This is the first in a series of articles debunking Aged Care myths and ‘traps’ that are commonly encountered. Clients new to this field often struggle with, or misunderstand, rules around RADs. (RADs by the way, are Refundable Accommodation Deposits – we describe them below!) Two common Aged Care myths regarding RADs are:
- Misunderstanding available options
- Thinking they are non-negotiable.
Firstly though, we’ll deal with another ‘monkey from the woodpile’: how RADs and DAPs interact. (DAPs are Daily Accommodation Payments.)
What are RADs and DAPs and are both always applied?
The RAD is a deposit paid by an incoming resident of an Aged Care facility. The deposit entitles the new resident to an exclusive room and those facilities of the establishment available to them. Interestingly, the RAD can be paid as a lump sum coincident with entry to the facility, or by other financial agreement. Where the RAD is only partly paid, a DAP will be payable covering the balance of the agreed fee1. It is possible that residence is granted without a RAD, fully paid through the DAP. The extent to which partial RAD is offered is set by the operator of the Aged Care facility.
A RAD is an interest-free loan to an Aged Care provider: a DAP is considered interest on any unpaid RAD.
Full payment of the agreed RAD will preclude the payment of any DAP.
The RAD amount paid is fully refundable to the resident (or their estate) at the termination of their occupancy2. Comparatively, the DAP is more akin to rent, calculated as interest, and no part of it is refundable.
Options available for payment of RAD
Residents researching suitable facilities to access Aged Care sometimes confuse the offering published in marketing materials, as fixed. This may not always be the case, as examples are only given to highlight potential flexibility. Whilst legislation prescribes maximum amounts payable as RADs, there is no such prescription as to how it can be required. Options are offered according to the strategic financial constraints of the operator of the facility.
Accordingly a brochure showing that a RAD of $550,000 can be paid a –
- Initial payment of 50%; and followed by payment of a
- DAP amount monthly,
doesn’t mean that this is the only configuration. If the operator is open to it, you may be able to enter with a 25% RAD payment, and a higher DAP. Any financial structure that suits your circumstances should at least be proposed to the facility operator and negotiated.
Can the RAD amount be negotiated?
Whilst there is a cap on the RAD able to be taken by an aged care facility, there is potential to negotiate an amount less than that published by them. The degree to which negotiation will reduce the RAD will depend on a number of factors. None the least of these factors is the occupancy rate of the facility at the time. As with most markets, supply and demand play a part in determining price. A report by the Department of Health and Aged Care for the 2019/20 year reveals that the average RAD for that year was around $70,000 less than the advertised price.
In our experience, the difference may not be so great. The important point here though is that it is worthwhile asking!
Wanting your Aged Care myths debunked?
Our experts at Continuum Financial Planners are here to help you debunk some of the urban aged care myths. Our accredited specialist adviser (Warwick Bragg) is available for consultation as to RADs DAPs and other costs you may incur. You can book yourself in for a meeting with Warwick using the ‘Book A Meeting’ tab above. If you want to discuss the matter in advance, you can phone our office (on 07-34213456) or submit our Contact Us form.
1 The DAP may be able to be paid from the RAD payment. This protects the resident’s cashflow, but that arrangement may need to be negotiated with the facility operator.
2 The RAD may be depleted and not fully refundable if any DAP has been agreed to be charged against it.
