How do we figure out the best way to pay for accommodation in an aged care home, and what options do we have?
Understanding the accommodation costs for aged care homes and the payment options available is crucial for making an informed decision that suits your care needs and financial situation. Here’s a detailed guide covering everything you need to know:
1. Negotiating Your Room Price
Before moving into an aged care home, you will need to agree on a room price with the provider. This price depends on:
- Room Type: Whether it’s a single or shared room, and if it has a private ensuite or shared bathroom.
- Room Size: The dimensions and layout.
- Location: The geographical location of the aged care home.
Providers are required to publish their maximum room prices, but you can negotiate a lower price. They cannot charge you more than the published rate.
From 1 January 2025, the maximum price that can be charged without approval will increase from $550,000 to $750,000. This doesn’t mean all prices will automatically change. If you’re already in care, your room price remains the same.
Use the Find a provider tool to compare room prices, locations, and features.
2. Payment Options for Accommodation Costs
You have three main ways to pay for your aged care home accommodation:
- Refundable Lump Sum
- Refundable Accommodation Deposit (RAD): If you cover the full cost yourself.
- Refundable Accommodation Contribution (RAC): If the government assists with your costs based on your means assessment.
- Refund Policy: The lump sum is refunded when you leave, minus any amounts used to pay other aged care costs.
Note: Paying a lump sum counts as an asset in your means assessment, potentially affecting your means-tested care fee or accommodation contribution.
- Daily Payments
- Daily Accommodation Payment (DAP): If you cover the full cost yourself.
- Daily Accommodation Contribution (DAC): If the government assists with the costs based on your means assessment.
- Non-Refundable: These payments work like rent and are not refunded when you leave.
- Combination of Lump Sum and Daily Payments
- You can split the cost between a partial lump sum and daily payments.
- Example: For a room priced at $400,000, you might pay $100,000 as a lump sum and cover the remainder with daily payments.
3. Choosing Your Payment Option
You have 28 days from the date you move in to decide how to structure your payments. Until you decide, you will pay daily payments.
- If you opt for a lump sum, you have up to 6 months from your entry date to pay it.
- You can switch to a lump sum or pay additional amounts at any time.
4. How Daily Payments are Calculated
Daily payments are determined by the Maximum Permissible Interest Rate (MPIR), fixed on the date you agree to the room price.
Examples
- Full DAP Calculation (Room price: $500,000):
DAP=(RoomPrice×MPIR)÷365DAP = (Room Price × MPIR) ÷ 365DAP=(RoomPrice×MPIR)÷365
DAP = ($500,000 × 8.36%) ÷ 365 = $114.52 per day - Combination Payment (Paying $200,000 as a lump sum):
ReducedDAP=((RoomPrice−RADPaid)×MPIR)÷365Reduced DAP = ((Room Price − RAD Paid) × MPIR) ÷ 365ReducedDAP=((RoomPrice−RADPaid)×MPIR)÷365
Reduced DAP = (($500,000 − $200,000) × 8.36%) ÷ 365 = $68.71 per day
MPIR
As of 1 July 2024, the MPIR is 8.36%. This rate remains fixed at your entry date.
5. Drawing Down on Lump Sums
If you pay a part RAD or RAC, you can draw down on it to cover daily payments or other fees:
- Part RAD: Draw down daily accommodation payments (DAP).
- Part RAC: Draw down daily accommodation contributions (DAC).
Impact of Drawing Down
As your lump sum decreases, your daily payment will increase unless you top up the lump sum or increase your daily payments.
6. Other Financial Considerations
- Lump Sums as Assets: Counted in the means assessment, impacting your means-tested care fee and accommodation contribution.
- Family Contributions: Family can help with payments, but lump sums paid by family members are still counted as your asset.
- Couples: Lump sums may affect your partner’s aged care fees.
- Refund Policy: Providers are not required to refund lump sums while you are in care, but you can ask.
7. Financial Hardship Assistance
If you can’t afford your fees due to circumstances beyond your control, you can apply for financial hardship assistance for:
- Basic Daily Fee
- Means-Tested Care Fee
- Accommodation Costs
Note: Hardship assistance does not cover extra service or additional service fees.
8. Seeking Financial Advice
It’s highly recommended to seek independent financial advice before deciding how to pay for aged care. Payment methods can impact your pension, means-tested fees, and your partner’s fees.
Services Australia’s Financial Information Service (FIS)
- Free advice to help you make informed decisions.
- Call 132 300 and say “Financial Information Service.”
For more details, visit the Financial Support and Advice page.
Summary of Key Steps
- Negotiate your room price with the provider.
- Choose a payment option: lump sum, daily payments, or a combination.
- Understand the impact on your finances and fees.
- Seek financial advice to ensure the best decision for your circumstances.
This decision can feel complex, but with the right information and support, you can confidently choose an option that ensures comfort and financial security.
