When moving into residential care in Australia, there are four main costs to consider. Understanding these fees is essential for making informed decisions about your parent's care. In today’s blog, I want to discuss the Means Tested Care Fee, which is the contribution towards your care, calculated based on your financial means.
Before we jump in, here’s a summary of the different fees paid by an Aged Care Resident and how they contribute to overall care:
Accommodation
Either expressed as a Lump Sum or a Daily Amount, this changes depending on whether you are low means. For most entrants, they pay a Lump Sum RAD, a Daily DAP, or a combination of the two. For low means, the equivalent is RAC and DAC. You can learn more from one of my previous blogs here.
Basic Daily Fee
This fee covers basic living costs such as meals, cleaning, and laundry. Everyone pays the same amount regardless of their financial position, and it is pegged to 85% of the Single Person Aged Pension amount.
Additional Services Fee
Not all facilities charge this fee, but it is increasingly common. It usually ranges from $1-20 a day (sometimes more) for extra services like higher-quality meals or entertainment options. In my experience, this fee often goes towards providing much better food and comfort for residents and is very worthwhile.
How is the Means Tested Care Fee Calculated for Aged Care?
The calculation of the Means Tested Care Fee involves assessing both the resident’s income and assets. The calculation is much the same as the Centrelink Aged Pension looking at:
Income Assessment:
Deemed Income
Rental Income
Annuity Income
Foreign Pension Income
Asset Assessment:
Real estate (including the family home, with some exceptions)
Savings and bank accounts
Investments (shares, bonds, etc.)
Superannuation
Personal assets (vehicles, collectibles, etc.)
Key Differences between Centrelink Assessment for Aged Care and Aged Pension
The Family Home
Aged Care (MTCF): Whether the home is assessed depends on who is living in it when the resident moves into care. If there is a protected person, it is exempt from asset test assessment. If there is no protected person, the value is capped at the Home Exemption Cap ($201,231 as of 10/07/2024) for each person. For more detail, please see my previous blog on the family home here.
Aged Pension: The family home is exempt from asset test assessment for 2 years after the resident moves into care if there is no spouse in the home. It is exempt if their spouse still lives in it. If the home is rented out, the rental income counts towards the Income Test, but the home is still exempt from the Asset Test.
The RAD or RAC Lump Sum
Aged Care (MTCF): Any amounts paid onto the RAD/RAC are still included in the Asset Test assessment for the MTCF.
Aged Pension: Any amounts paid onto the RAD/RAC are exempt from the Asset and Income tests, so paying off more of the RAD/RAC can improve the amount of Aged Pension your parent receives.
The Annual and Lifetime Cap
An important consideration when looking at the means-tested fee is the Lifetime Cap, which is the maximum you have to contribute towards your Means Tested Care Fee in your lifetime. These values include both amounts paid when in Residential Care, as well as Home Care and is per person (not combined for a couple).
The Annual Cap is currently $33,309 and is the maximum amount you have to pay within the 12 months from entry. The fee is taken as per your calculation until such time as you reach that amount. In effect, if you are paying the maximum fee (currently $417.41 per day), you would reach that cap in 80 days, and the Residential Facility should stop charging you this amount.
The Lifetime Cap is currently $79,942 and is the maximum amount you have to pay within your lifetime. This takes about 2.4 years in care at the Annual Cap if you had no home care fees prior to entering care.
Assets Non-Disclosed and Paying the Maximum Fee
In order to complete a MTCF, Centrelink must be notified of your financial situation, even if you are already getting the Aged Pension. If you fail to notify Centrelink, they regard you as Assets Non-Disclosed and you are charged the maximum $417 per day. For anyone living on the Aged Pension, getting a $12,000 bill in the first month of care is a horrible experience but not uncommon for people who don't realize this important step.
To notify Centrelink, you need to do one of the following steps:
For Homeowners on Centrelink:
If Centrelink already has your income details, complete the SA485 (Residential Aged Care Property Details for Centrelink and DVA Customers) form.
Make sure your Centrelink information is up to date.
For Non-Homeowners or those whose Centrelink does not have records:
Complete SA457 (Residential Aged Care Calculation of your cost of care form).
Being Assets Non-Disclosed Can Be a Good Thing
Being assets non-disclosed can have advantages for people with higher means and complex situations, saving time and effort where you know you are going to pay the maximum fee anyway. This just means you don't notify Centrelink of your asset/income position and pay the Maximum Daily Fee until you reach the cap each year, then the Lifetime Cap. As you can imagine, situation-dependent, there can also be strategies around timing the caps with selling the family home or a partner entering care, especially where your parent is paying the maximum fee.
In closing
Navigating the complexities of residential aged care fees can be daunting, but understanding these key aspects can empower you to make informed decisions that best suit your family's needs. Whether considering the Means Tested Care Fee or other costs associated with aged care, being well-informed can help you ensure the best possible care and financial management for your loved ones. For more detailed guidance, always consult with a financial advisor or aged care specialist.
Resources
For more information or to book an assessment visit MyAgedCare: https://www.myagedcare.gov.au/
If you suspect a loved one may be experiencing elder abuse contact the Eldar Abuse Phone Line on 1800 353 374.
If you think they are in immediate Danger Ring 000 or make a non urgent report to Crime Stoppers in your state.
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