The complexities of moving into an aged care facility contribute to the stress that residents and their families experience. Determining the costs involved isn’t an easy task as there are different types of fee arrangements depending on the level and type of care provided. In this article we will look at Simon’s situation, the costs he is likely to face and the options he may consider.
Simon has recently suffered from some health issues and after being assessed by the Aged Care Assessment Team (ACAT) it was determined that he will require assisted aged (high level) care. This means that Simon will need to find a suitable residential aged care (RAC) facility. Simon’s wife Paula wishes to remain in the family home so there is in less disruption to her life and she will not have to sell the family home at this stage.
There are generally three levels of fees that can apply with RAC. Firstly an accommodation bond or charge depending on the level of care, a basic daily fee (BDF) and depending on the person’s income and other factors, an income tested fee (ITF). Currently an accommodation bond (lump sum amount) is charged when entering a low care facility and some high care facilities that offer extra services. An accommodation charge (ongoing fee) generally applies only to high care facilities. The accommodation bond can be negotiable but cannot exceed the resident’s assessable assets less an indexed amount (currently $43,000) determined by Centrelink.
On top of these fees some facilities may charge for ‘extra services’. This may be to cover a better appointed room and/or other ‘extra services’ including internet, satellite TV and other leisure and entertainment facilities, access to therapies such as massage, aromatherapy and/or hydrotherapy, and access to certain foods and beverages.
In order to calculate the costs Simon will face, his financial situation will need to be looked at. This is usually attended to by the Financial Information Service at the Department of Human Services. Simon and Paula own their home, and have a range of investments such as term deposits, a bank savings account with minimal holding and an annuity (complying asset test exempt as was purchased prior to 20 September 2004).
- Simon’s assets – $95,000
- Paula’s assets – $70,000
- Savings account in joint names – $1,000
- Family home in joint names – $540,000 (exempt as Paula will remain there)
- This includes his Government Income Support (GIS) payments and half the combined assessable income, including the annuity.
The assessment of assets and income in determining the cost is the same process in determining his GIS payments. So despite Simon and Paula holding some of the investments in their own names, as well as others in joint names, the assessment is based on their combined financial investments.
With regard to the family home, it remains exempt from the calculation of costs for Simon’s aged care as Paula will remain in the home. So the total assessable asset value used for calculating the RAC fees is $83,000 ($166,000 x ½).
If Simon was to go into low care accommodation without extra services, the highest bond amount that he would pay is $40,000 ($83,000 less $43,000). The bond is held by the RAC facility and returned, less a ‘retention amount’ charged for five years, to the resident or to their estate upon exiting the facility. The retention amount is also set by government and is currently $331 per month if the bond is above $39,720. The retention amount reduces if below $39,720 and no retention amount is payable if the bond is lower than $20,520.
It would seem on the face of it that Simon is able to pay the bond in full from money held in investments. Bonds can also be paid on an instalment basis including the retention amount and interest (at a specified rate) on any unpaid amount of the accommodation bond. Strategies are available for those who do not have a partner remaining in the home and who wish to retain the property.
When entering a ‘high care’ facility an accommodation charge usually applies and is currently set at a maximum of $33.29 per day if the resident’s assessable assets are at least $112,243.20. For residents with assessable assets of less than this amount but over $43,000 the Accommodation Charge is calculated by deducting $43,000 from their assessable assets and dividing the result by $2,080. In Simon’s case the charge is estimated at $19.23 per day.
Next the basic daily fee (BDF). This fee is currently $44.54 per day and is indexed twice yearly in March and September. It is charged to all residents so it will apply to Simon.
Finally the income tested fee (ITF). The amount of the ITF that is charged is determined by the resident’s level of assessable income and the type of care they receive. Simon and Paula’s assessable income is within the range of paying an income test fee. In Simon’s case an ITF of $3.24 per day is estimated initially. Ongoing assessments are conducted and this can increase or decrease the ITF.
With the help of his family Simon has found two options at a facility which are suitable and convenient. The first option is where Simon has his own room and the second is where he will be in a shared room. Both placements are offered through a facility which provides extra services.
As mentioned previously, ‘extra services’ may be supplied as part of the placement and additional costs will apply. These costs are charged as a bond and as an additional amount to the BDF. The extra services amount charged is set by the government approved provider of the residential aged care, but these fees must also be approved by the Department of Health and Ageing. More information on the formulation and acceptance of extra service fees being charged can be found at //www.health.gov.au/internet/main/publishing.nsf/Content/Ageing-ess-general-info .
Another area of their finances which needs to be considered in Simon and Paula’s case is the GIS aspect. Prior to Simon moving into RAC, the entitlements are calculated on them being homeowners, and in a ‘couple’ relationship. When Simon enters aged care, they will still be considered homeowners as Paula will remain in the home but they will be assessed as a ‘couple living apart’. In a future article we will look at this assessment in more detail.
Prior to acting on information provided in our articles, NICRAC strongly recommends you confirm details in relation to your personal circumstances with any relevant government department and, if applicable, seek professional financial advice.
For more financial information relating to residential aged care, call and speak to a NICRAC specialist officer on 02 62800234 and visit www.nicrac.org.au .