RAD/DAP or DAC/RAC – when, why and who pays

In this article, we look at the important financial accommodation cost considerations when a person needs to to be admitted to permanent residential care.

A resident’s classification, either a RAD payer or a low means resident, is determined on their day of entry to permanent residential care.

If assessed as a RAD payer, they will remain a RAD payer, even if they run out of money. If assessed as a low means resident, they will remain a low means resident, even if they have a substantial windfall. The two exceptions to this rule are:

1. If they voluntarily move to another facility
2. If they leave residential care for 28 days or more

RAD payers

RAD payers are required to pay either:

• a lump sum Refundable Accommodation Deposit (RAD), up to amount set by the facility and published on the myagedcare.gov.au website, or
• the equivalent Daily Accommodation Payment (DAP), or
• any combination of the two.

The DAP is calculated by multiplying the RAD by the Maximum Permissible Interest Rate (MPIR) and then dividing the result by 365.

The MPIR also remains fixed at the date of entry unless the resident voluntarily elects to change rooms, elects to move to another facility, or leaves residential care for 28 days or more.

The resident has 28 days after entering permanent residential care to advise the provider how they wish to pay their accommodation cost – either 100% RAD, 100% DAP or any combination of the two. However, they retain the right to pay any outstanding RAD, thereby reducing the DAP, at any time in the future.

Low means residents

A low means resident can be either Fully Supported or Partially Supported and their accommodation amount will be determined by their assessable assets and income, initially on their day of entry to permanent residential care and, subsequently, at each quarterly review.

The calculated accommodation amount is called a Daily Accommodation Contribution DAC, and it too can be converted to a lump sum Refundable Accommodation Contribution (RAC), either partially or in total, at any time.

The RAC is calculated by multiplying the DAC by 365 and then dividing the result by the MPIR

With a low means resident, the MPIR remains fixed at the date of entry unless the resident elects to move to another facility or leaves residential care for 28 days or more.

Centrelink/DVA conduct a quarterly review for each resident. If their circumstances have changed in the preceding quarter, it is possible for a fully supported resident to be re-assessed as partially supported.

For example, if a fully supported resident’s former home had been exempted from their aged care Assets Test because a protected person had been living there and the protected person ‘moved out’ during the previous quarter, the net value of the home would then be assessed up to the capped rate.

Consequently, they would then become partially supported and would be required to pay a DAC, capped at the facility’s maximum accommodation supplement and, possibly a means tested care fee.

These matters can be complex. To help you make an informed decision about aged care and age pension considerations please contact us to find out about our specialist Lifestyle and Care division.

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