Getting some clarity about the new aged care reforms

The imminent changes that are about to hit the aged care sector may have many concerned. Anyone who has family that is currently in residential aged care, or is considering moving someone into a facility will no doubt want some clarity, so we have put together this short summary and we will continue to monitor the developments. More than any other area of financial planning, aged care planning can be a highly emotive and sensitive subject. As we get to our more senior years, worries over accommodation, care and finances have a tendency to become overwhelming for our family and ourselves as we make these decisions on behalf or with our elderly parents. The previous Labour Government announced wide ranging reforms designed to transform the aged care system over the next ten years. The new Government has now followed through on the new legislation and 1 July this year is the deadline for the new rules to come into play. But what do these reforms really mean and how will they affect you.     Who will be affected? All those who move into residential aged care after 1 July will be subject to the new rules. For those already in residential aged care before 30 June this year then the new rules will not affect you unless your care situation changes and you move from a low care situation to a high care situation after the 1 July 2014 deadline.   How will costs change? One of the key differences under the new system is that there will now only be one set of funding rules that apply to both low level care and high level care, (previously there were two sets of rules). While this does create equality in the system, the costs of residential aged care may now be higher, depending on your financial circumstances. Those who receive a full age pension will generally not be any worse off under the new system, but those who only qualify for a part pension or are self-funded retirees are likely to pay more. The good news is that new provisions provide more predictability and allow you more time to make considered decisions. The new provisions include:   In relation to entry fees ·         Payment can be made as a lump sum refundable deposit (on which the institution is entitled to collect the interest earnings), or in periodical installments, or a combination of both. ·         The payment method will be at the discretion of the resident, which may relieve the need for an urgent sale of the family home. ·         The institution must disclose their fee structure in their promotional material so you can make a more informed decision. ·         A cooling off period will be implemented, which allows a new resident 28 days after entering the accommodation to decide which entry fee method they prefer. ·         There will still be full government subsidy for those who do not have the financial means to cover the cost of residential care.   In relation to ongoing fees ·         The amount you are required to contribute will be determined by a single means test, which will replace the current combination of assets and incomes means tests. ·         At a minimum you will be charged a proportion of your age pension, but you may also need to pay a proportion of your assessable income as well. ·         The treatment of the family home in the means testing will remain unchanged and will be exempt from the means test calculations if the home is still occupied by a spouse or a protected person.   What to do if you are concerned Now, more than ever, it is highly recommended that you seek professional financial advice so the complexities of the new system don’t leave you out of pocket unnecessarily. A financial adviser can assess your individual circumstances. They will consider your social security and asset position and present you with options for action to find the most effective solution to minimise costs and maximise your entitlements and income.   Are you moving your parents or family into aged care? Have you already done it? What is some advice you can give to those who are getting used to the system?