fees are changing from 1^st November. The substantial, and deserved, big pay rise for aged care staff a couple of years ago now means many aged care providers are running at a loss according to the industry association. Increased fees are necessary and are about to take effect.

Elder Australians who are already in residential aged care when the new rules start will continue to be charged under the old rules.

There are two main categories of residential aged care fees – accommodation charges and care fees. Each care home can ask for payment of a large one-off lump sum, known as a Refundable Accommodation Deposit or RAD, to cover accommodation costs.

Currently the RAD is fully refundable on departure from the aged care home. In future the home will be able to retain two per cent of the RAD per year for up to five years, so only ninety per cent of it will be assured of being repaid.  

If residents don’t pay the RAD in full a Daily Accommodation Payment or DAP, is calculated by multiplying the unpaid RAD amount by an interest rate set by the Government, currently 7.61 per cent per annum, and dividing to get a daily cost. 

From November there will also be a new fee called a Hotelling Supplement Contribution which is designed to cover daily living expenses such as meals, cleaning and laundry. It will be means tested and have a maximum of $12.55 per day. Residents with assets of less than $238,000 will pay nothing.

There are two care fees. All residents pay a Basic Daily Care Fee. It is set at $65.55 currently and equals 85 per cent of the age pension. It applies whether the resident receives an age pension or not.

There is also a Means Tested Care Fee. It is calculated using a complex formula that assesses both assets and income, either actual or deemed. Pensioners with little savings pay no Means Tested Fee. Part pensioners typically pay $10 to $20 per day.

Self-funded retirees pay more. The very wealthy can be asked to pay over $400 per day. However there is an annual maximum of $34,174 and a lifetime maximum of $82,018.

The Means Tested Care Fee is being abolished and replaced with a new fee called a Non-Clinical Care Contribution or NCCC. This fee is also means tested. People with less than $503,000 of assessable assets will pay nothing.

The NCCC will have limits. Its daily maximum will be $101.61. It will cease to apply when the resident has been in aged care for four years, or when they have paid a total of $130,000, whichever comes first.

Next week we will look at the effects of the changes on people at various asset levels more closely.