Confused about aged care fees and what it all means? You are not alone. In this article we simplify the basics of aged care fees for you.
If you, or someone you love, need to make a move into residential aged care, understanding the fees and getting a clear picture of what it will cost is not easy. There are all sorts of fees and you will come across a myriad of acronyms such as RADs, DAPs, MPIRs, MTAs and MTFs. Or possibly RACs and DACs.
So where do you start and how do you navigate through this maze? And what might change in the future, following the recent release of the Aged Care Taskforce report on aged care funding?
Why so many fees?
A move into residential care is essentially a move into a new home – just a home with built-in care and support. Just like living in your home, the fees for residential care can be divided into three categories:
- Paying for accommodation
- Paying for daily living expenses
- Paying for care services.
The way these fees are calculated is different to the spending choices you have while you live in your own home. The government sets some of the rules and fees. Other fees may be set by the care provider.
Paying for accommodation
Paying for your room is probably the most complicated part.
The cost of a room can be anywhere up to around $2.5m but on the Central Coast the average is around $400,000-$500,000. While you are not buying property, you still need to either find a lump sum of money to buy the right to live there or generate cashflow to rent your room.
This is a cost you need to fully fund, so it is important to make affordable choices. But if you are assessed to have low financial capacity, the government sets a different pricing structure and might help by paying some (or all) of the room cost.
Some of the discussion on reforms in this space may see the phasing out over time of the lump sum purchase option, with everyone just paying a daily rent.
Paying for daily living expenses
Once you move into care, many of the daily bills you receive for things like food, electricity, gas and cleaning will no longer come to you. Instead these are paid by the care provider and you will be asked to pay a flat daily fee to help cover the shared costs of these expenses.
Potential reforms in this area may see residents paying higher fees for these services. Currently the government sets a flat fee for all residents in all residential care services, but potential changes may see this being set individually by care providers based on the level and quality of services provided.
Paying for your care
On average, the government currently funds around 75% of care costs, with the remaining 25% paid by residents according to a means-test which determines financial capacity.
The decisions you make around how to structure your assets are important as they may impact how much you will be asked to pay. To help with planning there is an annual cap and a lifetime cap on the fees payable.
It is generally agreed that these costs are high and need to be subsidised by government but there is not a clear direction yet on where reform will go in this area. Some proposals consider that means-testing should be abolished with the government paying the full cost. Other proposals consider that means-testing should be increased so that wealthier residents pay more of the cost. We will need to wait and see what the Government decides to do.
If you need to make decisions
Making aged care decisions on your own is hard. There are so many moving parts with family preferences, taxation, age pension, estate planning and fee implications. That’s why we are here to help.
As an experienced financial planner who specialises in aged care advice we have the experience, knowledge and tools to help you review your options and make good decisions. If you need help, or want to start planning ahead, call our office on 02 4325 0884 to arrange an appointment.
Sophie Doyle (AR#000470612) is a Retirement and Aged Care Specialist at Morgans Financial Limited (Morgans AFSL 235410 / ABN49 010 669 726); with a passion for assisting people make informed financial decisions, as they navigate their way through retirement and aged care.
Disclaimer: While every care has been taken, Morgans Financial Limited makes no representations as to the accuracy or completeness of the contents. The information is of a general nature only and has been prepared without consideration of your individual objectives, financial situation or needs. Before making any decisions, you should consider the appropriateness for your personal investment objectives, financial situation or individual needs. We recommend you see a financial adviser, registered tax agent or legal adviser before making any decisions based on this information. Current as at 12 March 2024.
