as featured in the Farm Weekly issue 15 October 2020
With an aging population and more people requiring professional care this area is a hot topic, but can be quite complex to understand.
I thought I would share some basic information as a starting point for anyone having to navigate their way through this process.
Care Assessment Process
When a person deteriorates either mentally or physically to the point where they require care, an assessment is required. This assessment can be initiated by the person, their family, carer or other representative of the person, by the completion of the application for care under the “Aged Care Act 1997”. The Aged Care Assessment Team (ACAT) will carry out the assessment to determine the required level of care. Regional Assessment Services (RAS) conducts this service in regional areas.
Types of Care
The assessment team will approve the type of care required, being:
- Residential Care
- Residential Respite Care
- Home Care
- Transition Care
- Short Term Restorative Care
Our clients are mostly concerned with the residential care, which means they will be admitted to a facility for full time care, whereas the other options are lesser care requirements.
“Residential” means a care facility and “home” means they are principally at home, with some services.
Residential Care Costs
If we concentrate on the residential care costs, these can be broken down into three costs:
1) Accommodation Bonds
This amount will vary between care facilities and is negotiated between the applicant or applicant’s family and the facility.
Generally, the facility will determine an amount, which can be paid to them as a lump sum upon entry or charged as a day rate, if elected not to be paid upfront.
Recent real life examples has indicated that, in most cases, paying the bond up front is financially more beneficial than paying the day rate.
This is because the annual cost of the day rate far exceeds the normal after tax investment income earned from the bond amount. It is however always best to check this before committing to the accommodation bond!
Note: In most cases the “Accommodation Bond upfront payment: is refunded to the family once the resident passes away, but they need to check the fine print to ensure the facility is NOT deducting a charge against the deposit or keeping the bond.
The facility generally keep the income generated from the deposit, which is intended to be used for the up keep and further capital works of the facility
2) Maximum Basic Daily Care Fee
This cost is calculated by the Department of Human Services as part of their assessment for Government subsidy. A similar level of Centrelink forms, as an age pension application, need to be completed and the complex assessment team will get involved if trusts and companies are part of the person’s financial structure.
Centrelink then advise the care facility of the resident’s entitlement to government subsidised care and set both the Basic daily care fee and the Means tested daily care fee.
As a rule, most self funded residents will be charged the maximum current $52.25 per day for basic daily care fee.
3) Means Tested Daily Care Fee
As the name suggests this is a means tested additional cost for residents with higher asset and/or income levels and again the amount is set by Centrelink during the assessment process.
If the resident and/or their spouse is found to have exceeded the income and asset assessment thresholds the maximum day rate may be set at as much as approximately $200.00 per day until the current annual upper limit of $28,087 is reached.
This means, the means tested daily care fee cannot exceed $28,087 in a given year. Once the $28,087 is reached during the year the Means tested care fee reverts to nil until the anniversary of the residents admission, then it starts again.
Note: The maximum life time cap for Means tested daily care fees is currently set at $67,409, so there is an upper limit to what can be charged with this fee.
A Typical Example
Based on a real life example, this person owned their home and had investment assets in excess of $1 million.
They had a medical episode and was subsequently admitted to an aged care facility.
Their annual costs in 2019 amounted to:
| Annually | | $ |
|---|
| Basic Daily Care Fee | $50.66 | $18,491 |
| Means Tested Daily Care Fee | $199.36 to the Annual Limit | $27,200 |
| Accommodation Bond (paid upfront, so no annual fee) | | $0 |
Annual Care Costs | | $45,691 |
Today’s costs will total slightly more, but this is a typical example of a self funded person whom is not entitled to much or any government assistance
Summary
Read carefully the facility’s care contract, especially the Accommodation Bond section, and note this is a contract between the resident and the facility.
Seek sound advice prior to signing any care options and talk to your accountant and financial adviser about managing the resident’s financial affairs. You can visit the Department of Health website for more information.
Disclaimer: This content provides general information only, current at the time of production. Any advice in it has been prepared without taking into account your personal circumstances. You should seek professional advice before acting on any material.