If an older Australian qualifies for Government support for the cost of residential aged care accommodation, they will need to be clear about just what kind of bed is available to them.
A clear knowledge of accommodation payments (see here), is the starting point for understanding this challenge.
Clarifying and understanding Government support for aged care accommodation costs increases the complexity for older Australians and their families as they seek to make the best decisions around residential aged care.
Government help for accommodation costs: How it works
Government asset and income testing will determine the level of care and accommodation support that will be provided to the resident. (Get our infographic)
In the case of accommodation support, the resident is ineligible if assessable assets are greater than $154 179.
If the resident has a home, and there are no spouse or dependents remaining in the home, the home is assessable up to a value $154 179. This means that a resident going into care with a house valued at more than $154 179 (without a spouse or dependent still living there) will not be eligible for any accommodation support.
The extent that the government will provide support will be at it’s highest for those in a low assessable asset and income position (e.g assets less than $45 000), and the amount of available support will taper down until the assessable assets reach $ 154 179.
(Note that there is an income component to the test also - we talk mainly in terms of assets for simplicity)
Full Pension does not mean full accommodation support
The Centrelink Aged Pension does not include an assessment of the home.
Residential Aged Care Means Testing will take the house into account if there is not a spouse or dependent remaining in the home.
It’s an important difference that could mean someone on a full pension moving to residential aged care will have their home included in their means testing.
How much does the government help?
The government has a maximum rate known as the Maximum Accommodation Supplement Amount.
This is currently set at $52.49.
So if the resident is eligible, the government can provide accommodation cost support at a rate of up to $52.49 per day.
There is another way to look at it (we talk about this more here).
$52.49 per day is essentially a Daily Accommodation Payment (DAP)
A $52.49 DAP is like a RAD of:
$52.49*365/6.69% = $286 380
How does $286 380 compare to the quoted RAD of the bed you are looking at?
What does this mean anyway?
If the RAD is higher than $286 380, and the resident is eligible for full accommodation support ($52.49 per day), then the resident is going to have to find money to pay the difference.
Not surprisingly, a resident eligible for the highest level of accommodation support is unlikely to have the means to support other cashflow.
Meanwhile, if you type into the Residential Care Fee Estimator an asset base of $40 000, then the estimator tells you that the resident will not have to pay any accommodation costs (at all).
This does not mean that the provider with a bed with a RAD of more than $286 380 has to offer this bed to someone who is assessed as being eligible for the full amount of accommodation support.
Consider a bed with a RAD of $400 000. The Daily Accommodation Payment in this bed would be ($400 000 * 6.69%)/365 = $73.31.
Now if the maximum level of government contribution to the cost of care is $52.49, and assuming the resident is eligible for the full amount, then who is going to pay the difference?
They can pay as a DAP (per day) : ($73.31-$52,49) = $20.82
Or by a lump sum - ($20.82*365)/6.69% = $110 134
Just be careful when the Residential Care Fee Estimator tells you that you cannot be asked to pay an accommodation contribution. This doesn’t mean that the facility has to offer you a bed.
Then there are the permutations
Note that there are permutations of this - e.g the eligibility for the government support is on a sliding scale. If the resident is eligible for say $20 per day of support, they would be assessed as having to contribute the balance - known as a Daily Accommodation Contribution (DAC)
The bed the resident may be considering may have a DAP that is less than the government maximum. This means that the resident may not be eligible for the maximum amount of support, yet may still have the government cover their accommodation costs.
There are many variations here, and this can be very confusing for older Australians and their families.
We can help you understand your options and make more informed decisions.
Contact us for help.