There’s been a lot of talk in recent months about the affordability of housing.
But what about the affordability of aged care?
Aged care affordability has been making headlines across the country in recent months, prompting a lot of discussion about whether aged care is too expensive or not.
Last month, The Daily Telegraph reported that several nursing homes in Sydney were now charging bonds of more than $1 million – well above the $550,000 maximum set out by the Federal Government.
That’s because the Federal Government allowed 215 aged care facilities to charge more than the $550,000 maximum.
Among the aged care facilities reported by the Daily Telegraph as charging more than $1 million bonds is the Mark Moran Vaucluse facility ($1 – $2 million), Cranbrook Care’s Landsdowne Gardens ($2.7 million), and Adavantage Care at Bondi Beach ($750,000 to $1.45 million).
The article quoted Seniors Rights Service chief executive Russell Westacott, who told the paper that the costs of luxury nursing homes was “squeezing people out of the end of the market that caters to basic needs”
“Many people are increasingly demanding aged care with luxury services and trimmings,” he said.
Despite the concerns over the nursing homes with bonds higher than $1 million, the Minister for Aged Care Ken Wyatt told Starts at 60 that only 0.7% of aged care places had been approved to charge more than $1 million for a bond.
“The Aged Care Pricing Commissioner’s 2015-16 annual report shows that only 6.64% of aged care places have been approved to publish prices above the $550,000 threshold,” he said.
“There have been approvals for 1% of total aged care places to charge from $850,000 up to $1,000,000.”
But it’s not just an issue endemic to Sydney.
Aged and Community Services Australia CEO Pat Sparrow told Starts at 60 that providers charged a range of prices for aged care across the country, taking into account what they would pay for any form of accommodation in the area.
“If a provider is going to charge over $550,000 they need to demonstrate a much higher level of quality, condition, room size and amenity features, and receive approval from the Aged Care Pricing Commissioner,” she said.
While the Sydney figures seem extreme, they’re far from the average bond for an aged care facility.
According to the 2015/16 Report on the Operation of the Aged Care, the average bond (RAD) for an aged care facility in Australia is $370,541.
But there are some who believe aged care facilities should be charging more for bonds.
In January, Patrick Reid from StewartBrown told the Australian Ageing Agenda that aged care facilities could explore increasing the cost of their bonds.
“In real terms it could be said that aged care accommodation is too cheap, leading to pressure on other parts of the business where costs outstrip income, which should push management and boards towards re-pricing their accommodation,” he said.
He pointed to statistics that showed the average RAD was much lower than the average house price.
But while there are concerns about the cost of aged care bonds, it’s also important to understand how the system works.
There are a range of payment options for aged care facilities, as well as government support for pensioners who require aged care.
As Ms Sparrow explained to Starts at 60, there were a number of ways a potential aged care resident could pay for their accommodation.
“Whether that be a Refundable Accommodation Deposit (RAD, previously called a bond), a Daily Accommodation Payment (DAP) or a RAD/DAP combination,” she said.
“At the end of the person’s stay the RAD is fully refunded. The amount a person contributes is also dependent on their income and assets as determined by the Government through Centrelink.”
So, how much assistance is available to you?
The Minister for Aged Care told Starts at 60
If your income is below $25,264.20 and you have less than $46,000 in assets, then you won’t have to pay for aged care – it’ll be funded by the Government.
But as Ms Sparrow points out, aged care is moving to a more “user-pays model”.
“In aged care, where people can afford to they are expected to contribute to the costs of their accommodation and their care,” she said.
“Nearly all aged care services are required to have a ‘Supported Resident Ratio’ for those of low means, such as pensioners, and this is determined by region and the demographics of the people who reside in the area.
“This means that people of low means could potentially obtain an aged care place in almost any aged care facility in Australia. In effect this means that anyone can potentially access an aged care bed in the facility of their choice.”
According to the ACFA Annual Report, in 2014-15 66% of aged care costs were covered by the government and 27% was covered by residents.
Mr Wyatt said people don’t have to pay an RAD or bond, with several choices about how they can pay including a lump-sum refundable deposit, a rental style daily payment or combination of both.
“The person has 28 days after they enter the aged care home to choose their payment method,” he said.
“This provides flexibility to people and their families in deciding how to pay their aged care costs to suit their individual circumstances.”
The 2015/16 Report on the Operation of the Aged Care Act 1997 reported the breakdown of payments among residents, with 52% agreeing to pay by RAD, 22% by Daily Payment, and 26% as a combination of both.
“The pricing of access to aged care facilities is now more equitable following the aged care reforms and fees are based on the DHS Income and Asset test meaning that the potential resident would be assessed for fees that they would have the income and assets to pay,” Ms Sparrow told Starts at 60.
So while the industry and government argues aged care is more affordable, there are others who would say differently.