This posting – and the following posts in this series – are provided to assist families with the decision-making process when it becomes apparent/ obvious that a senior member of the family is going to require accommodation in an aged care facility: whether that be in a ‘low level care’, ‘high level care’ or extended services facility.
Moving into an Aged Care facility can be very challenging, even confronting if timely plans have not made for unexpected changes as we get older. With the growth in the aged population, more and more people are entering aged care accommodation facilities. The number of people over age 70 is expected to double over the next 20 years (by 2030) – increasing from just under two million in 2010 to approximately four million.
People confronting this situation, be they the prospective residents or the family members thereof, need advice in several areas to optimise the financial outcome. For residents moving to residential aged care, access to timely professional advice is highly valuable. (The area of advice on aged care is highly specialised and complex – and requires a solid understanding of the aged care system and fees, other services available and the interaction with the social security system.
Entry into a Residential Aged Care
Before someone can enter an aged care facility, their health situation must be assessed to determine whether a low level care (hostel) or high level care (nursing home) is appropriate. The assessment2 is undertaken by members of an Aged Care Assessment Team (ACAT) who are generally health professionals specialising in aged care. No one can enter a facility without a referral from an ACAT.
Aged care fees
There are several fees associated with entering an aged care facility and these can be expensive.
1. Accommodation bond
A person entering ‘low level care’ (hostel) or an ‘extra service facility’ nursing home may be asked to pay an ‘accommodation bond’ as a charge for accommodation. There is no prescribed amount for the bond. Each bond3 is negotiated individually between the resident and the management of the hostel, taking into account the resident’s assets at the time of entry.
The only legislative requirement for bonds is that the resident must be left with $37,500 (current as at 20 March 2010). Residents with less than $37,500 in assets will not have to pay the bond.
2. Accommodation charge
Nursing homes generally impose daily ‘accommodation charge’ as opposed to a bond, to cover the cost of accommodation. Each resident’s charge is calculated individually, taking into account the resident’s assets at the time of entry. Residents with less than $37,500 in assets will not have to pay the accommodation charge.
3. Basic daily fee
All residents in aged care (both ‘low level’ and ‘high level’ care) can be asked to pay the
‘basic daily fee’ as a contribution towards accommodation costs and living expenses. The maximum basic daily fee for all permanent residents who enter an aged care home on or after 20 September 2009 is 84 per cent of the new annual single basic age pension. Each resident’s basic daily fee is determined at the date of entry.
4. Income tested fee
Residents in both ‘low level’ and ‘high level’ care may be asked to pay an income tested fee in addition to the ‘basic daily fee’, depending on their income and level of care. The income tested fee is calculated as 5/12th of the total assessable income that exceeds a specified income threshold per fortnight.
Fortnightly fee = (Assessable income – threshold) x (5/12)
Total assessable income includes:
- income support payments (eg age pension/DVA pension), plus
- total assessable income as assessed by Centrelink (using the pension income test rules).
Appropriately experienced Financial Planners4 can help people confronting the dilemma of choices around ongoing accommodation and evolving care needs, not only in understanding how the aged care system works, but also in choosing the options of paying the cost of care that best meet their needs, as well as in employing the best strategies to help reduce the cost of care.
1Posting 1 in a series of 4 Blogs about preparation for the transition from home to an aged care facility for accommodation and care needs for the aging/ aged.
2Experience in South East Queensland at the time of this posting is that there is about a six-week wait for an assessment to be made: because of increasing numbers to be assessed, this delay could further extend in the future.
3Refer posting 4 in this series for more information about the variations in these bonds.
4Continuum Financial Planners Pty Ltd has experienced planners available to assist families in making the most appropriate decision in your circumstances.
