Tuesday, February 13, 2018

Explaining Aged Care Fees

Considering a Permanent Aged Care Residential Facility is a very stressful time, and although the Government has launched the My Aged Care site, there is still a lot of confusion around what gets paid, and then what goes to the Estate. 

Basically, a resident may pay the following fees:
A Basic Daily Care Fee
This covers the day to day living costs such as meals, laundry, cleaning, and utilities. The Basic Daily Care Fee is set by the Department of Human Services, at 85% of the single Age Pension. It is not set by the Residential Facility. Every resident with pay this, and it is not refundable.
Means Tested Care Fee
This fee is determined by the Department of Human Services when you complete the Permanent Residential Aged Care – Request for a Combined Assets and Income Assessment form (SA457). Aged Care Residential Facilities are subsidised by the Government, and this form helps the Department of Human Services decide how much of that subsidy the resident needs to contribute to. If you don’t complete the form, then you will received no Government assistance. This is not refundable, however there are annual and lifetime caps in place to limit the amount of the means-tested care fee that you are required to pay, and once these caps are reached, you cannot be asked to pay more towards the Means Tested Care Fee. Some residents are not required to pay this fee because they are fully subsidised with very little in assets.
Refundable Accommodation Deposit (RAD) or Daily Accommodation Payment (DAP)
This is set by the Permanent Aged Care Residential Facility based on the costs associated on running the facility, market conditions, and the quality of the establishment. This fee can be paid by a lump sum, which is the RAD, and will return to the resident when they leave the facility (either by transfer, or death). Most residents will use the sale of their home to fund this, and the Facility will use the interest earned off the capital to fund the resident’s stay. The capital is Government Guaranteed, and is heavily regulated. If the resident cannot afford to pay the full lump sum, then they can both pay a partial RAD, and make the rest up with the DAP, or pay a full DAP. The DAP (Daily Accommodation Payment) is the equivalent of what the Facility is forgoing in interest earned. This is not refundable, and the Government sets the interest rate used for these calculation. It is currently 5.76%.
Extra Service Fee
Some, not all, Permanent Residential Aged Care Facilities will charge an Extra Service Fee, which is set by the Facility itself. This is to cover the little extras that they provide, such as wine with meals, activities, nicer furnishing, bigger rooms etc. In some Facilities these are optional, in some they are part of the standard package, and some do not offer them at all. These are not refundable, and the Resident will need to check to see if they are included in their charges.

Now, a word of caution for those who have ageing parents. Choose wisely as your parents are only going to get frailer, and keep in mind that the Power of Attorney will need to offer a personal guarantee to pay these fees in the case that the Resident cannot.

Find Erin* at Achieveit Financial Planning, or call for an appointment on 07 4638 5011.
*Authorised Representative of Securitor Financial Group Ltd ABN 48 009 189 495 AFSL 240687

This is general information only and does not consider your personal circumstances. You should not act on any recommendation without obtaining professional advice specific to your circumstances. We recommend you speak to a financial adviser before acting on any of the information you read on this website.

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