Understanding Aged Care Options
Aged Care options can be confusing. You and your family may notice changes in a parent or loved ones’ situation, where they may need help around the home or with some of their daily needs.
However, many people enter Aged Care under emergency conditions due to an accident or illness. Making the move to residential care is quite sudden. From home care to residential care, is important to understand your options to make an informed decision.
The Aged Care system can be complicated to navigate at the best of times. When there has been an emergency and the transition has come as a surprise, family is often faced with the compounding stress of finding suitable long-term solution in a short time frame. So it is no wonder making these decisions can be emotionally draining and overwhelming.
Firstly, it is important to understand that aged care help can be accessed in either the home or in a residential service. To help you decide which option is best, you can arrange a free assessment by an Aged Care Assessment Team/Service (ACAT/ACAS).
It is worth noting that you will need to have ACAT/ACAS approval before accessing a government-subsidised home care package or residential care.
Financing Residential Care
If Residential Care is required, steering your way through the jargon is not easy – especially if decisions are made in a time of crisis and emotions are running high.
An excellent place to start is to ask yourself:
How is the age pension affected if you move to aged care?
How to pay for the accommodation?
What are the contributions to ongoing care?
Will there be any Tax obligations?
Is there enough cash flow to pay for care and living expenses?
What is the impact on the net wealth and estate of you or your loved one?
Having strategies in place can help you identify suitable options and make informed and appropriate decisions.
Strategies you use might take into account:
Structuring assets to pay for accommodation and as well as create sufficient cashflow
Minimise fees or maximise Centrelink or Veterans’ Affairs benefits
Engaging a third party who is an expert in this area can provide an objective view point throughout the process.
Aged Care Fee Structure Explained
The government regulates most fees in residential aged care. However, some care providers offer additional services – with additional charges.
Payments for residential care are divided into contributions towards three areas:
Basic living expenses
The government subsidises food, electricity, cleaning and laundry services and nursing assistance. Residents are asked to contribute to the cost through a basic daily care fee plus a means-tested fee for those with a higher capacity to pay.
Luxuries and lifestyle
Additional items can be purchased on a user pays basis or in bundled packages as other service fees. The range of services and the prices charged vary widely.
Simply put, residential care is accommodation that needs to be “purchased” (called a refundable accommodation deposit, or RAD) or “rented” (called a daily accommodation payment, or DAP).
Market forces set accommodation costs with prices published on the MyAgedCare website. If assets and income can be reduced to low enough levels (to become a low-means client) before the move, the government may subsidise accommodation and regulate how much the resident pays.
In this way, the accommodation cost may be cheaper. But cheaper is not always better as you may lose choice and control of your options. Residents may be faced with accepting a place in whichever service has a low-means place available - even a shared room.
Some fees such as lifestyle contributions are not published on the MyAgedCare website. For full disclosure of the costs associated with a facility, ask the provider for a schedule of available services and the prices for each one.
When you are offered a place in residential care you will be asked to sign a Resident Agreement. This should detail (amongst other things) the cost you have agreed for your room, the type of room and what additional service fees you have agreed to pay.
Somethings you may consider as you read through the agreement include:
What services you are being provided and whether they are things you want, need and will use
The fee you need to pay for these services
Whether you can opt-out and stop paying the costs if you no longer wish to receive the benefits
Despite the best intentions, three of the most common errors I see come down to simply not having the right information to make long-term informed decisions.
Selling the home without understanding the implications
Being afraid to pay a lump sum (refundable accommodation deposit) for residential care accommodation and missing out on Centrelink concessions
Not generating enough cash flow
Getting the correct information and advice can help determine your options and the implications for your cash flow, Centrelink or other concession cards, aged care fees, taxation and estate planning. This will allow you to make the best choices for future care, security and happiness of you or your loved one.
If you need more advice or wish to talk to our team, call us today for a no obligation discussion.
Disclaimer: Prepared without taking into account your objectives, financial situation or needs. Before acting on any information in this article, Olive Grove Financial Advice recommends that you consider whether it is appropriate for your circumstances. Information in this article was correct and current as of 28 March 2023.
Olive Grove Financial Advice is operated by Bill Savellis through The Financial Advisor (Australia) Pty Ltd ABN 72 619 546 431, who is a Corporate Authorised Representative (No. 1278394) of Havana Financial Services Pty Ltd.