5 key considerations when researching residential aged care in 2021

The year 2020 was one the residential aged care industry would likely rather forget; Covid-19 caused the deaths of almost 700 residents, while families were cut off from loved ones for weeks or months as strict isolation rules were implemented. Some families ended up removing their family members from aged care facilities, while others delayed entering.

But as Australia’s Covid-19 cases stabilise – and with a population that is not getting any younger – more and more people will again be looking for the best aged care facilities for their loved ones. And there really are some excellent facilities around, staffed by caring and professional people.

That’s because over the past few years there have been significant changes to the residential aged care industry, many as a result of government enquiries. In July 2014, the Living Longer Living Better reforms saw the removal of the distinction between low-care and high-care and the introduction of the Refundable Accommodation Deposit (RAD) for high-care residents. For low-care residents, the bond they were required to pay became a RAD too. (I explain aged care fees in much more depth here and here.)

Then, in January 2016 changes were made to the means-tested care fee by removing the rental income exemption.  And more recently, changes were made to the Age Pension assets test thresholds and taper rate. The Aged Care Royal Commission will doubtless make more recommendations when it reports later this year.

None of these reviews or rule changes have made the aged care industry simpler, though! Today, more so than ever, navigating Australia’s aged care system is not for the faint-hearted. But with all the changes, there remain some key things to consider when considering a move – either for yourself or a parent or loved one – into residential aged care.

Here are, in my opinion, the top five:

Is the facility close to friends and family?

For all the large amounts of money that can be involved in moving into residential aged care, the most important thing is to find a place that is close to family members and friends. This will mean they are more likely to visit. Ideally, the place should also be close to the old family home, so the resident is in familiar surroundings, close to friendly shops etc.

Have you done in-depth financial research?

There are significant financial issues to consider when moving into residential aged care, including:

• Will the resident be able to keep his/her pension?
• How will the family fund the RAD, which can be as much as $2 million in some places, and the large monthly fees, which can be up to $10,000, or double if both parents are in aged care?
• Should the family home be kept or sold?
• Would it be better to rent out the family home and use the income generated to pay the daily residential aged-care fees?
• Many aged-care facilities prefer the RAD be paid as a lump sum up front. However, it is possible to choose to pay interest payments only or pay with a combination of lump sum and interest payments.
• It is possible to negotiate to pay some or all of the daily fees from the RAD to minimise the impact on a person’s cashflow?

In many cases, RADs are negotiable, and at times can be reduced by up to 50 per cent. Willingness to negotiate on RADs depends very much on the demand for beds – and the supply of beds – in a particular aged care facility.

The means-tested fee is set by the government and collected by the aged care facility based on an individual assessment for each resident. It is an attempt by the government to ask residents with the financial capacity to contribute to the cost of care, so can range from nothing to a maximum $256.40 per day.

An Extra Services Fee, which can be as much as $120 per day in addition to the above fees, is supposed to give the resident extra services, including more activities and access to services such as podiatrists, hairdressers etc. If an aged care facility is charging an Extra Services Fee, you should ask what services are being delivered and assess whether or not they offer value for money. The Extra Services Fee can also be negotiated – I’ve seen reductions of up to 50 per cent agreed by some facilities.

Do you understand the aged care system?

There is probably no other industry in Australia that has such a confusing array of jargon, acronyms and nuances. There are RADs, DAPs, DACs and RACs, not to mention Centrelink fees and means-tested fees. A family is generally confronted by all these at a time of considerable stress.

For example, your mum may have fallen over and broken a hip and the treating doctor may say that she is unable to return home. The family may suddenly only have a fortnight to get to get to know the aged care industry, visit potential residences and book Mum into one. Entering the aged care industry can be a daunting experience, but much can be learned if it is approached in a systematic and thorough manner.

Have you asked for expert help?

I firmly believe that people who act for themselves in the aged care industry have fools for clients! Getting help from an aged care expert is a smart thing to do, particularly for families that may not have much time on their hands and where timely decisions must be made. Not only can an aged care consultant guide people through this jargon-filled industry – taking much of the stress out of a very stressful time – but they can save a person hundreds of thousands of dollars along the way, via the following:

• Negotiating on the RAD
• Looking at potentially part-paying the RAD
• Structuring finances so that a parent can keep the full pension
• Lowering the daily means-tested fee
• Looking closely at the extra services fee.

It is important that your aged care consultant has an Australian Financial Services Licence (AFSL) so they can legally provide financial advice, as well as find the most appropriate accommodation under the circumstances. Advisors can also financially model several years ahead to provide clarity and comfort that your loved one’s time in aged care can be fully-funded.

It is important to remember that specialists in aged care advice often receive regular weekly updates on vacancies from aged care facilities and can pass this information on to clients; specialists often know about vacancies before they are advertised to the public. Often aged care facilities will call the specialists to see if they have any clients looking for accommodation. Being aware of what vacancies there are at certain places in turn allows the specialists to negotiate a significant reduction in the RAD – a discount that may not be offered to members of the public.

Do you know what to do about Centrelink?

The Centrelink form, which helps to determine how much a resident must contribute to the cost of their care, is a source of much confusion.  It is also a considerable document; 21 pages long, with 66 questions. Plus, many people make the mistake of showing it to aged care providers when negotiating a place.

Doing so allows the providers to see a person’s financial situation and determine whether or not fees can be afforded. If they can be afforded, aged care providers will very likely be less willing to negotiate. In fact, there is absolutely no requirement for a person or a family to show this form, or give any other financial information, to an aged care provider before obtaining professional advice.

Indeed, it may not even be necessary or beneficial to even spend the time preparing and lodging the Centrelink form if there are significant assets and income. The key issue is to do the financial modelling first to clarify the best pathway into aged 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.