Aged care fees: How much should I expect to pay?

As we enter our golden years, understanding the intricacies of aged care and its associated fees becomes increasingly important. However, navigating the complex landscape of aged care can be overwhelming, particularly when it comes to the financial aspects.

As Financial Adviser Nicholas Donnelly from Plenary Wealth points out, “aged care in Australia is complex, involved and in many cases, expensive”.

“Planning ahead and seeking professional advice is critical to avoiding common mistakes and pitfalls,” he explains.

From accommodation costs to care fees and means-tested contributions, the system can seem daunting and confusing. However, with the right knowledge to back you up, you can feel secure in your ability to make informed decisions and ensure a secure future that meets your care requirements.

In order to shed some light on the various aged care fees that you may encounter, Starts at 60 provides a comprehensive overview of aged care fees to empower not only yourself but your family to plan ahead, make informed choices, and ensure a fulfilling and comfortable journey in your later years.

What fees will I need to pay?

It’s important to understand what you will be expected to pay as you embark on your journey towards a comfortable and supported lifestyle in your later years. By understanding your financial obligations when entering aged care not only will you avoid any nasty surprises but you can also ensure you are receiving the care you need.

When it comes to aged care there are several costs to be aware of for potential residents. These fees include:

Care and accommodation costs:

• Basic daily fee: A fee that you pay for the day-to-day services you will receive at the aged care home.
• Means-tested care fee: A contribution that some people pay toward the cost of their care which is determined by a means assessment.
• Accommodation costs: An amount that some people pay to contribute towards or cover the full costs of their room, depending on their means assessment.

Further costs to be aware of

Depending on the aged care home you choose and what agreement you come to with your provider, there are additional expenses you may incur.

In contrast to the regulated care and accommodation expenses, these fees are not determined by the government. Therefore, by accepting them, you will be solely responsible for covering the entire expense.

• Additional service fees: Fees for services that go beyond the minimum care and service requirements. These services can include internet access, special therapies, or food and drink packages.
• Extra service fees: Certain aged care facilities provide supplementary amenities similar to those found in hotels.

How do these fees work?

Knowing what fees you will be expected to pay when you enter aged care is important, but knowing how these fees work, particularly what you need to pay and when is paramount.

Basic Daily Fee: All aged care residents are required to pay a basic daily fee to cover essential services such as meals, cleaning, facilities management, and laundry. This fee is paid directly to the aged care facility either fortnightly or monthly. It applies to every day you reside in the facility, even if you are away for an extended period of time.

The basic daily fee is calculated at 85 per cent of the single-person rate of the basic age pension. The government adjusts this fee on March 20 and September 20 each year to align with changes in the age pension. The current rates can be found on the Department of Health and Aged Care website.

As of now, the maximum basic daily fee amounts to $58.98 per day, or $21,527.70 per year.

Means Tested Fee: The means tested care fee is an additional payment that some individuals contribute based on a means assessment. It covers the ongoing costs of personal and clinical care.

The amount of the means tested care fee varies for each person, and not everyone in aged care is required to pay it. Once you enter care, Services Australia will inform you and your provider about the specific amount you need to pay.

Your means tested care fee can range from $0 to $358.41 per day. The maximum amount of the fee is subject to adjustments and is regularly updated.

Accommodation costs: Before moving into an aged care home, you will be required to come to a written agreement with the provider regarding the room price. However, whether or not you have to pay the agreed-upon amount will be determined by your means assessment.

You will be provided with three options to pay for your accommodation:

• a refundable lump sum amount
• non-refundable daily payments, or
• a combination of both.

Is government assistance available?

The Australian Government helps make aged care homes more affordable and accessible by providing subsidies. These subsidies and supplements are directly paid to your aged care home.

The government determines the amount they contribute based on your ongoing care needs assessment once you enter the facility. If your means assessment shows that you have limited financial capacity, the government will provide additional support.

Samantha Freeman, the Communications Manager for Medical and Aged Care Group explains that “the Income and Asset Assessment will determine whether the Australian Government will subsidise the fees or fully pay for your accommodation costs based on your income earnings and assets.”

“In this asset assessment, your income and assets are evaluated,” Freeman says.

“What is considered ‘income’ includes but is not limited to financial investments, age, disability or service pensions, income support payments, bonds, shares, your superannuation, family trusts and super funds.

“Assets include properties you own (including your own home), investment properties, private or partnered businesses, and more. You will be asked a range of questions regarding your income and assets to determine your eligibility for subsidies.

“This assessment will determine what you will be required to pay the aged provider.”

Financial assistance for accommodation costs is available to those who require it. The dollar amount of assistance you will receive is determined by the following factors:

• If your income falls below $31,140.20 and your assets are below $57,000, the Australian Government will cover your accommodation costs.
• If your income is above $78,816.92 or your assets are above $193,219.20, you will be responsible for paying the full cost of your accommodation, which will be negotiated and agreed upon directly with the aged care home.
• If you need to pay for a portion of your accommodation, Services Australia or the Department of Veterans’ Affairs (DVA) will assess your means and determine your contribution amount. The Australian Government will cover the remaining cost.

Please note that these income and asset thresholds are subject to change and are current as of March 20, 2023, with adjustments made on March 20 and September 20 through indexation.

Understanding aged care fees is essential for both you and your family to successfully navigate the complex landscape of aged care. With a thorough understanding of the various types of fees, such as accommodation charges, means-tested care fees, and additional service fees, you can make informed decisions about long-term care options.

While some of these fees may seem overwhelming, it’s crucial to remember that support and assistance are available through financial advisors, aged care providers, and government agencies. By seeking guidance and staying informed, you can ensure a smooth transition into aged care, leaving you to focus on enjoying your golden years with peace of mind and the assurance of quality care.

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.