Many older Australians eventually reach a time when they need assistance with some of the tasks of daily living. In some cases their needs can be satisfied by carers visiting while they continue to live in their own home. In other cases residential aged care is necessary.
Older people and family member who become involved in arranging entry to an aged care home invariably find the financial aspects complex and difficult to understand.
Each applicant must be assessed by the Aged Care Assessment Team (ACAT). This determines what services the aged person needs and whether they can stay in their own home. If so they are introduced to a Home Care provider. Fees will be based on the services provided.
If ACAT agrees the person needs residential care they can apply to enter the home of their choice. The wait for a place may be short or long.
There can be three types of fees to pay, accommodation charges, care fees, and extra service fees. If the person has assessable assets of less than $57,000 the Government pays all their accommodation charges.
People with greater asset levels will be asked to pay a Refundable Accommodation Deposit (RAD) that is set by the retirement home. Typically this is $300,000 to $500,000 in regional areas and more in the cities.
If the resident pays the RAD in full they will not need to pay any further accommodation charges. The RAD is refundable in full when the resident leaves the home. It is not mandatory to pay the RAD. If it isn’t fully paid the resident will be charged a Daily Accommodation Payment (DAP).
The DAP will be calculated by multiplying the unpaid RAD amount by an interest rate set by the Government called the MPIR, divided by 365 to give a daily figure. The MPIR is currently 7.46 per cent per annum. If retirees expect their investments to earn more, they may choose not to pay the RAD.
There are two fees for the resident’s care. Every resident pays the Basic Daily Care Fee which is 85 per cent of the age pension. People with very little savings pay nothing more.
People with more significant savings must pay a Means Tested Care Fee (MTCF). It is calculated using a very complex formula partly based on the person’s assets and partly on their income. For the typical elderly person who owned their home and has moderate savings it will be $5 to $20 per day.
The MTCF is greater for wealthier people with the maximum applying to those with several million dollars of assets. The fee is capped at $31,707 per annum with a lifetime maximum of $76,097. Some aged care homes also charge for optional extra services that they provide.