If you are in the process of helping a family member transition from their own home to residential aged care, it can often be daunting for both you and your loved one. It seems like overnight you have to enter a whole new world, while trying to understand what aged care means for them financially, particularly when it comes to aged care fees.
The Australian government expects you to partially or fully contribute to the cost of your aged care – if you can afford it. I break down exactly what that means in this column but, essentially, if you have an income below $27,460 a year and assets worth less than $49,500 (including the family home*), the government will pay for your residential aged care.
If you are above this threshold, there will be an expectation that you contribute at least some of the cost towards your aged care needs.
However, it’s important to remember that there is often room to negotiate aged care fees and, as with any market-driven sector, it pays to shop around. In aged care, not all facilities will charge the same fees and depending on your situation, it may pay well to negotiate.
There are a number of common care fees that you will come across when looking to access residential aged care, also known as an aged care home or nursing home. These are:
For a full breakdown on what each of these fees mean read my previous column.
Out of the above fees, generally your basic daily fee and means-tested care fee are not negotiable because they are set by the government. You are also, for example, unable to pay more than the advertised RAD in exchange for a lower Additional Service Fee. But the RAD, DAP or Additional Service Fee can still have wriggle room.
Gladys came to me because she needed advice on helping her 84-year-old father find residential aged care. She had spoken with an aged care home in her area, which explained her father needed to pay a RAD of $300,000 for a bed.
Gladys believed there was no way they could afford the RAD, so in that situation the aged care facility was obligated to offer the DAP as an alternative. (Remember that if you want to pay for aged care through the DAP, the facility must accept your decision.)
This meant that Gladys’ father would only pay the interest on $300,000, currently capped at 4.91 per cent. But while Gladys initially felt happy with this, there was room for more negotiation.
While working with Gladys I found that there were two other aged care homes in her area, which were charging a RAD that was $50,000 less than that of the first home Gladys approached. So took this information to the original aged care home and were able negotiate the overall cost of the RAD down, which in turn reduced the DAP Gladys’ father had to pay.
There are other fees to consider as well, such as Additional Service Fees. I refer to these as ‘luxury fees’ as they are for items that add a bit of luxury, in that they may mean more meals to choose from at dinner time, Foxtel, a daily newspaper etc.
It’s important to note, though, that if an aged care home is charging an Additional Service Fee, there is an expectation that the resident is able to use those additional services. I had as a client a lady in her late 60s who was unfortunately in the late stages of dementia. When her family were going through the process of placing her in residential care, we were able to point out to the aged care home that the resident was unable to utilise the Additional Service Fee benefits that were offered, which eliminated that cost.
This ‘luxury’ fee can range from anywhere from $10 a day to $60-plus per day, so you can see where the benefits are of truly looking at all of your options. Even if you have to pay some Additional Service Fee, you may be in a position to pay a higher percentage of the RAD than initially planned, then negotiate the Additional Service Fee from there.A
Many of us cannot see what all of our choices are when we are working with an industry that is unknown to us and where we may need to make a decision in a short amount of time. It’s important when you are considering negotiating your aged care fees or simply want to see what your options are, that you get help from a professional if you can.
You may think a financial planner is the best point of call and while I do recommend engaging a financial planner when planning your aged care, an aged care consultant is a better advisor for negotiating residential aged care fees.
A financial planner is unlikely to understand the aged care market, what is standard for facilities to charge or what they are charging within the same area. An aged care consultant, on the other hand, is paid to represent you and will know what the facilities in your area are charging for an aged care bed.
When we don’t have to navigate the aged care process on our own, we often realise we have more options than we thought we did.
*Keep in mind that the family home is only exempt if a ‘protected person’ is living in the home, this is defined by Centrelink and typically refers to either a spouse, child or someone living on a support pension. However make sure to check with Centrelink that anyone living in your home qualifies under this definition.
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.