Over the last six years, I have written quite a few articles about Aged Care on our RYD blog, with the most recent a two-part article in November last year.
So, why am I writing about his subject again you may ask?
I continue to get questions, not only about the fees but when they need to be paid. It is confusing and most people do not understand the fees they have to pay or why they must pay the fees. You would be surprised at how many people are shocked when I advise them of the fees they or their parents will need to pay when entering residential aged care.
So, I thought I would take the opportunity to briefly outline each of the fees that a resident of a nursing home has to or could pay.
This fee is currently $52.25 per day or $731.50 per fortnight. All residents in aged care facilities, regardless of the level of care they are receiving, their income or their assets, will pay this fee. This fee is adjusted every March and September. The fee is based on 85% of the annual single basic age pension, which is adjusted every March and September. I should mention that the basic single age pension is the age pension less the supplements that are paid.
This is the cost which causes the most confusion and angst.
The questions that I receive relating to this fee are many. The most common being “mum or dad does not have the money to pay the deposit,” or “why do mum or dad have to pay that much to enter the home?”.
The amount a person must pay to enter an aged care facility is based on two main factors.
- The chosen aged care facility
The first factor is based on the home that is chosen. Each aged care facility can charge what they believe to be a suitable deposit to secure the facility. What the home charges is not based on a person’s circumstances. It can depend on the home’s location, the demographics of the surrounding area, and the age of the facility.
The home can charge a deposit of up to $550,000 without having to acquire Government approval. Amounts above this require approval from the government. I should mention there are many homes in Sydney and Melbourne which do charge more than the $550,000.
Think of it as buying a home. If you cannot afford to pay $1 million dollars for a home, you need to find something that fits your budget.
- Income and assets requirement
The second factor as to whether this deposit needs to be paid is based on income and assets. As a rough guide, if assets are currently below $171,535.20 this deposit does not need to be paid. You just need to find a home that has a room available to a “low means resident”.
Remember that the Daily Accommodation Charge may need to be paid, regardless of whether the deposit is required to be paid or not.
3. Means Tested Care Fee
This is the second daily fee a person can pay.
This fee is based on mum or dad’s financial position – in other words their income and assets. I am not going to attempt to explain how this fee is calculated here but again, as a rough guide, if their assets are currently above $171,535.20 they may have to pay a Means Tested Care Fee.
This fee can vary depending on mum or dad’s financial position, but it is capped at an annual rate of $28,087.41, which averages out at $76.95 per day. This fee also has a lifetime cap of $67,409.85.
In other words, once you reach the caps as mentioned you are no longer required to pay the Means Tested Care Fee. You will of course still pay the Basic Daily Fee.
This fee is not charged by all nursing homes. However, if you do select a home that advertises this fee, you must pay this fee.
What do you get for this fee? You may get a choice of menu, access to streamed TV services, a daily newspaper, or even a wine with dinner.
This is just a quick overview of the fees that could be payable. As I have explained in previous blog posts, the calculation of these fees can be daunting and a little frightening.
So, do not wait until someone has an immediate need to find an aged care facility. Try to understand what would happen and the likely fees before any health issues arise. Discuss yours or your parent’s circumstances with someone who understands the system.
Be prepared for the worst-case scenario, then hope the situation never arises.
PK believes people have the right to accurate, affordable and unbiased information that addresses all aspects of their preferred retirement lifestyle, thereby giving them the opportunity to make informed decisions that will empower them to live out their lives with dignity, certainty and security.
Tealey’s ambition is to change how people think about their retirement, he wants people to dream, plan and realise retirement is not defined by a magical age prescribed by the legislation.