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Change in Aged Care rules

Jul 07, 2014

Increasing life expectancies and improvements in medical technology mean we can expect to have longer and more productive retirements. There is however, still a high chance that help will be needed with daily living activities and/or medical care especially at older ages.

For some people this may mean accessing aged care services at home. For others a move to a residential care facility may be needed.

The choices available to you may depend on your family arrangements and your health requirements.  But if your finances are carefully planned you will have more choices and greater control over where and how you live and receive care.

What does care cost?

The cost to care for someone in a residential facility can be as high as $225.75 per day ($82,399 per year) but thankfully these costs are heavily subsidised by the government. The Federal Government spends over $12 billion a year on aged care.  This is in addition to costs incurred by care providers for building and maintaining the facilities and fees paid by residents.

With the percentage of Australia’s population over age 85 set to triple over the next thirty years the pressure on finances is increasing. This has led to a new fee structure for aged care which started on 1 July 2014.

“The need for people to seek financial advice will be greater than ever now that the new fee structure has been implemented, as the changes will result in many new residents facing higher costs” says Simon Hele, Director of Perks Integrated Business Services.

What is the impact of the new rules?

The new rules impact both residential and at-home care, with more funding directed to at-home services. This is in line with many people’s desire to stay in their own homes and the difficulty with building new residential facilities.

But at-home care does not work for everyone, especially those who are living alone or who have high care needs.

How the new rules will work and a comparison to existing rules is summarised below:

Accommodation payments

  • Pre 1 July 14 – lump sum bonds paid in low care and daily fee in high care.
  • Post 1 July 14 – all facilities will publish a lump sum and a daily rate. The resident chooses which to pay.

Daily care fees

  • Pre 1 July 14 – all residents pay a flat daily rate.
  • Post 1 July 14 – no changes.

Additional care fees

  • Pre 1 July 14 – daily fee based on assessable income with an annual cap.
  • Post 1 July 14 – daily fee based on assessable income and assets with annual and lifetime caps.

Extra services fees

  • Pre 1 July 14 – package fee charged by approved facilities.
  • Post 1 July 14 – residents in all facilities will be able to select (where offered).

The main impacts of the new rules are:

  • No distinction between low care and high care.
  • Accommodation payment (entry fees) will be quoted as a fully refundable lump sum and an equivalent daily rate. These amounts will be published on the facility’s website. Residents will have 28 days after moving in to decide which fee option to pay.
  • The additional daily care fee (means-tested fee) will be calculated on both income and assets and so is likely to be higher than the previous rules, but a lifetime cap will apply to make care affordable for people with long-term care needs.
  • Facilities will have greater ability to offer additional services for an additional fee.

The new rules will only apply if you move into care on or after 1 July 2014. People who moved into care before that date will continue to be assessed under the old rules unless they move from one facility to another and choose to have the new rules apply.

Things to consider

The new rules may result in higher fees, but financial aspects are only one consideration when preparing for your care years. It is more important to find the right place at the right time.

“With the right financial advice and plan in place you have the flexibility of being able to choose the right kind of care without the additional stress of how you will finance it” says Simon Hele.

“It is also important to consider your family needs and estate planning considerations as well as access to other government benefits and concessions” says Simon Hele.

If you think your plans need to be reviewed or you would like further information on aspects of aged care, call Perks today on 8273 9300.

 

Disclaimer: The information in this article is general and does not take into account your particular objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness having regard to your objectives, financial situation and needs.

Perks Wealth Management Pty Ltd. ABN 88 086 643 058 is the holder of an Australian Financial Services Licence No. 236551.

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