What will it cost?
The current charges for aged care are a maze of daily fees, accommodation bonds and extra service fees. And even within these categories, the charges applied are complex. One recommendation of Caring for Older Australians is simplifying how aged care is charged and how it can be funded.How much you are asked to contribute will be determined in two ways;
1)How much you are assessed by Centrelink as being able to afford to contribute towards actual care costs
2)How much you will have to pay in periodic rental or accommodation bond to enter your chosen facility
What are actual care costs and how much will you pay?
Actual care costs is the amount factored for your actual care, i.e. nursing, medical attention and other care needs. Under the proposed scheme, the Government will meet most of the actual care costs but individuals will undergo a Centrelink assessment to determine if they can afford to contribute. Under this assessment, those less wealthy may not be asked to contribute anything at all, and the maximum any individual will be asked to contribute is 25 per cent. Contribution will be subject to a lifetime limit, which has been suggested at $60,000.
Some examples given by the Productivity Commission, based on a community care cost of $961.40 per fortnight are as follows:
- an Age Pensioner with no home would pay $40 per fortnight
- a self-funded retiree with a home valued at $1 million would pay $240.38 per fortnight
- an Age Pensioner with a home valued at $500,000 would pay $195.13 per fortnight
For more details of how actual costs are assessed and funded, click here to read the relevant section of Caring for Older Australians
What are the uncapped costs and how much will you pay?
A further recommendation of Caring for Older Australians is to give the individual entering aged care the option of where they go. This is when the uncapped charges such as rental charges and accommodation bonds come into play.
Basically, choice comes at a cost. While the majority of actual care costs are met by the government, there are other costs which will be covered completely by the individual. Accommodation bonds or rental charges and living expenses will be met by the individual and the current cap which exists on such charges will be abolished. It is envisaged that the market will set the correct charge for such costs and not the government.
However, this also gives individuals the option to choose a care facility based on how much they want to pay, can afford to pay and how they wish to pay for this.
Under the current system, an individual may be asked to pay an upfront accommodation bond which is held by the aged care provider. Under the new system, an individual can:
- opt to pay such a bond
- split the cost over daily, weekly or monthly rental charges
- or a combination of both to suit their budget
Living expenses are actual expenses incurred by an individual and can cover items such as laundry, entertainment and meals. These will be paid for by an individual as and when incurred.
Currently, bond and rental charges must be funded by the individual, usually through the sale of the family home or other savings if available. It is proposed that an equity release scheme which is backed by the government would be a fair and prudent means by which individuals can fund costs. Once the individual dies, their spouse or family can opt to repay the debt without having to sell the family home. Regardless, any spouse or child still living in the family home will not be forced to sell the property to repay the debt.
Should individuals opt to sell the home to fund aged care costs, they can deposit the proceeds into a special pensioner savings account, the balance of which will be excluded from the Age Pension income and asset tests.
For more details of how accommodation bonds and living expenses will be charged and funded, click here to read the relevant section of Caring for Older Australians.
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