Aged Care Advice – Arrowstone can assist you, your family or friends in
understanding and assessing the impact of the new rules.
Commencing Home Care and managing the transition into Aged Care is a difficult process for retirees and their families. Understanding the aged care system, as well as the interaction with social security and other rules is complex. As an accredited Aged Care Adviser, we are happy to assist families in understanding and advise on all the financial aspects of commencing Home Care or moving into Residential Aged Care.
Some of the new rules impacting residential aged care services
The Aged Care Bill 2024 was introduced to Federal parliament on 12 September 2024 and the new legislation was passed on 25 November 2024 and is now law.
Why are the changes happening?
With the number of Australians over the age of 80 expected to triple over the next 40 years, the sustainability of the aged care industry is under threat. In 2022/23, 46% of aged care providers made a loss from aged care accommodation.
In 2023, the Aged Care Taskforce was established to explore these issues and made recommendations on how to improve the sustainability of the sector. Their final report was released in March 2024 where a number of recommendations were made for the Government’s consideration. The legislated changes adopt several of the Aged Care Taskforce recommendations.
At a high level, these changes seek to ensure that those who can afford to contribute towards the cost of their care do so. Government support will be targeted to those who are not as financially secure. The changes also seek to increase investment in the aged care sector to improve the facilities available to residents.
Will the changes impact me if I’m already in residential aged care?
Most of the changes will only impact new aged care residents entering care from 1 July 2025. The ‘no worse off’ principle ensures that if you’re receiving care before 1 July 2025, your fees will continue to be determined under the existing rules, unless you move to a new aged care provider and choose to be under the new rules.
Will the changes increase the cost of residential care?
The Government will continue to pay most of the aged care costs for all aged care residents, however if your income and/or assets are above certain levels, you may need to contribute more to the cost of your care if you enter care from 1 July 2025. The Government expects that half of all new residents entering residential care from 1 July 2025 won’t pay more under the new system. Specifically:
• no ‘fully supported’* resident will contribute more
• 7 in 10 receiving the full Age Pension will not contribute more, and
• 1 in 4 part Age Pensioners will not contribute more.
Residential aged care fees – At a glance, what’s changing?
Residential care fees are broken down into ‘accommodation fees’ and ‘ongoing care fees’. The changes impact both.
What’s an accommodation fee?
You can think of the accommodation fee as the cost of the room. You can choose to pay this fee as a refundable lump sum (often referred to as a ‘bond’ or ‘refundable accommodation deposit’ or ‘RAD’). Alternatively, it may be paid as a non-refundable daily fee (referred to as a ‘daily accommodation payment or contribution’).
Currently, when you leave aged care, any refundable lump sum that you’ve paid is refunded (less any other fees that you’ve agreed to have debited from the amount).
While there’s no limit on the lump sum fee that can be charged for a room, there is a limit on the amount that a facility can charge you for a room without getting specific approval from the Aged Care Pricing Authority.
Changes to the accommodation fee include:
- The maximum amount that a facility can currently charge as a RAD without special approval from the Aged Care Pricing Authority is $550,000. This amount has not been indexed or adjusted to account for inflation or the rising costs of construction since 2014. The Aged Care Pricing Authority can change this amount at any time. Many facilities charge more than this amount for certain rooms, however the requirement to receive additional approval can be time consuming. From 1 January 2025, the maximum amount of RAD that can be charged without specific approval from the Pricing Authority increases to $750,000 and will be indexed on 1 July each year.
If you are living in residential aged care before 1 January 2025, the RAD already agreed between you and your provider will not change, as it was set in your Accommodation Agreement at the time you entered care. Facilities can only re-price rooms for new residents from 1 January 2025.
- From 1 July 2025, facilities will charge a ‘retention amount’, which means 2% per year (for a maximum of 5 years) will be deducted from any refundable lump sum deposit you pay to the facility. This will be calculated daily and charged no more than monthly (reducing the amount refunded when you leave the facility).
- The Daily Accommodation Payment (DAP) payable by a resident will be indexed twice per year to CPI. This change will not apply to Daily Accommodation Contributions (DAC) paid by partially supported residents.
What are ongoing care fees?
Ongoing care fees cover the daily costs of your ongoing care. This includes the cost of meals, bathing, and services that may be provided during your stay.
Changes to ongoing fees include:
- Certain residents to contribute towards ‘Hotelling Supplement’: Currently, the Government covers the full cost of the Hotelling Supplement for each resident. From 1 July, residents with more than $238,000 in assets or more than $95,400 in income (or certain combinations thereof) will make contributions to this cost, known as the ‘Hotelling Contribution up to a $11.24 per day (as at 1 July 2024).
- Means-tested fee replaced: The current means-tested fee (MTF) will be replaced with the ‘Non-Clinical Care Contribution’ (NCCC). The NCCC is the resident’s contribution towards the cost of non-clinical care services.
It will be calculated based on means and is subject to a daily cap of $101.16 indexed (there was previously an annual cap) and a lifetime cap of $130,000 indexed (previously $82,018.15). Residents will not pay the NCCC after they reach the cap, or after 4 years in residential aged care, whichever occurs first.
It is only paid by residents that hold assets exceeding $502,981 or income exceeding $131,279 or a combination thereof.
- Extra/additional services fees will be replaced by ‘Fee for higher everyday living’: This fee is agreed between the service provider and the resident and will be payable for certain enhanced benefits and extras in addition to those covered by other ongoing care fees, and otherwise not required to be provided to a resident. Existing residents paying an Extra Services Fee will be transitioned to the new fee.
- Increases: Allowing certain daily fees to be adjusted during your stay in care to keep up with rising costs.
Please feel free to contact us to discuss and/or obtain advice on this topic.