Different Payment Plans for Aged Care Facilities

Making the decision to transition a loved one into an Aged Care facility is never easy. Concern about the wellbeing of a dear family member or friend, uncertainty of which type of care is most suitable, and confusion around the fees and charges can all make this period in our lives feel a little overwhelming. Fortunately, there are several funding options when looking for Aged Care for beloved older people in our lives. Read on to get an overview of the different payment plan options for Aged Care Facilities in Australia.

How Is Aged Care Funded in Australia?

The Australian Aged Care system provides support and care to Indigenous Australians aged over 50 years old, and non-Indigenous Australians over the age of 65. Aged Care is provided by a wide range of government, nonprofit and for-profit providers, in settings including the individual’s home, community settings, or in dedicated residential aged care facilities (also known as nursing homes). The Commonwealth Government is the primary regulator and funding body for all Aged Care provided across Australia, however in most cases individuals have to pay something towards their own care. How much you are required to personally pay for your Aged Care depends on the type of care needed, the provider chosen, the level of support required, and the financial circumstances of your loved one and their immediate family. An assessment process is undertaken for each individual receiving Aged Care, to determine the level of need and support, which then determines the subsidies paid to the facility for each person under their care. Those of greater financial means are often expected to pay a greater proportion of their Aged Care fees themselves, but every situation is different and will be assessed on an individual basis.

Determining Funding Eligibility

The first step you should take when considering a transition to Aged Care is to undergo an assessment of eligibility for government funding. My Aged Care is Australia’s central portal for Aged Care services and information, and is responsible for assessing your personal circumstances to determine funding eligibility. The assessment process can be done online, or by contacting their call centre on 1800 200 422. My Aged Care staff can also answer any questions you have about the assessment or application process, and give an initial estimate of likely fees and charges, however this is only an estimation and should not be considered a definitive quote for your care needs. 

Types of Aged Care Funding and Payment Options

Basic Daily Fee

The first type of payment to understand when transitioning to Aged Care is the basic daily fee. You will likely be asked to make some level of financial contribution towards your daily living expenses under this funding umbrella. The cost of this fee will vary based on your financial situation, the type of care and services needed, and the provider you choose. Basic daily fee covers essential living expenses including meals, heating and cooling your living environment, laundry, some medication support, some personal care and some assistance with daily living. The rate of this fee will be different for each person, however the maximum amount you can be charged is regulated by the Commonwealth Government. This maximum charge is reviewed on a regular basis, and is currently capped at 85% of the annual single basic Age Pension. This means that if you receive an Age Pension of $860.60 per fortnight, the maximum you can be asked to pay towards the Basic Daily Fee is $731.50 per fortnight or $52.25 per day. You can find out more about pension rates and how they impact Aged Care fees at the Services Australia website.

Accommodation Payments

Accommodation Payments are the fees and charges that Aged Care facilities set for their rooms. This varies significantly depending on the provider you choose and the location, size and features of the room selected, such as whether it is private or shared. It is very important to agree upon and understand the proposed accommodation charges with your chosen Aged Care provider before entering care, to ensure it is affordable and suitable for you and your loved one. Keep in mind that you are granted a 28 day period during which you can change your mind about Accommodation Payments should your circumstances change. 

Accommodation Payments are different for everyone, as they are calculated based on your financial circumstances. If you can afford it, you will be expected to pay for your room in full. However, funding support is available for everyone who needs it, to differing levels. This is determined using a means assessment and will be different for everyone, however as a general guide, people with income below $28,100.80 and assets below $51,000 will receive full government funding for their room. People with income above $70,827 or assets worth over $173,075 will be expected to pay the full cost of their room, which they can negotiate directly with the provider. For people between these upper and lower limits, some combination of personal contributions and government funding will be proposed. Once your total accommodation fees and charges are decided, you can choose between three different payment plans to choose from. If unsure of the best option, it is always a good idea to seek independent financial advice to ensure you make the right choice for you. 

Payment option 1 – Refundable Accommodation Payments

The first payment option for your accommodation is a one-off, lump sum payment otherwise known as a refundable accommodation payment. There are two types of upfront payments available, based on whether you are paying for your fees upfront yourself, which is called a Refundable Accommodation Deposit (RAD), or if you are receiving government financial assistance, in which case your payment is called a Refundable Accommodation Contribution (RAC). These payments are largely refunded once your loved one leaves care, less any funds that have been used to pay for services during their stay.

Refundable Accommodation Deposits or Contributions can be drawn from to pay for various Aged Care fees and charges during your loved one’s stay, however this is subject to approval from your specific provider. Any use of the RAC or RAD funds during a stay in Aged Care can also reduce the amount that you are refunded at the end of your stay, so it is always a good idea to get financial advice when considering drawing from your Accommodation Payment for personal care or other services. 

Payment option 2 – Daily Accommodation Payments and Contributions

Daily Accommodation Payments or Contributions are regular, non-refundable, rental-type payments that are set by the Aged Care home to cover the cost of your room and the services you receive. The rate of these payments depend on the room you have chosen and the cost you have agreed upon, and is also subject to interest rates. The government sets maximum limits on the amount of interest you can be charged for your Aged Care accommodation, known as the maximum permissible interest rate (MPIR). Similarly to the lump sum payments, your assessment process and means testing will determine whether you need to pay your daily accommodation fee yourself, or if the government can subsidise this charge to reduce your overall costs. 

Payment option 3 – Combined Upfront Payment and Daily Accommodation Payments

The final option you may consider to pay for Aged Care involves a combination of an upfront, lump sum refundable payment, supplemented with regular accommodation payment installments. You can approach a combined payment plan in any way that best suits your needs and financial situation. The pros and cons of paying a greater amount upfront or paying gradually in installments are complex and depend on your individual circumstances, so getting independent financial advice is a great idea. Services Australia offer a free Financial Information Service (FIS), and are a great source of information and support when making big financial decisions, such as entering into paid Aged Care. Financial advisors can help you to understand the likely impact of your Aged Care payments on your personal circumstances. You can access this service at any time by contacting the Centrelink Older Australian’s line on 132 300.

Means-Tested Fees

Aged Care is available in many different forms in Australia, and the right one for you will depend on your preferences, support needs, budget and financial situation. Some Aged Care fees are means-tested in Australia, meaning that those who can afford it pay a higher personal contribution than those with less financial means. This helps ensure everyone in Australia can access high quality Aged Care when they need it, and that no one is left behind in their older age due to financial disadvantage. Not everyone is required to pay an additional means-tested fee, as this will be determined during the assessment process. You can also use My Aged Care’s fee estimator tool and income and assets checklist to get an idea of whether you are likely to be charged this fee. The rate of the means-tested fee varies, however is currently capped at $259.26 per day, subject to annual updates in line with indexation rates. The latest figures for means-tested fees are regularly updated on the My Aged Care website.

Extra Fees

Additional comfort items or more luxurious services are sometimes offered by Aged Care facilities for an extra cost. These fees are set by the provider and, as they are optional ‘extras’ like internet access, dry cleaning or being visited by a hairdresser, are not eligible for any government subsidies or funding. Additional services available, and their costs, should be explained to you when touring or considering an Aged Care facility. Some Aged Care homes will offer individual extra services so you can pick and choose what suits you, whilst others have packages to select the level of extra care you wish to purchase. You can only be charged for extra services that you or your loved one actually use, so make sure you fully understand what you are agreeing to, and read any fee statements and bills carefully to pick up any errors or charges you are unsure of. 

Financial Hardship and Extra Support Available

If you can’t afford the fees and charges presented to you for Aged Care, there are options to help. Some Australians are eligible for financial hardship support, in which case the government will help pay for some or all of your daily fees, means-tested fees and accommodation fees. Financial hardship support is not available for extra fees for additional services. To find out if you are eligible for financial hardship support, you will need to undergo an assessment process of your financial situation, including any assets. Services Australia will then support you through the application process, if you are found to be eligible. If you are deemed ineligible, but still cannot afford the payments for your Aged Care, you can contact Services Australia who may give advice about other financial aid options available to you. The Financial Information Service can also give independent advice about options including the Pension Loans Scheme or reverse mortgages which can help to fund the cost of care.

Residential Aged Care supplements

Some people need a higher level of care that is outside the scope of basic daily living fees, but are not optional luxury items or services. In these cases, Aged Care providers can apply for supplementary payments from the government to cover the costs of providing additional essential care. This can include supporting older people who require a regular oxygen supply, or those who require the ongoing use of an enteral feeding tube. Other supplements available include a veterans supplements to support older people who have a service-related mental health condition, and a viability supplement for people seeking Aged Care in rural or remote areas. More information about supplement payments can be found on the Australian Government’s Department of Health website, or by contacting a financial advisor.

Caregiver Support

The process of moving a beloved older person into Aged Care is not easy, and often places a lot of emotional, physical and financial strain on you as the caregiver. Navigating complex financial information and weighing up the pros and cons of different Aged Care providers and options can really take a toll, so don’t try to do it all alone. Carer Gateway is the Australian Government’s central portal for carer support services and information, and also offers community forums where you can seek advice from other carers on things like finding the best payment plan for you. Homage is also here to help throughout this process, for instance by providing high quality respite Aged Care in your home, giving you peace of mind knowing your loved one is well cared-for whilst you focus on taking the next step empowered with knowledge and confidence.