Introducing Commonwealth regulated residential aged care

Introducing residential aged care

by Christine Hopper

Commonwealth regulated Residential aged care is available for people who need personal support and/or nursing care irrespective of their financial resources.
The Commonwealth is the ‘gatekeeper’ for who is allowed into potentially subsidised aged care. The Commonwealth also pays a substantial subsidy for aged care residents who cannot pay the full costs of their care.

What to do when someone needs more personal support and/or nursing care than could be provided at her home.

Step 1 – A current ACAS is essential

Only an Aged Care Assessment Service (“ACAS”) team member could issue an ACAS certificate. The ACAS certificate includes a statement of the types of care that the applicant could access. Your ACAS might show that you are eligible for both ‘Respite’ and ‘Permanent’ Residential care.

You are not compelled to use the home care or residential care that your ACAS certificate allows. But your ACAS normally expires after twelve months if you have not entered Permanent Residential Care within that time.

You must have a current ACAS certificate as at the date you enter residential aged care either Respite or Permanent care. If you are transferring from Respite to Permanent Residential Care then you must have an ACAS certificate valid for permanent residential care on the day that your Permanent Residential Care starts.

Step 2 – Find an aged care facility that caters for your needs as detailed on your ACAS certificate.

Each aged care facility determines the types of resident that it accepts. For example, some facilities have secure dementia sections that are keypad controlled at all times; an active resident cannot wander out of a secure facility. Some facilities provide high dependency nursing care for residents who are immobile.

Your ACAS certificate lists the medical conditions and physical and/or mental impairments that qualified you for your aged care. The aged care facility would check that your care needs as shown on your ACAS certificate, are not inconsistent with its service offerings.

Step 3 – Agree the Accommodation Room Price and any Extra Service Fee before you enter residential aged care

The Accommodation Room Price and any Extra Service Fees are critical parts of the costs of living in residential aged care. Each Commonwealth regulated residential aged care facility must publish on its website, its Accommodation Room Prices together with a description of the accommodation. Many facilities provide good descriptions of the different types of accommodation within the facility and the Accommodation Room Prices for each type of room.

Alas, some facilities are quoting the maximum allowable Accommodation Room Prices for every room with a note that the individual new entrant could negotiate a lower price. When aged care is required urgently, the potential resident’s family might not be in a good position to negotiate a reasonable Accommodation Room Price.

Caution. An Accommodation Room Price over $300,000 could result in cash flow challenges. Seek independent financial advice before agreeing to a higher Accommodation Room Price or any Extra Service placement.

The Accommodation Room Price is then inserted into the Resident Agreement. The Resident Agreement also includes the interest rate to be charged on any unpaid portion of the Accommodation Room Price and the amount of any Extra Service Fee applicable to the chosen aged care accommodation.

The resident via her Attorney or court appointed Administrator, is expected to sign the Resident Agreement promptly on entering Commonwealth regulated Residential aged care.
Completion of step 3 is the earliest point of entry to permanent residential care.

Financial Care Services offers appointments at short notice for families requiring financial advice fast when entry to aged care is urgent. Call Christine at Financial Care Services on 03 9808 0338 to arrange an appointment to discuss aged care entry now.

Step 4 – Obtain independent financial advice before signing the Resident Agreement

Before committing to a substantial Accommodation Room Price, wise families seek independent financial advice to understand the total level of costs of living in the chosen aged care facility.
Prompt payment of part of the Accommodation Room Price is financially smart for many residents who have significant bank balances. To generate the cash flow needed to pay the regular aged care fees, the family might release the aged care resident’s former home. The former home could be sold or retained as a rental property.

Caution the aged care facility managers are not qualified or licensed to provide financial advice. Any “advice” to agree a higher Accommodation Room Price or pay a larger Refundable Accommodation Deposit in order to reduce the means tested fee could be misleading and not in the resident’s best interests overall. Caution: the aged care facility manager is concerned about the facility’s financial position whereas the family are  concerned with the resident’s financial lifetime planning.

Be aware that the financial adviser recommended by the facility manager would support the Accommodation Room Prices quoted by the aged care facility that refers him business.

Before you commit to an aged care placement consult Financial Care Services regarding your personal situation. Christine at Financial Care Services understands the new Accommodation cost system and the various means tested fees for residential aged care and Age Pensions.

A consultation at Financial Care Services could Illustrate the various Daily Care Fees and Accommodation Charges that you could be asked to pay for Commonwealth regulated residential aged care.

Your Illustration could include the financial impact of retaining the former home vacant or leased, or releasing it for sale.

Call Financial Care Services on 03 9808 0338 to arrange an appointment.

Step 5 – Understand the payment terms for the Accommodation and the Daily Fees for ‘hoteling’ and ‘care’.

Residential aged care fees include a ‘hoteling’ part consisting of the Accommodation charges and the basic daily fee.
The basic daily fee of 85% of the Single rate of Age Pension is payable by every resident.

Residents who have no more than $45,000 of assets and no more income than a full rate Age Pensioner could have, cannot be asked to pay for Accommodation.

Residents with more than $45,000 of assets and/or more income than a full Age Pensioner could have, pay at least part of their Accommodation costs.
A resident who owns a now vacant former home would have a high enough ‘means tested amount’ to be ineligible for any Accommodation Supplement and would therefore pay the full cost of her Accommodation.

The Accommodation could be paid for by a lump sum Refundable Accommodation Deposit equal to the Accommodation Room Price, or by paying interest on the unpaid Accommodation Room Price termed a Daily Accommodation Payment.

The amount that the resident pays for her ‘care’ depends on her financial resources as measured by her ‘means tested amount’, and the cost of the ‘care’ that she needs.
The nursing staff in the aged care facility assess the level of personal support and nursing care that each resident needs according to the Commonwealth scales. The resident’s maximum care fee is then set as the cost of this care based on the current Commonwealth rates.

A new resident who does not want to provide financial information to the Commonwealth at Centrelink, will pay the full cost of her care until the charges reach her annual and lifetime limits.

Initially, the care fee limits are $25,000 in a ‘care year’ and $60,000 over a lifetime. Both ‘home care’ fees and residential ‘care’ fees are counted towards the lifetime cap. The dollar amounts of the caps are expected to be increased marginally each year.

Step 6 – Understand how the ‘means tested amount’ is calculated and hence how it could change significantly.

The ‘means tested amount’ is calculated by Centrelink based on the income and assets of the resident. The ‘means tested amount’ is updated every time the Age Pension rate and/or Allowances change. Also any significant change in the resident’s asset or financial position would result in a review of her ‘means tested amount’.

The ‘means tested amount’ includes an Income component and an Asset component. The Income component is half of the Income of the resident in excess of the amount of Income that a full Age Pensioner could receive. Income includes any Commonwealth income support payments together with the ‘income’ as defined for the Age Pension Income Test.

The Asset component of the ‘means tested amount’ is calculated on a sliding scale of percentages of the resident’s Assets. For the purposes of the ‘means tested amount’ calculation, Assets includes the Assets as for the Age Pension Asset Test plus any Refundable Accommodation Deposit paid plus the value of the former home if it is not occupied by a ‘protected person’. The value of the former home is capped at $154,179.20 initially.

The ‘means tested amount’ is calculated as shown in the table below:

Aged Care Assessed Assets band Asset range for this rate Annual Rate Full Amount for this Asset band
 First $45,000 of Aged Care Assessed Assets  Nil -$45,000  0%  Nil
 Next $109,179.20 of Aged Care Assessed Assets  $45,000 – $154,179.20  17.5%  $19,106.36 per year
 Next $218,358.40 of Aged Care Assessed Assets   $154,179.20 to $372,537.60 1.0%  $2,183.58 per year
 Any Aged Care Assessed Assets over $372,537.60   Over $372,537.60 2.0%  Unlimited

The level of the cap on the value of a vacant former home ensures that a single person in residential care would have a ‘means tested amount’ that would exclude her from any Accommodation Supplement; she would pay the full cost of her Accommodation.

The ‘means tested amount’ could increase substantially when the former home is sold for more than the $154,179.20 cap. But if the former home is retained as a rental property, there might not be enough cash flow to pay the aged care fees each month.

Independent financial advice could demonstrate the potential cash flow position if the home were sold or retained for rental. An independent professional adviser would not be pushing the family to sell the home to ‘buy’ investments to generate cash flow.

Christine at Financial Care Services understands the new Accommodation cost system and the various means tested fees for residential aged care and Age Pensions.

A consultation at Financial Care Services could Illustrate the various Daily Care Fees and Accommodation Charges that you could be asked to pay for Commonwealth regulated residential aged care. Your Illustration could include the impact on any DSP or Age Pension when you use assets to part pay a Refundable Accommodation Deposit.

Your Illustration could include the financial impact of retaining the former home vacant or leased, or releasing it for sale.

Call Financial Care Services on 03 9808 0338 to arrange an appointment.

Step 7 – Update Centrelink

Centrelink calculate each resident’s means tested amount on behalf of the Commonwealth. Centrelink have released a new 32 page booklet form to collect the information needed to assess your Means Tested Amount: Permanent Residential Aged Care Request for a Combined Assets and Income Assessment.

The Attorney or Administrator for the new resident must complete this booklet form and send it to Centrelink. Help is available Christine at Financial Care Services is familiar with Centrelink asset and income forms.

Financial Care Services offers appointments at short notice for families requiring assistance with completing Centrelink forms. Christine could attend a Centrelink office with you.
Normal hourly rate fees apply to collating your data, filling in forms for you to sign and accompanying you to Centrelink.
Call Christine at Financial Care Services on 03 9808 0338 to arrange an appointment to discuss aged care entry now.

Step 8 – Arrange the resident’s assets so that cash is available to pay the aged care fees each month.

The full rate of Age Pension is just enough to pay the basic daily fee and essential pharmacy and incidental expenses.

A resident who must pay at least part of her Accommodation costs and possibly some of her care costs needs to have money available each month to pay her fees. If her ‘means tested amount’ results from owning significant assets then she would need to have access to some of her capital to pay her living costs; her income is unlikely to be sufficient to cover her monthly bills for residential aged care.

Independent advice could help you decide to sell or lease the former home, to commit to an annuity or maintain access to financial resources held in bank accounts. These are serious decisions for the Attorney or Administrator.

Step 9 – Set up the fee payment process, monitor the financial position and update Centrelink

The aged care facility sends regular accounts for fees. The basic daily fee, Accommodation costs and care fees may be levied one month in advance. If fee rates change for any reason then the fee adjustments could be made retrospectively in the next billing cycle.

Many aged care facilities issue monthly accounts to be collected via direct debit on the resident’s bank account on the first day of each month. The Attorney or Administrator must ensure that adequate funds are in the bank account to cover the fees. Invoices for essential pharmacy items would be payable by the Attorney or Administrator, directly to the pharmacy.

When the bank account is depleted then the Attorney or Administrator needs to arrange for assets to be liquidated to ensure that the direct debits for aged care fees could be covered next month.

Finally, the Attorney or Administrator must keep Centrelink or DVA, updated about the resident’s assets and income. Every change of $10,000 must be reported to Centrelink or DVA. A lower threshold might be required by Centrelink for some aged care residents.

Help with assessing the aged care fees Means Tested Amount is available.

Christine could assist you with collating your personal data, estimating both your Means Tested Amount and how much Centrelink Pension you could expect to receive and completing the Centrelink forms for you to sign. Normal hourly rate consultation fees apply for assistance with personal data collation, completing Centrelink forms and attendance at a Centrelink office with you.

Call Financial Care Services on 03 9808 0338 to arrange an appointment.

Before you commit to an aged care placement consult Financial Care Services regarding your personal situation.

A consultation with Financial Care Services helps you understand your potential aged care costs and Centrelink income support pensions. Call Christine on 03 9808 0338 to make an appointment for a consultation.

Financial Care Services is licensed to offer investment strategy advice and to assist you to invest. Financial Care Services charges fees based on the work involved in advising you and arranging your investments. Financial Care Services does not base fees on the value of your assets nor do we accept any commissions or payments from other service providers.

If you would like further confidential, independent and professional advice about Centrelink, lifestyle or financial issues please contact Christine Hopper 03 9808 0338.

Disclaimer: The information contained in this website is of a general nature only and does not constitute “financial advice”. You should obtain your own personal financial advice before investing any money or moving in to any retirement village, lifestyle community or aged care facility. Financial Care Services is licensed to provide financial advice to individual clients based on their personal situations. © 2014 Financial Care Services Pty Ltd. All rights reserved.

To make an appointment for professional advice, call Financial Care Services 03 9808 0338