Importantly, low-means residents will be no worse off under the new rules.
The changes are necessary for the future of the aged care industry. Under the current funding rules - which have been in place for 12 years - nearly half of Australia's residential aged care providers have been operating at a loss, with many going out of business in recent years.
In recent times, four times more facilities have closed than have opened. The new funding model was necessary to encourage facility owners to continue to invest in the sector and provide more beds for older Australians.
Over the next 25 years, demand for aged care beds in Australia is projected to grow more than 300 per cent, from 180,000 beds to more than 750,000 beds.
Refundable accommodation deposits
Currently RADs (formerly known as bonds) are fully refunded when a resident leaves care. Under the new rules, aged care providers will retain 2 per cent of the RAD each year for up to five years, meaning a total of 10 per cent can be retained by the facility. For a $1M RAD, this equates to $100,000.
Daily accommodation payments
Interest rates on unpaid RADs, currently locked in at the time of admission, will instead be indexed to inflation twice a year.
Hotelling supplement
Previously covered entirely by the government, this daily fee, which will be up to $22.15, will now be means-tested. Residents will contribute none, some, or all of it, based on their financial circumstances.
Higher everyday living fee
Replacing the current additional services fee - which ranges from $0-100 - this charge will be negotiated only after a resident has moved into care, with built-in cooling-off periods and regular reviews. It will also be indexed to CPI.
Non-clinical care contribution
The NCCC will replace the current means-tested fee, which has an annual cap of $35,238 and a lifetime cap of $84,571. While clinical care will be fully funded by the government, residents will pay up to $105.30 per day, without an annual cap, but a higher lifetime cap of $135,000. The Basic Daily Care Fee, which is set at 85 per cent of the full pension, remains unchanged under the new rules. The new rules add another layer of complexity, especially with the introduction of CPI-linked fees and the increased emphasis on means-testing.
What to consider
Australians considering entry to aged care should consider three things:
1. Understand the means-test changes
Aged care advisers can calculate how the new means testing and CPI-linked fees will affect your aged care fees. Understanding how your means will be assessed can help you plan ahead and avoid surprises.
2. Consider funding strategies for RADs or DAPs
Review whether paying a Refundable Accommodation Deposit (RAD), a Daily Accommodation Payment (DAP), or a combination of the two makes the most sense for your situation under the new rules, especially with new RAD retention rules and CPI-linked DAPs coming into effect.
3. Plan ahead for ongoing fee increases
Understand how these fee increases will affect you and your family. Fees will continue to rise over time, and planning for indexed increases can prevent future fmancial stress.
Talk to your family
It's important to talk to your loved ones, ahead of time, about when it is necessary to consider moving from home care to aged care, to ensure you have a plan in place for when the time comes.
If you would like guidance from an
experienced aged care planner, the team at Clarity Aged Care can help you understand your options and move forward with clarity and confidence.
Note: Figures are accurate as of the publication date
