industry & policy
Queries on costs, answered
The price of
aged care
continues
to rise; here
are some
responses
to frequent
queries about
how to get the
best value out
of the system.
By John Rawling
and Rod Horin
20 agedcareinsite.com.au
s people live longer, more and more will end
up in aged care. The number of people in
permanent aged care in Australia is expected
to more than triple in the next 35 years, from 225,000
today to 700,000 in 2050.
The industry is complicated and many decisions
must be made, often involving large sums of money.
Here are some answers to the most common
financial questions we hear.
A
4
1
Why is aged-care so expensive?
Aged care is labour intensive, and land and
buildings are expensive to buy and maintain. The
owners of such facilities expect to make a return on
their investment. From a client’s point of view, typical
fees include accommodation deposits and charges,
daily fees, extra services fees and means-tested fees.
5
2
6
Is the accommodation deposit negotiable?
Yes. Accommodation deposits (known as
refundable accommodation deposits, RADs) can be
as high as $2 million to secure a bed in an aged-care
facility. In many cases, these RADs are negotiable,
and can be as much as halved. Willingness to
negotiate on RADs depends on the demand and
supply of beds in a particular aged-care facility.
3
What alternatives are there for paying the RAD?
Many aged-care facilities prefer the RAD be paid
as a lump sum up front; however, it is possible to pay
interest payments only or pay with a combination of
lump sum and interest payments. A bank guarantee is
not an alternative.
Will the family get all of the RAD back?
In a government-accredited aged-care facility,
the accommodation deposit is fully government
guaranteed. Before July 2014, the accommodation
bond repaid to the family would be reduced by
retention amounts deducted by the aged-care
facility. Since July 2014, any lump sum paid as a
RAD is now generally repaid in full at the end of the
care period.
What is the Centrelink fee?
The Centrelink fee is a means-tested charge set
by the government and collected by the aged-care
facility. It is an attempt by the government to ask
residents with the financial capacity to contribute to
the cost of care. This fee can range from nothing to a
maximum of $241.92 a day.
Why is the Centrelink fee so high and how do I
reduce it?
The fee is based on the income and assets of the
aged-care resident, so it increases as assets and
deemed income increase. For example, a person on
a part Age Pension with assets totalling $200,000
and deemed to be earning just over $27,500 a year
will pay $2.22 a day ($812 a year) in aged care,
while a person with assets totalling $1,200,000 and
deemed to be earning just over $38,000 a year will
pay $68.66 a day ($25,061 a year). Two key ways of
reducing the Centrelink fee are paying a higher RAD
and buying an aged-care annuity. There is no link
between the actual cost of a person’s care and the
Centrelink fee they pay.