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While the government offers support to older Australians in Aged Care, understanding and applying for help is confusing.
While you may not get to the bottom of all the detail, it is worth understanding how decisions around how you pay for care, and what you do with the former home can affect payments.
You may also be looking at a number of aged care providers. There are many reasons why one provider may be more suitable for your loved one.
Thankfully, comparing the costs is straightforward. We show you how to do it.
The Residential Care Fee Estimator is designed to help people "estimate the fees and charges you may be asked to pay while living in an aged care home."
This tool gives an estimate of the means tested care fee, and any accommodation cost support.
The reality is that decisions around paying for residential aged care cannot be solved as simply as this.
The best outcome is a balance between maximising government support, and ensuring financial viability. This means considering a whole bunch of alternatives - and many calculations.
Consider these examples - does the Residential Care Fee Estimator help?
Sell the house to pay for care. Then the cost of care goes up. What?
So you get an estimate of the fees using the Residential Care Fee Estimator. Then, you decide it makes sense to sell the home to pay for the fees. Make sure you know what you are doing - as you may have just increased the cost of care. How does this work?
It works like this: The proceeds from the sale of the home are now taken into account when determining the means tested care fee and any accommodation support.
Previously most or all of the value of the home may not have been included in the assessment.
The level of support from the government goes down, and the out of pocket cost of care goes up.
There may be other options here. Make sure you know what they are.
Paying by Daily Accommodation Payment is more like paying by an expensive interest rate - and you may lose the ability to get more Aged Pension
The Residential Care Fee Estimator has little to say about Accommodation Payments.
The reason for this may be that their are so many alternatives in how accommodation payments can be made.
Your provider will offer a choice between a Daily Accommodation Payment (DAP) and a Refundable Accommodation Deposit (RAD).
These two payments are related to each other and use can use our calculator to see how.
Multiply the Daily Accommodation Payment by 365 and you will understand that a Daily Accommodation Payment (DAP) is like an interest payment on the Refundable Accommodation Deposit (RAD) amount.
This rate is currently set at 5.73%. This rate is set by the government.
Does it make sense to pay the RAD as if it were a loan, when you have the funds in the bank earning low interest rates? Maybe it does - but can you be sure you will have enough money available to meet other care costs?
This decision will be easier to make if you have a clear understanding of the overall cost of care.
And another thing - funds paid as a Refundable Accommodation Deposit (RAD) are not included in assessment for the Centrelink Aged Pension. This means that payment of a RAD may not only be saving on interest costs, but may also result in an uplift in payment of the Centrelink Aged Pension. Are you able to take advantage of this?
The Residential Care Fee Estimator does not have anything to say about this important choice. Make sure you are getting the whole story.
Making the most of government support will not ensure financial viability. It may not be enough.
As you can see, making the most of entitlements, and having appropriate reserves to fund care can be two competing objectives.
By keeping funds aside to pay for (expected) aged care costs, the resident will likely be in a position of getting less government support.
How do you make the best decision?
The right answer is not found via an estimator. It is found by exploring alternatives and recalculating outcomes until a balance is struck.
What is the right balance for you?
You won't find it unless you have a thorough understanding of your options around paying for care.
The Aged Care Fee Estimator is not up to the job.
Later Life Advice can help.
Finally - watch for means tested care fee estimates greater than $72.30 p.d.
These are the limits of the means tested care fee:
- The amount of supplement the government pays for care
- A maximum of $26 380 per year (up to about $72.30 per day)
- A lifetime cap of $63 313.
Meanwhile, the estimator calculates a means tested care fee that has NO maximum.
However, the means tested care fee DOES have an annual maximum.
What does this mean?
It means that in some cases the daily means tested care fee may be charged at a rate that is much higher than the average of the maximum rate.
This is a real challenge for cashflow, and very confusing for the resident and their family.
Later Life Advice can help.