Aged care is one of those topics most of us don’t want to think about, preferring to put it aside for another time, which unfortunately often results in big decisions needing to be made in a rush. Your plans for when you need more care than you have at home now, is something that should be discussed in calmer times and when the person needing the care is able to express their wishes clearly as well.
Whether you’re preparing for aged care for yourself or a loved one, understanding the options available at different stages and the associated costs is a good starting point.
Different levels of care
The first thing you’ll need to decide is how much help is required and if it can be provided at home.
There are two main types of government subsidised home care services:
- Commonwealth Home Support Program (CHSP) provides low level support to assist with living independently, offering services such as cleaning, laundry, meal preparation and shopping. The cost will vary depending on the type of support needed and the provider.
- Home Care Packages provide help to those in greater or more complex care situations. There are four levels of care packages ranging from basic to high care needs. These offer services such as assistance with showering, dressing, home maintenance and modification, and physiotherapy. The costs depend on the care package and include a basic daily fee (up to $10.75 per day) and an income-tested care fee (up to $30.86 per day). There may be additional fees which is an agreed amount for additional care and services.
There are long waiting lists for Home Care Packages, so apply for an assessment as early as possible.
Choosing the right home
Choosing the right home shouldn’t be left to the last minute. You or your loved one will be spending a lot of time there, and you’ll want to be comfortable in your new surroundings. Ideally, family should be comfortable with the standard of care you receive, and that the home delivers on their promises.
It’s worth talking to friends and other families about aged care homes and finding out which one might suit you, as well as visiting a few. You should make sure the agreement with the home is suitable for your needs and ask as many questions as you can along the way. Remember you don’t have to commit until you’re ready.
Once you’re ready, you’ll have up to 28 days after signing an agreement to decide if you’d like to proceed and to work out which payment plan you’ll commit to.
There are government-owned and private aged care facilities where the government covers the bulk of the costs.
How much you’ll pay will depend on the home and its charges, your financial situation and the types of care services you require. There are four different types of costs involved in aged care.
- Basic daily fee
This covers meals, laundry, nursing and personal care. Everyone pays this fee, which is equivalent to 85% of the maximum single Age Pension rate.
- Means-tested care fee
This is an additional contribution towards the cost of care and can be up to $260 per day, depending on your income and assets. It’s also worth noting if you are moving out of your own home only a proportion of it may be counted as part of the means test, and if a spouse or protected person is living in the home it is an exempt asset. There are online estimation tools that can give you an idea of figures. You should consider completing an assessment form to find out how much of your fee will be covered by the Government before signing any agreements. There are caps in place of $28,087.41 per year or $67,409.851over a lifetime. Assessment reviews can take up to six weeks, so if you are planning on moving into aged care you should consider trying to apply as soon as practical, even if you haven’t decided on a home.
- Accommodation costs
This is the most significant cost you’ll face. Just like the normal property market, the cost of aged care accommodation depends on a number of factors, including the location of the accommodation, size of your living space, quality of the fit out and the services provided. Homes usually provide the flexibility to pay a regular monthly amount (called a Daily Accommodation Payment or DAP), or a refundable lump sum (called a Refundable Accommodation Deposit or RAD), or a combination of both. Government support for these fees doesn’t apply if the person has income above $70,320 per year or assets over $171,535.201.
- Extra service fees
These optional fees are charged by some providers for extra services such as additional TV stations, WiFi, en-suite bathrooms, larger bedrooms and special therapies.
Ways to pay
The RAD is a significant amount and can lead to people selling the family home to pay the lump sum, which is one of the key concerns for many when it comes to aged care. But there are other options, particularly as you can pay with a combination of DAP and RAD.
Families should consider different strategies for accommodation costs once they know what the total on-going cost of care is. These may include:
- Renting the family home: This will help cover the regular payments without needing to sell the home, which has been an appreciating asset, and could keep growing in the future.
- Home equity/reverse mortgages: You can consider taking out a home equity loan or a reverse mortgage against the family home, although there is risk and long term financial impacts involved, so make sure you get independent financial and/or legal advice before making any decisions.
- Superannuation: A lump sum withdrawal from super could help pay the lump sum portion (RAD) of the cost and depending on the remaining balance the ongoing costs as well.
- Annuities: These protect the principal and can be structured to pay regular amounts to the aged care home. Your beneficiaries will receive the money you have in annuities if you pass away.
- Insurance: If the person has suffered an injury that has made them permanently unable to work, an insurance payout can go towards the RAD while the balance can be invested to meet the regular monthly payments.
Making the right decision
Aged care is a complex area and just like planning for retirement it’s important to plan for the next stage of your life as well. Aged care is an issue that can carry a lot of emotion. But, at its core it’s about looking after yourself or a loved one. Thinking about aged care before you need it can take the emotional burden off your family, and allow you to set up your finances to put you and your health first.
It’s important to consider the different areas that may be impacted by your choice of aged care and how you’ll pay for it. Your Centrelink benefits, any estate plan you have in place, and your available cashflow may be affected by the choices you make.
There are a lot of options available so if you’d like some advice from a specialist to help navigate through them, your EISS Super Financial Planner can put you in touch with our specialist aged care planners who can offer personal advice tailored to you or your loved one’s situation.
To arrange an aged care advice appointment please speak to your financial planner or call us on 02 9046 1920.