The financial side of aged care can be a major stressor and a source of confusion for families. There are individual factors to consider which can make it hard to gauge how much you’ll be up for.
Aged care residents pay different fees depending on their means assessment and negotiations with the provider. Because of this, it can be tricky to know what to expect when you’re financially planning for aged care services.
Here is how you can get a clearer picture of what you’ll need to pay.
Basic Daily Care Fee
This is a government-levied fee, which everyone needs to pay. It changes twice a year in line with pension increases and is approximately $ 56.87 a day based on current rates. It is set at 85% of the single person rate of the basic age pension.
Accommodation Payment (RAD and DAP)
RAD stands for Refundable Accommodation Deposit while DAP is Daily Accommodation Payment.
Think of RAD as similar to purchasing – as it’s a government-guaranteed, one-off lump-sum payment that is largely returned when you leave – while DAP is similar to rent, with the money going to food and lodgement costs. You can also choose a combination of RAD and DAP. RAD must be paid for upfront and is around $550,000 .
A means test assesses whether you need to pay the means tested care fee and if you’ll receive government payments. It determines if you will have to pay the agreed room price your provider is asking for.
You will be deemed low, moderate or high means. If you are low means, you will be fully subsided by the government, while moderate means will get you a partial subsidy. High means residents don’t get a subsidy and must pay the RAD.
Additional service fee
You also need to keep in mind additional service fees to cover things like a preferred brand of toiletries, access to paid TV services, or arranging a hairdresser. You and your provider must agree on a fee for additional services before you start receiving them. You should only be charged for the additional services that you can make use of.
Extra service fees
Some aged care homes offer extra service rooms and can charge for the bundle of upgraded hotel-type services provided. This could include higher quality linen or room furnishings. This can apply to the whole home or just to individual rooms. If you agree to enter an extra service room, you will have to pay this fee, whether or not you use the extra services provided.
Example of fees
Here’s an example of the varying costs depending on circumstances.
Marie and Rose are both single. Marie receives the full aged pension, while Rose doesn’t get a pension.
Marie earns $22,800 and has $10,000 in assets and also in savings. She doesn’t have superannuation.
Rose on the other hand earns $200,000, owns her house (having $1 million in assets) and has $500,000 in savings.
They will pay different amounts for aged care. Marie can expect to pay a daily fee of around $49, while Rose will pay a lot more, around the $740 mark.
While the example above can give you a clearer idea of the costs involved, it’s not always as simple as the higher earner paying more.
Let’s look at Gwen. She no longer works, so she earns less than Marie, but she has $200,000 in super and $500,000 in savings. She is married and has $50,000 in assets.
Gwen can expect to pay around $58 a day – higher than Marie but a lot less than Rose.
An experienced aged care financial adviser can do financial modelling of the available options and financial outcomes. They can minimise fees and maximise benefits, negotiating with the aged care home on fees and contracts.
Given the complexity around the cost of aged care, it’s a smart idea to seek specialised financial advice. Speak with an aged care financial adviser before committing to a residential aged care home as this can not only clarify the costs involved, but potentially lead to savings.