Funding aged care – home care versus residential

Case studies in June’s example compare cost of home vs residential care.

June has been struggling to cope at home and while her family think that residential aged care is the best option, June is not sure she can afford it. In all reality, June would rather remain in her own home.

She owns her home, which has a value of $650,000. She has financial assets totalling $60,000 and receives the full Age Pension.

Case study 1: home care
June has an ACAT assessment, which approves her for a Level 3 home care package. This provides a budget of $36,306 per year for home care services. June will need to contribute just the basic daily fee of $10.10* ($3686.50 per year) towards the package of services. 

June and her family can work with service providers to determine which services are provided and who will provide them. She will need to pay an administration fee and other fees may also apply – these are deducted from the package value available to pay services. If the package does not provide enough care to allow June to stay in her home, she may need to pay for additional services. On top of this, June still needs to pay for her normal living expenses and home maintenance costs.

Case study 2: residential care
After looking at what can be provided under a home care package, June decides to move into residential care for a $400,000 accommodation payment.

She decides to sell her home, but this may take a few months, so she starts by paying a $12,000 refundable accommodation deposit (RAD) to cover the daily accommodation payment (DAP) for the first six months. The service provider will deduct the DAP from the RAD paid.

At the end of the six months the home has sold and June uses this money to pay $400,000 RAD and invests the remainder in the bank. Her Age Pension will go down slightly to $20,814 per annum and she earns $8932 (as per deeming rate) of interest – total income of $29,746. She will pay daily care fees of $27,505* (basic fee plus means-tested fee) which cover costs such as food, electricity, daily care, laundry and cleaning services. June should be able to fund this from her income with a small amount left for personal extras.

*Rates current to 19 September 2017.

Finding a financial planner
When making decisions about accessing aged care, it can be a very stressful and difficult time. But you don’t have to make the decision alone. A financial planner who is experienced in aged care advice can help you to make fully informed choices.

Ensuring that you have adequate cash flow or cash reserves to meet the cost of your care services is vital. You might choose to withdraw the money from your savings to meet the costs or you might need to look at how to increase your monthly income.

In some cases, your financial adviser may even be able to offer recommendations to structure your finances to minimise the fees for home care or residential care.

Planning ahead and seeking professional financial advice may save you a lot of time and stress as well as help to prevent you from making a wrong decision.

If you have a financial planner already, ask if they are able to help you with your aged care decisions or refer you to someone else who can. You can also use the ‘Find an Adviser’ service on the Aged Care Steps website to search for an adviser who has completed the Accredited Aged Care Professional training program.

*Rates current to 19 September 2016.

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    COMMENTS

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    cat
    3rd Jan 2017
    10:41am
    nobody ever tells us how we with no home to sell manage
    Anonymous
    3rd Jan 2017
    11:59am
    Yes assuming you are on the full old age pension you will be provided with a room in good accomodation that should be quite acceptable at no cost to yourself the Government pay.
    cat I have had experience in this area with people in your situation.
    Dancer
    3rd Jan 2017
    12:13pm
    Yes, Roby is correct - if you do not own your own home, and you do not have other substantial financial assets to draw on, then you will still be provided with suitable aged care accommodation. The fee for this will be deducted from your pension income, it used to be 85% of the full age pension, and is probably deducted on a monthly basis. It leaves 15% of your pension for personal items, clothing etc. which is not much, so hopefully you may have some small financial balance you can draw on, or family can help out.
    yellownanna
    3rd Jan 2017
    12:43pm
    Thank you Dancer, Roby & Fast Eddie. My mind is at rest now. I thought there must be something for those of us who are not rich. I just didn't know what that something was/is.
    Anonymous
    3rd Jan 2017
    1:28pm
    You are welcome, have a great 2017, and vote One Nation.
    Rosret
    3rd Jan 2017
    2:16pm
    Yes, you are actually better off not having a home and assets. If you do have money they will take it all. Of course it does cost a lot to run these facilities but it is a rather odd system.
    Old Geezer
    4th Jan 2017
    12:06am
    You will probably be in a room next door to someone who has paid a big bond. I have seen it many times.
    Radish
    8th Jan 2017
    2:58pm
    Eventually the bond is paid to your estate...the nursing home of course has the use of your money while you are in there.
    MICK
    3rd Jan 2017
    11:03am
    This is something I have not looked into in detail but I have seen enough of retirement villages ripping off vulnerable people, and then their families, to put me off the care sector forever.
    People need to think twice about the healthcare industry. Better to have full time home care if possible rather than be institutionalised where you become easy prey. How you fund home care is of course the question. One way is to have a granny flat or the like and offer free accommodation and a small wage in exchange for looking after you. Of course there are real dangers here too with many old folk leaving their estates to third parties, some of whom have groomed these vulnerable old people for years. A disgraceful practice which governments let happen. It is a real growth industry and should be stopped through legislation rather than ignored.
    Anonymous
    3rd Jan 2017
    11:38am
    Yes, MICK, this is yet ANOTHER example of the government doing nothing for the welfare of the people. They are but LAZY SODS!
    Anonymous
    3rd Jan 2017
    4:12pm
    Hey MICK and Fast Eddie are you a couple or what.
    McGroger
    3rd Jan 2017
    4:12pm
    Well said, Mick.

    On top of the unscrupulous behaviour of some, there can be incompetence.

    A few years ago I left work to help my wife look after her mother who was declining with Alzheimers. We moved in and I was the designated carer while my wife kept on with her part time job. When the mother-in-law had deteriorated to the point where we could no longer cope, we went for an interview at an aged care home. We were told that a bond would have to be provided, necessitating either a sale of or a charge over the house. And interest would be levied on the amount of the bond.

    Thankfully I had studied up on the regulations beforehand. The advice was totally wrong. Because she had had a full time carer for over three years and she would qualify as a high care patient - that is, attracting a higher government subsidy - the bond did not apply. (In this case the government was attempting to do the right thing, but the implementation by the retirement home was negligent.)

    My pointed question to this supposedly experienced interviewer was: how many people have had to sell their houses because of incorrect advice? How many families, living in the family home, had been affected? Obfuscation ensued.

    I must say that - to all appearances - the care she got was excellent.

    But, I agree with you, institutionalised care can be a messy bloody minefield and should be avoided for as long as possible.
    Anonymous
    3rd Jan 2017
    6:43pm
    Hey Roby, are you a robot?
    Anonymous
    4th Jan 2017
    7:50am
    Good one Fast Eddy
    Bonny
    8th Jan 2017
    8:18am
    I have a housekeeper and handiman living on my estate that get free accomodation for their work on the estate.
    Radish
    8th Jan 2017
    2:59pm
    The Brightwater group are a not for profit outfit and they run lovely nursing homes from what I have seen.
    yellownanna
    3rd Jan 2017
    11:39am
    My question is the same as Cats. If our only income is the old age pension & we have no assets, what happens to us?
    Anonymous
    3rd Jan 2017
    12:03pm
    The compassionate government has done their calculations and the answer is that you will survive - just!
    Dancer
    3rd Jan 2017
    12:14pm
    Yellownanna, see reply under Cats ... hope this helps and put your mind at rest.
    Radish
    8th Jan 2017
    3:01pm
    We are lucky to live in a country who looks after us...it may not be perfect but is sure a hell of a lot better than living in a third world country isn't it?
    KB
    3rd Jan 2017
    2:15pm
    There will be many old aged people in the future like me who do not own our own homes.What happens to us?
    MICK
    3rd Jan 2017
    4:02pm
    The short answer is you and people like you need to vote out the mongrels and vote in Independents and minor parties who generally give a damn.........or get tossed next election.
    Old Geezer
    4th Jan 2017
    12:09am
    You will get a room without paying a bond next to someone who has paid a big bond.
    Anonymous
    4th Jan 2017
    1:26pm
    You don't get a choice of location though. You could be forced to move a long way away from loved ones and friends.
    Anonymous
    4th Jan 2017
    1:27pm
    You might also have a long wait for a room to be allocated. There are limited supplies of free rooms.
    Old Geezer
    4th Jan 2017
    3:17pm
    If you leave until the last minute Rainey you don't have choice where you go at all.

    When the times comes for me then I know what to do as I'm certainly not going to spend time playing bingo in God's waiting room just waiting for my number to be called. I can think of nothing worse.
    Bonny
    8th Jan 2017
    8:15am
    There is no limit on free rooms Rainey that is a myth they use so people think they will get a place quicker if they pay. Everything is negotiable.
    KB
    3rd Jan 2017
    2:15pm
    There will be many old aged people in the future like me who do not own our own homes.What happens to us?
    Bonny
    8th Jan 2017
    8:14am
    If you have no assets you don't pay anything.
    PAYEdmydues
    3rd Jan 2017
    3:02pm
    So good to get advice from those who have not really looked into it. What of your parents? Did you care for them? My mother spent 12 years in a St Ives retirement village before I moved her to an aged care facility. Yes there are costs involved but I have no complaints. She passed away at 92 early last year. My mother in law is 96 next year and has lived with my wife and I for the last year.
    MICK
    3rd Jan 2017
    4:05pm
    There are all flavours. The anger here today is that this government has come after those who thought voting Liberal was a smart thing to do, whilst at the same time these bastards are giving tax cuts to the rich using the lie of Trickle Economics which has been proven to be a sham of the rich in other countries.
    A fair system is what is needed. The current bunch of cretins will not give you that because they are in power to service the rich...which they are trying their darndest to do: $50 billion worth.
    Anonymous
    3rd Jan 2017
    4:15pm
    Good effort PAYEdmyes I could not have lived one hour with my mother in law.
    Pablo
    3rd Jan 2017
    4:13pm
    This is all BLOODY DISGRACEFUL! It is all so difficult to understand, and I am someone who has run my own business and managed my finances since then! The article DOES NOT talk about the cost, which can be quite high if you have better than the average income/assets! If the government is forcing such a complicated and ridiculous system onto us, I believe they should be providing independent advice from a financial advisor at no cost to us! This whole business is really making me sick, aged people are treated like rubbish that needs to be thrown out every Tuesday! We are NOT the reason the budget is in deficit and the sooner we have someone in Government who treats us with the respect we deserve!!!
    shirboy
    3rd Jan 2017
    4:38pm
    I think the government is doing a "Robin Hood"thing. Robbing the so called rich to help the poor.
    Rae
    4th Jan 2017
    9:28am
    Don't know if it helps the poor but it certainly helps investors and owners of aged care hospitals. I bet they pay hefty donations to get this sort of a deal.
    KB
    4th Jan 2017
    11:06am
    The government is robbing the poor to help the rich/
    ronnieb
    3rd Jan 2017
    5:57pm
    Sorry shirboy, either you have your tongue in your cheek or you have it the wrong way around. It's a kind of 21st century Robin Hood where they rob the poor to give to the rich. Just listen to old smokin'Joe (Hockey), when he spoke about 'Lifters and Leaners'.
    Anonymous
    4th Jan 2017
    1:34pm
    How do you figure that, ronnieb?

    I read recently that a homeowner couple with $816,000 in assets lost $215 a week in pension entitlements on Jan 1 to gift $115 a week to a homeowner couple with $620,000 in assets.

    Homeowners have to sell their house to go into aged care, but non-homeowers go free. Homeowners suffer losses and costs of up to $450 a week to live in their own home in retirement while renters get rent assistance and renters with assets get a much larger pension.

    Workers and responsible savers are being robbed to give to the poor and the rich.

    The whole system is a total disaster that is creating a welfare mentality by punishing workers and savers who live responsibly and doling out to bludgers, cheats, spendthrifts, and manipulators.
    Old Geezer
    5th Jan 2017
    11:55am
    Only those with no assets go free into a nursing home Rainey. The rest have to either pay what they ask or negotiate an amount. It doesn't matter if you own a home or not.
    Teena49
    3rd Jan 2017
    6:02pm
    BE VERY CAREFUL. Last year I had my husband home with Palliative Care. ACAT Level 4 allowance approx $50,000 per year. After Govt & Provider fees taken out approx $30,000 remained. Equal to approx 1 1/2 hours of care per day. IMPOSSIBLE. To enable me to keep him at home it cost me $70,000 for a mixture of full and part time care over the next 4 months. I was fortunate to have the savings and he passed away at home after 4 months. ACAT packages are certainly NOT what they initially seem.
    Bonny
    8th Jan 2017
    8:12am
    Time to bite the bullet and allow people to die with dignity. Pallative care is so cruel.

    3rd Jan 2017
    8:55pm
    I dont know what the answer is but seems extremely unfair that someone who has squandered away there money over the years gets into full time care for extra nothing . For those of us who have gone without put some money away managed to get a home worked 12 hours a day for most of there lives did not drink gamble or smoke are penalized for being good managers .So I guess the answer is get on to center-link when young waste your money and you will be looked after by the government for nil.
    Teena49
    3rd Jan 2017
    9:32pm
    Very True Fair Dinkum. I worked full time & my husband worked 3 jobs most of his life - so yes we had "the savings" we needed to provide home care….
    Old Geezer
    4th Jan 2017
    12:14am
    Yes a nursing home works very similar to the OAP. If you have the means you pay and if not you don't. Real Robyn Hood stuff. Take from the rich to pay for the poor.
    yellownanna
    4th Jan 2017
    1:49pm
    Yes, it's not fair you have to pay while others don't. We are not all bludgers though. If I had been able to work all my life, my daughters & I would have had a far superior lifestyle. I would loved to have been able to provide for them - basics & a few luxuries. Life would have been so much better. And now with 3/4 of my life past, I would be facing my declining years with financial security. I would also be looking back on accomplishments of which to be proud. Now all I can say is we scraped by, my girls were educated & they are off living their own lives.

    Just for interest sake, I didn't squander money - there was never enough to do that. I have never drunk, gambled or smoked. These attitudes & those of the government to force people off pensions, whether they deserve it or not, only instills fear, helplessness, hopelessness & despair. I can only think of one remedy that would diminish the number of rorters - down by one permanently. This is no idle threat, rather a measure of desperation I feel.
    Old Geezer
    5th Jan 2017
    5:11pm
    Paying and not paying for a place in a nursing home certainly stirs up the oldies in those homes at times.
    Radish
    8th Jan 2017
    3:06pm
    Life is not fair for all...that is how it is...yes there are lots of bludgers who drank and smoked and spent every cent they earned.

    They are now on the aged pension living week to week with no savings.

    Then you have those who did the opposite, scrimped and saved and at the end of the day they are over the assets/income limit.

    No point in complaining you are not getting the OAP...you are enjoying a better standard of living in most cases.

    No one size fits all...
    Maggie
    6th Dec 2017
    11:54am
    The answers below seem strange to me. Ideally you should get a room but I have seen documentaries about women especially who are living in their cars and on the streets,having made application for accommodation. There was an Insight programme about this too, if I remember rightly. Who is right?


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