Fees in aged care – how much and why?

When entering residential aged care, you are likely to come across a multitude of acronyms. This can be overwhelming, and to help make the change easier, having a clear understanding of what the fees in aged care are and how they apply, can certainly help.

What are the fees?

A move into residential care is essentially a move into a new home (with built-in care and support). Just like living in your own home, the fees for residential care can be divided into various categories:

• Accommodation Payments
• Living Costs
• Additional Services

Accommodation payments

An accommodation payment provides for the resident’s room or bed in an aged care home.

Residents with assessed assets and income above a government-determined threshold will be asked by the residential care home to pay an Accommodation Payment. This amount is determined by the care home and is listed on the My Aged Care website (by looking up the provider) here.

The agreed amount can be paid as either

• Refundable Accommodation Deposit (RAD): a lump sum payment which is refundable when the resident leaves. Unless you have agreed to an amount being deducted from it.
• Daily Accommodation Payment (DAP): a daily payment calculated on the agreed amount for the room. These payments are “rent-like” and are not refundable.
• RAD and DAP combination: a partial payment made as a RAD, with the remaining amount paid using a DAP, in whatever ways best suits the resident.

If the resident does not have assets and income above the government-determined threshold, they are assessed as a Low Means Resident and cannot pay the agreed amount for the room. Instead, the resident may be required to pay a contribution for their accommodation costs determined by the government. Similarly, these can be paid as lump-sum contribution, known as a Refundable Accommodation Contribution (RAC), a daily rent-like contribution, known as a Daily Accommodation Contribution (DAC), or a RAC and DAC combination.

Some recent proposals from the Aged Care Task Force have recommended the government consider grandfathering the current rules and have residents pay a rent-like daily amount as the only option from 2035. In addition, the task force has recommended a transitional measure allowing lump sum RADs that would not be fully refundable.

Living costs

There are two main daily living costs that can be payable by a resident.

Basic Daily Care fee

This fee is payable by all residents and helps to provide for various day-to-day services such as food, bedding, laundry, and cleaning. This cost is set at 85% of the basic age care pension for a single person.

Means Tested Care Fee (MTCF)

This fee may also be paid by the resident and is a co-contribution to cover a resident’s personal and clinical care costs. It is not payable by everyone as it is assessed based on the resident’s assessed assets and income. The MTCF has yearly and lifetime caps, so it is not an open-ended payment.

As part of the recent Aged Care Taskforce’s report, it was noted that the co-contribution arrangements for aged care mean that, on average, the government currently pays for around 75% of residential aged care funding and 95% of home care funding for a resident. Deeming this as not being an “optimal” or “fair” mix for the taxpaying population, The Taskforce generally agreed that the costs are high and need to be subsidised by the government, however, there is also a need for increased contributions from residents who have the ability to pay. Additionally, there’s a need for increased clarity and transparency on what residents and the government pay. There were several proposals made to address this, however, at this stage, we will need to await the government’s responses to gain further clarity on potential changes.

Additional services

Additional services are now being offered to residents by many aged care homes for a fee. They provide niceties to make life more comfortable for the resident.

Recommendations in the Aged Care Taskforce’s report support the need to maintain a safety net for low means residents and provide residents with greater flexibility to elect to pay for improved daily living services, subject to various conditions.

We are here to help

If you have any questions or need guidance on any aspect of the aged care financing journey, please do not hesitate to get in touch. With a specialist division of financial advisers who are accredited in aged care advice, we have a team that can talk you through the various options and explain the various financial considerations. Our team can also connect you with trusted organisations who can help guide you through the care choices that best align to your unique care situation. Learn more about our accredited aged care financial advisers.

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