Aged care fees – what are they and how will I pay?
It’s possible that one day you, your partner or your parents may need to move into aged care. Naturally, you’ll want the best possible outcome for all concerned.
However, this can be a very emotional and testing time, and there’s a lot to consider. In fact, you’re required to make sometimes difficult and complex financial decisions which can affect the level of aged care fees to be paid, the pension payments that you or your loved one receive, the timing of any sale of the family home and more. It’s important to understand all of the fees associated with aged care and it can help to speak to a financial planner about how you or your loved one will finance their move into aged care.
Aged care options
The type of costs you’ll pay will depend on the type of home you move into. If you have simple needs, you’ll probably need low level care (provided by hostels). Low level care homes offer accommodation services such as meals, laundry, additional personal care and some nursing care if needed.
If you need assistance with most activities of daily living, it’s more likely that you’ll need high level care (i.e. a residential aged care facility). These types of homes provide 24 hour nursing care and accommodation. They generally provide meals, toiletries, mobility aids and most medical supplies.
Your care needs will be determined by a member of an Aged Care Assessment Team (ACAT). In fact, you can’t enter a home without being assessed and approved by an ACAT member.
Fees and costs
If you are entering a low level care home or a high level care home with extra services, you’ll be asked to pay an upfront cost called an accommodation bond.
The amount of the accommodation bond, generally a one-off lump sum, is negotiated with the home at the time of entry, and will vary from facility to facility. Unless you have a large amount of assets you can use to pay for the bond, your next option might be to sell the family home. However, it is important to realise that there can be financial advantages to keeping the home. Your financial planner can help you make the right decision and help you to understand how you will afford your ongoing costs.
There are several types of ongoing costs you might pay, usually depending on the type of home you enter and the services it offers.
For a high level home without extra services, you’ll be asked to pay an accommodation charge in lieu of an accommodation bond. Your charge will be negotiated with the home at the time of entry. This is calculated daily and is set upon entry into the home, so it will not change while you’re a resident.
A basic daily fee is another ongoing cost payable by all residents for the costs of daily living such as meals, cleaning, laundry and heating. For someone entering care today, the basic daily fee is $44.54 per day (this is indexed twice a year in line with the indexation increases to the Age/Service Pension).
You may also be asked to pay an income tested fee on top of the basic daily fee. This fee amount is determined by your assessable income and should not be more than the cost of your care.
To give you more flexibility and choice, a number of low and high level care facilities also offer extra services for an additional fee. These services may include a higher standard of accommodation, food and other services.
Making the right financial decisions
If you have sold your home and have an amount of cash remaining after paying an accommodation bond, or if you have other investible assets, there are ways to structure your investments to minimise your ongoing aged care fees and get more from the Age/Service Pension. There are also special investments just for people in aged care, which can deliver a secure income stream, improve pension payments, give access to the Seniors Card and reduce ongoing aged care fees.
The financial aspects to entering an aged care home can be complex. It is wise to always seek professional advice before making any commitments.
Source: Challenger, June 2013