The Aged Care Taskforce Final Report was released last Tuesday. It gave 23 recommendations relating to the fees and funding arrangements for aged care.
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So what does mean for the average Australian, and their hip pocket?
The report says there is a need for an immediate increase to the Refundable Accommodation Deposit (RAD) price threshold to $750,000.
Currently aged care homes need to seek approval for prices above $550,000, as a result most aged care beds are set at this price.
This change could be one of many that take effect as early as July 1 when the new Aged Care Act is set to begin.
Among the other recommendations of the taskforce is a 3 per cent per annum levy on Refundable Accommodation Deposits (RADs), capped after you have lived in aged care for five years.
The levy would mean a RAD of $550,000 would have $16,500 per year deducted from it. If you live in the home for five years the amount deducted would be $82,500. Of course if the price is higher then so is the levy; on $750,000 the annual deduction would be $22,500 which amounts to $112,500 if you stay five years.
In the longer term, beyond 2035, the taskforce recommends phasing out RADs with residents paying a rental model. Residents currently have the choice of paying a rental model in lieu of a lump sum RAD, or paying a combination of the two.
The rental model works on a government set interest rate, currently 8.38 per cent per annum, meaning a $550,000 RAD price can be converted to an accommodation payment of $126 per day ($46,090 per year). On $750,000 the accommodation payment is $172 per day ($62,850 per year).
Not giving residents the choice to pay by lump sum could see the cost of aged care accommodation increase by tens of thousands of dollars a year. It could also have an adverse effect on pension entitlements as the Refundable Accommodation Deposit is currently exempt from asset testing when calculating your Age Pension.
The Basic Daily Fee, which is paid by all residents and set at 85 per cent of the Age Pension - currently $61 per day - could also increase.
The taskforce has recommended residents, other than "full pensioners with no other assets or income" should pay more.
The government currently provides an $11 per day supplement to this fee, however, the price of Basic Daily Fees could increase by significantly more than that.
The taskforce have recommended flexible pricing to enable "residents and their representatives to negotiate a higher Basic Daily Fee".
The taskforce believe this price flexibility will enable residents to be provided with a higher level of services or amenities and could be safeguarded through requiring homes to publish their prices and services and give residents a cooling off period and regular reviews to ensure that they want the services and can still use them.
The taskforce didn't provide specifics on how aged care would be means-tested beyond saying it should be tiered based on whether you are a full pensioner, part pensioner or self-funded retiree and in residential aged care homeowner status would need to be considered.
However, it did talk about "simpler and fairer" arrangements and aligning aged care and pension means testing arrangements. This could have significant implications for carers and close relatives of people moving into aged care.
You see, the pension asset test exempts your home while you or your partner live there and for two years from when the last one leaves, but the exemption for aged care is broader. Under the asset test for aged care your home is exempt if a "protected person" lives there, this includes your partner or dependent child and can also include a carer who has been living in the home for at least two years or a close relative who has been living in the home for at least five years.
As far as limiting what people could pay as a contribution the taskforce contemplated that the government could meet all of the costs associated with care, meaning people would only contribute towards their accommodation and living expenses.
At the moment the government funds 94 per cent of residential aged care ($13 billion) with residents paying 6 per cent ($800 million) towards their care costs through means-tested care fees.
Means-tested care fees are currently capped at $32,700 per year with a lifetime limit across home and residential aged care of $78,500.
While not a specific recommendation, the taskforce said if the government chooses not to fully fund care it may wish to remove the current caps.
Ultimately there are only two parties that pay for aged care - the government (through taxpayers' funds) or the person receiving care. The Aged Care Taskforce ruled out imposing a levy or tax and instead have decided to increase the fees people pay.
The government is yet to say which of the report's recommendations it will seek to implement but it seems inevitable the cost of aged care is going to go up.
Why the cost of aged care is set to increase by $200,000
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17.03.2024
The Aged Care Taskforce Final Report was released last Tuesday. It gave 23 recommendations relating to the fees and funding arrangements for aged care.
$0/
(min cost $0)
Login or signup to continue reading
So what does mean for the average Australian, and their hip pocket?
The report says there is a need for an immediate increase to the Refundable Accommodation Deposit (RAD) price threshold to $750,000.
Currently aged care homes need to seek approval for prices above $550,000, as a result most aged care beds are set at this price.
This change could be one of many that take effect as early as July 1 when the new Aged Care Act is set to begin.
Among the other recommendations of the taskforce is a 3 per cent per annum levy on Refundable Accommodation Deposits (RADs), capped after you have lived in aged care for five years.
The levy would mean a RAD of $550,000 would have $16,500 per year deducted from it. If you live in the home for five years the amount deducted would be $82,500. Of course if the price is higher then so is the levy; on $750,000 the annual deduction would be $22,500 which amounts to $112,500 if you stay five years.
In the longer term, beyond 2035, the taskforce recommends phasing out........
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