Everything is more expensive now, even aged care.

By Tracey King and Milan Chetkovich

PART ONE – THE COST OF CARE

In this two part opinion series, we seek to explain how the costs of moving into or living in an aged care home have recently changed.

How do the costs of care work in aged care? Put simply, it is broken into two categories. The first is your care costs (living costs such as nurses, carers, food, laundry etc), and the second is your accommodation costs (the roof over your head, the building).

For this article we will only focus on the first category, which is the costs of your care. In our next edition we will explain how the accommodation payment system works.

The Royal Commission into Aged Care discussed many recommendations, including improving funding to enable a greater amount of care hours per resident.

If you are in a situation where you are contemplating the costs of aged care for a family member or even for yourself, there are some important changes that you should know about. You should also be aware that these changes also affect those already living in aged care. The costs of your care have now become more expensive, as the new government funding model to achieve the greater amount of care hours is implemented.

From October 2022, residential aged care facilities moved to a new funding model called the Australian National Aged Care Classification, or AN-ACC. This model is designed to align funding with the costs of delivering higher care hours.

So, why does this matter when it comes to the cost of aged care? The costs of your aged care are shared between you and the government (Medicare). The government applies a means tested care fee as an offset to how much government funding you will receive for your care. So if you can afford to pay, you will be required to pay the means tested care fee.

You should consider completing a means test using the calculator on the My Aged Care website so you can understand if you would need to pay a means tested care fee. Many people complete their financial assessment after they have decided to enter an aged care home. The risk with this approach is that you may be entering into the situation without clarity of your costs and obligations.

The new funding model has meant that both the government contribution and means tested care fee contribution have been adjusted. Explained another way, if you are a self-funded retiree or choose not to disclose your income and assets, the means tested care fees that apply to your contribution for aged care would have changed. If you are in care or your loved one is in care, you will soon receive an update from the Department of Health and Centrelink regarding the fee changes. So, this means that if the government funding increases, so will your means tested care fee.

Here’s a simple overview of how your care costs are calculated.

The government contribution:

Under the new AN-ACC model, there are three components to the government contribution to your care fees:

1. A one off entry payment – approximately $1,150 paid by the government to the aged care home when some one first enters
2. An individual care component (AN-ACC classifications – there are 13 levels from low to high care need) which is funded between $41.19 and $216.80 per day and;
3. A fixed or shared care component (Base Care Tariff) which is based on the aged care homes location, size, specialisations of care and ranges between $106.23 and $390.24 per resident per day.

So if you add it all up, it puts the maximum daily government funded component under this new model to a staggering $350 – $600 per day.

So why does this matter? Firstly as tax payers we should have an interest in how our taxes are being spent. The Government has allocated $5.4 billion to deliver an average of 200 minutes of care per resident per day, including 40 minutes of care delivered by a registered nurse. This additional funding will be distributed across the new AN-ACC funding model (nickname pronunciation “Anac”).

The consumer contribution for your care:

There are three components to aged care charges as a consumer for your residential aged care (your contribution) and this framework is the same as the pre AN-ACC model:

• Basic daily care fee – currently charged at $56.87 and it’s adjusted twice a year. The calculation is based on 80% of the aged pension. Everyone must pay this fee and it covers day-to-day services such as meals, cleaning, facilities management, and laundry.
• Means tested care fees – the maximum will be up to $358.41 per day (based on your income and assets as assessed by Centrelink) and this is an offset you are required to pay depending on your asset and income position. The government funding reduces for every dollar you are assessed for under the means tested care fee.
• Additional or extra services fees which are charged by some aged care homes – this covers things like a broader menu, wine with your meals and other hotel like services.

Here is a scenario for a self funded retiree. If you and your spouse or partner need to go into care, and you jointly earn $100,000 in income from superannuation and say hold $2M in assets, then based on this scenario, you could be paying per day:

• $186.30 for the means tested care fee
• $56.87 for the daily care fee
• In total you may be required to contribution $129.43 per day for the cost of your care

For a self funded retiree in this situation, the government will reduce the funding they pay to the aged care home by $186.30 per day as it is covered in the means tested care fee.

You should also note that there is an annual cap on the means-tested care fee of $30,574 and a lifetime cap of $73,378. The new funding model will affect existing and new residents, and if you are paying a means-tested care fee in September 2022 of $265, you could see a jump up to the new $358 per day from October 2022. That’s approx $93 per day extra.

It’s important to note that quality care in any aged care home can only be delivered if there is the appropriate financial model in place to cover the cost of the clinicians and other care and maintenance staff. The new funding model is a step forward to ensuring Australian’s in aged care can receive the direct care hours they need for a good quality of life in their last years.

Next week in this two part series, we will delve into the costs of accommodation in aged care.

The information provided in this article is general in nature and not intended to influence any decision about the costs of aged care or be viewed as personal advice. This information is our own personal opinions and are not to be construed as the opinions of Southern Cross Care (WA) Inc. (my employer) or any other aged care provider. You need to consider whether this advice is right for you, having regard to your own objectives, financial situation and needs. It is important to check any product information directly from the provider. Ensure you consider the relevant contracts, Product Disclosure Statement (PDS) or other applicable product documentation before making a decision to purchase, aquire, invest in or apply for an aged care, financial or credit product.  You should always seek your own professional financial and legal advice prior to making any decisions regarding your financial situation and the costs of aged care.

Further information about the costs of aged care can found on My Aged Care. Consider consulting with your local Centrelink Office. https://www.myagedcare.gov.au/aged-care-home-costs-and-fees