Navigating the maze of privately funding home care

Watching your ageing or frail parents or loved ones struggle with some of life’s basic activities such as cooking, cleaning or caring for themselves can be difficult – and yet they will invariably want to retain their independence and live in the comfort of their own home as long as possible.

It’s at this point many people start to investigate the various home and aged care options available.

Home care services can range from assistance with personal care and domestic duties, to the provision of transport or nursing services – basically, any form of care that your loved one can receive, that helps them to continue to live (mostly) independently in their own home.

Aged care can involve your loved receiving home care, community support or moving into a more traditional residential aged care or nursing home facility.

All forms of care require careful consideration, and come at a cost – some of which may or may not be subsidised by the government.

In this first article in a two-part series, we explore the financial implications of funding home care. In the next article, we look at the more complex implications of funding aged care.

What are the indicative costs of professional home care?

The Department of Human Services’ My Aged Care site provides detailed information about the costs associated with home care packages.

It suggests that if you are thinking about a home care package, you’ll first need to have your loved one’s care needs assessed by the Aged Care Assessment Team (ACAT) as soon as possible. Your loved one must be assigned a home care package to receive government subsidies. The value of the home care package will depend on the level of care your loved one needs.  

Home care providers may then charge three types of fees – the basic daily fee, an income- tested fee and potentially fees for additional services.

All recipients of home care packages will pay the basic daily fee. The basic daily fee for a home care package is 17.5 per cent of the of the basic single age pension rate, which is $10.17 per day (on February 2018). It increases with increases to the age pension every 20 September and 20 March. Those on full pensions will pay only this fee.

Those on part-pensions and self-funded retirees may also pay the income-tested care fee in addition to the basic daily fee. This fee is different for everyone because it is based on individual income levels, but the maximum amount of income-tested care fee that your loved one can currently be charged, is $14.59 per day for part pensioners and self-funded retirees with income up to:

• for single with income up to $50,876.80 per annum
• for partnered with income up to $38,958.40 per annum
• for partnered but separated due to illness with income up to $50,408.80
• or $29.19 per day for people with income above those thresholds

The care provider may also charge to the home care package administration, case management, and other costs agreed to in the Home Care Agreement. Amounts that exceed the value of the home care package and the any additional services excluded from the Home Care Agreement have to be paid for by your loved one.

Some issues with relying on government-funded home care

There can be complications when applying for government-funded home care packages which may mean your loved one will need to fund these services out of their own pocket.

For example, your loved one might have an accident, illness or sudden loss of capacity, and they may require home care sooner than the government funded options are able to provide.

Janet Manzanero-Caruana, senior technical consultant at BT Financial Group, warns that there is long waiting list for government-funded home care.

“Even if you’re approved for home care because of your health, it doesn’t necessarily mean you’ll get it straight away,” she says. “Home care packages are assigned by order of priority to those who most need the services and the time they have waited for care, and it’s done nationwide. Because there are limited home care packages available, there is a really long waiting list.”

If you notice your loved one is starting to struggle or become ill, Manzanero-Caruana suggests its worth exploring home care options sooner rather than later. “Don’t wait until emergency strikes, and don’t procrastinate. If you think that your loved one will need home care, you should have them assessed as soon as possible.”

Options for privately funding home care services

If your loved one is ineligible for a home care package, or is on the waiting list, there are a few common ways to fund these services.

Commonwealth Home Support Programme

The Commonwealth Home Support Programme is another government-subsidised program which provides home help for people over 65 (or over 50 and identify as Aboriginal or Torres Strait Islander, or on a low income, homeless or at risk of being homeless) who need some help with daily tasks to live independently at home.

Under this program, a home support assessment is required – and it provides access to domestic help such as cooking, cleaning, bathing, driving to the doctors and doing the shopping.

Manzanero-Caruana says that while contributions towards specific services under this program are not fixed, these are substantially cheaper than if services were to be engaged at commercial rates. There are arrangements for those who cannot afford to make contributions.

Drawing down savings or accessing equity in your home

Drawing down on savings is another way some people choose to fund home care if they’re not eligible for any of the government-funded options.

If this is the option you’re looking at for your loved one, it’s worth speaking with a financial adviser to figure out how age pension entitlements may be affected and ensure that savings are best structured to continue earning the highest returns possible, whilst funding home care services.

Drawing down on the equity in yours or your loved one’s home is another potential option to access funds – again, it’s recommended to speak with a financial adviser to understand the implications of this strategy.

Accessing superannuation through compassionate grounds

In some circumstances, The Department of Human Services can approve the early release of a portion of superannuation on compassionate grounds to pay for medical expenses, mortgage repayments, disability, or palliative care for a person or their dependant.

For the payment of medical treatments to be approved, the person or their dependant must have a life-threatening illness or injury, acute or chronic pain or an acute or chronic mental illness. The applicant must also be able to show that they can’t pay for the treatment any other way, such as selling assets or using savings.

Adult children helping their parents out

Increasingly, adult children are helping their ageing parents who are perhaps asset rich and cash poor, by making money available to them to pay for home care.

“It’s quite heart-warming to see children helping their parents this way,” Manzanero-Caruana says.

Depending on the amount of money required to fund home care, some adult children negotiate with their parents to buy a stake in the parents’ home to free up cash, while others will simply lend their parents money with an agreement to ensure the loan is paid back at some point, usually when the home is sold or from the parent’s deceased estate.

As with any important financial and life decisions, it’s worth starting the discussions about home care options – and their financial implications – with aging loved ones sooner rather than later.

Your financial adviser or specialist care providers can give you further advice specific to your loved one’s situation.

What have been your experiences with sourcing home 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.