The landscape of aged care fees is set to change, affecting both home care and residential care services. After a prolonged period of speculation, the government has unveiled the specifics of the proposed adjustments. While some individuals may experience an increase in their fees, it is reassuring to note that aged care will continue to be significantly subsidised, with fees remaining contingent on your financial circumstances to ensure affordability.

Key Points to Note:

• The government will maintain its coverage of 73% of residential care costs and 89% of home care costs.
• These changes are intended to enhance the quality of aged care and assist providers in meeting the rising demand.
• The majority of these changes will apply to individuals commencing home care or entering residential care from 1 July 2025.

If you or a loved one requires care soon, it may be beneficial to seek our advice on whether moving before the changes take effect could result in cost savings and to understand how you will be impacted.

Although there is still much to digest, here is a brief summary of the planned changes.

Changes to Residential Care

1. Room Price Cap: Starting 1 January 2025, room prices may begin to increase. Currently, providers need approval to charge more than $550,000, but this cap will rise to $750,000, facilitating higher charges.
2. RAD Retention Amount: You can pay for your room with a lump sum (Refundable Accommodation Deposit or RAD) or as a daily fee. Presently, RADs are fully refundable upon leaving care, but from 1 July 2025, up to 10% of the RAD may be retained.
3. Indexing Rent: If you opt to pay a daily fee instead of a lump sum, this “rent” (known as the Daily Accommodation Payment or DAP) will be indexed over time, potentially increasing the amount.
4. Living Expenses: Contributions to daily expenses such as food, laundry, and electricity could rise by up to $12.55 per day, depending on your financial situation. Some providers may charge more for higher standards or quality, so it is crucial to check prices before selecting a place to live.
5. Care Expenses: Depending on your finances, you may be required to contribute more to your care costs, which could include services like entertainment, bathing, and mobility assistance. While the government will still cover most care costs, your portion could increase by around $10 per day, with the lifetime cap rising from approximately $80,000 to $130,000.
6. Assessment of Your Home: There are no planned changes to how your home is assessed when determining what you can afford to pay. If a spouse or “protected person” resides there, it remains exempt; otherwise, only approximately $208,000 of its value (indexed) will be included in financial assessments.

Changes to Home Care

1. New Support at Home Program: A new program will consolidate the current home care options into 10 levels of care packages to better address individual needs.
2. Higher Contribution Fees: While clinical care will be fully covered by the government (up to the available budget of your care package), you may have to pay more for services like cleaning and gardening.
3. Means-Testing: Contributions to home care will now be means-tested, taking into account assets as well as income, according to Centrelink rules.

The increased costs will primarily affect self-funded retirees and some part-pensioners, but everyone could face higher costs and more significant decisions. It is essential to carefully choose care providers and understand accommodation costs.

Although the changes may simplify some of the confusion under the current system, it is now more important than ever to seek advice to understand what you will need to pay and how these fees might change as your financial situation evolves.

Planning ahead is crucial, and some decisions can feel overwhelming. If you have any questions or need assistance in planning for aged care, contact Tricia Hill at Hill Legal on 03 5976 6500 or send us a message on our website here. We can guide you through the process and help you make informed decisions about your future.

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Disclaimer: This document has been prepared by Hill Legal based on our understanding of the relevant legislation at the time of writing. While every care has been taken, Hill Legal makes no representations as to the accuracy or completeness of the contents. The information is of a general nature only and has been prepared without consideration of your individual objectives, financial situation or needs. Before making any decisions, you should consider the appropriateness for your personal investment objectives, financial situation or individual needs. We recommend you see a financial adviser, registered tax agent or legal adviser before making any decisions based on this information. Current as at 16 September 2024.

© Hill Legal, 2024. Used with permission.