In Australia, the government heavily subsidises the cost of residential aged care. However, depending on your financial circumstances, you may still need to pay for care.
In this newsletter, we unpack how the government determines if a person is eligible for additional financial subsidies or not.
You can use this information to make an educated estimation of where you fit in.
There is a cost to entering residential aged care
Every person will need to pay something if they are entering residential aged care.
What that payment is exactly will depend directly on the person or couple’s income and assets, which involves a lengthy and complicated calculation.
This calculation, by the Department of Human Services, will determine the Means Tested Amount (MTA) — whether a person entering residential aged care can afford the published accommodation payment, as well as the amount of ongoing care fees.
Remember, there are four distinct payments when entering residential aged care.
1: An accommodation payment: This is a contribution towards the cost of accommodation.
2 & 3: Living and care expenses, which are comprised of:
A basic daily fee, approximately 85 per cent of the single-aged pension; and
A means-tested care fee (MTF), a daily fee based on an individual’s income and assets
3: Other services, an opt-in additional services fee for non-extra service facilities.
The line in the sand
After processing a lengthy calculation using details of a person’s income and assets, as of 1 March 2019, government subsidisation to help pay for a person’s accommodation and ongoing care costs is a MTA = $57.14.
If a person is unable to calculate their MTA, then another quick rule is if assets = $168,351.20 or less (correct as of April 2019).
The infographic below illustrates this cut off:
*based on just assets, but MTA is subject to a combination of income and assets.
TIP: As a rule of thumb, a full means-tested pensioner who still owns their former home or paid a Refundable Accommodation Deposit (lump sum accommodation payment) may expect to pay some MTF.
A person who receives a full means-tested pension from Centrelink or Veterans’ Affairs may also pay a MTF, if they have:
Assessable assets over applicable thresholds, (this will include any lump sum accommodation payment – RAD, and the capped value of their former home (currently $168,351.20), or
Assessable income over applicable thresholds, or
A combination of income and assets that results in a means-tested amount over $57.14.
People who are exempt from paying the MTF are:
Full means-tested pensioners who do not own their own home or home has a value of less than the capped value of their former home (currently $168,351.20) or spouse/protected person is still living in the home
Residents with income and assets below the relevant thresholds (resulting in a means tested amount less than $57.14)
Ex-prisoners of war
Exempt as a result of a financial hardship determination
Residents with dependent children.
The aged care legislation uses a lot of jargon and specific terms. The entry fee is now called an accommodation payment. If this is paid as a lump sum, this is called a refundable accommodation deposit (RAD). If it is paid as a daily fee, this is called a daily accommodation payment (DAP).
Residents who have a MTA that is less than the maximum accommodation supplement i.e.: $57.14 (the potential subsidy that the government will pay facilities for taking clients with lower means-tested amounts) will receive concessional treatment and will pay an accommodation contribution instead of an accommodation payment. This is called a Refundable Accommodation Contribution (RAC) or a Daily Accommodation Contribution (DAC).
The difference between an accommodation payment and an accommodation contribution is:
The accommodation payment is the fee quoted on the facility website. The resident pays the full amount and no accommodation subsidy is paid by the government (care subsidies may be still payable)
government pays an accommodation subsidy to the facility.
Access to government subsidies and rules for calculating the residential aged care fees, based on your finances, help to make care affordable. Having adequate savings opens up your choices and your ability to control the level and type of care you receive.
If you need assistance understanding your MTA or you found the information complicated, give us a call or contact a financial planner accredited in aged care who can help work this out for you.