Residential aged care provides a combination of care and accommodation services for people who, for various reasons, are unable to continue living independently in their own homes and require continuing personal care.
Potential residents first need to be assessed and approved as aged care recipients by an Aged Care Assessment Team (ACAT). Assessments take into account many dimensions of the person’s care needs.
Residential Aged Care is funded by a combination of private and public financing.
Basically, there are two main categories of funding:
CARE COSTS payments.
In general, the Government funds most of these payments, which cover the costs of care and related services.
The Government calculates and makes payments directly to providers (that is, residential care facilities) on behalf of residents based on the resident’s classification under the Aged Care Funding Instrument (ACFI). The payment consists of a basic subsidy plus supplements based on the resident’s appraised specific care needs (as distinguished from general nursing care, interventions and treatments).
Residents may be asked to contribute to the cost of their care and accommodation through payment of the Means Tested Amount (MTA), which involves assets and income tests.
The MTA is collected by the provider but is wholly paid to the Government.
DAILY LIVING expenses and ACCOMMODATION payments.
In most cases, residents pay for the majority of these charges, which cover the cost of food, utilities and providing accommodation for residents.
DAILY LIVING expenses.
These expenses consist of day-to-day living costs just like when living at home, such as breakfast, lunch, dinner, morning and afternoon teas, linen, laundry, lighting, heating and cooling, amenities, room cleaning, entertainment, excursions and care costs such as nursing and personal care.
This is partly covered by payment of the Basic Daily Fee (BDF), a standard contribution that all residents pay.
The BDF is currently set by the Government at 85% of the single basic age pension, indexed twice yearly at the same time as changes to the age pension. Residents in financial hardship can apply to the Government for help paying the BDF.
This is a payment to assist with the capital costs of building, landscaping, furnishing, maintaining and providing accommodation in the residential care facility, just like at home.
The Accommodation Payment prices vary to reflect different room sizes, amenities and locations.
Residents can choose to pay their Accommodation Payment as a refundable lump sum deposit, known as a Refundable Accommodation Deposit (RAD), an equivalent periodic (daily) payment, known as a Daily Accommodation Payment (DAP) or a combination of both.
These methods of payment allow a direct conversion between the DAP and the RAD, using the Maximum Permissible Interest Rate (MPIR). The formula to calculate the DAP from the RAD is to multiply the RAD by the MPIR and divide by 365 days. The MPIR is set by the Government and, at 1st October – 31st December 2020, is 4.1%. It is updated by the Government every three months.
If a resident chooses to make a combination payment, the formula to calculate the DAP payable from the RAD is to multiply the unpaid balance of the RAD by the MPIR and divide by 365 days.
Example: if the full RAD amount is $500,000 and a resident wishes to pay $300,000 of it as a refundable deposit then the DAP is $22.47 per day, determined as follows using an MPIR of 4.1%.
(500,000 – 300,000) × 4.1% / 365 = 200,000 × 4.1% / 365 = $22.47
If a resident pays by a combination of RAD and DAPs, they can choose to have the DAPs drawn down from the RAD. If they enrol in a Peace of Mind Plan, then certain other daily payments, in addition to the DAPs, can be drawn down from the RAD. If any amounts are drawn down from the RAD, the amount of the DAPs will increase to compensate for the decreasing RAD balance, using the MPIR.
Residents can also top-up and increase their RAD payment to reduce the DAP payment.
Please enquire about our Peace of Mind Plans for security, flexibility and best value in methods of payment.
Residents have up to 28 days from entering care to choose which method of payment they prefer. Until the method of payment is decided, they must pay DAPs unless and until a RAD is paid. Daily payments are paid one month in advance.
The Government assesses and assists those resides who do not have sufficient means to pay their accommodation payments. Fully- and partly- supported Residents (full and part pensioners) may be eligible for the Government’s Accommodation Supplement payment.
If a resident’s assets are between $50,500 and $171,535.20 (-), the resident can be means tested and may be required to pay a lesser Accommodation Contribution, rather than an Accommodation Payment. Like the Accommodation Payment, an Accommodation Contribution can be paid as a refundable lump sum deposit (the Refundable Accommodation Contribution or RAC), periodic (daily) payments (the Daily Accommodation Contribution or DAC) or a combination of both. If a resident chooses a combination payment, the DAC can be deducted from the RAC. The actual Accommodation Contribution amount is assessed and advised by the Department of Human Services (Centrelink).
The Government will either pay the full or a part amount of the Accommodation Supplement, depending on the resident’s assessed financial circumstances.
The Means Tested Amount (MTA) is the contribution that residents may be asked to pay towards to the cost of their accommodation and care. It is calculated through asset and income tests.
A resident’s contribution is currently capped to a maximum of $28,087.41 annually to a lifetime maximum of $67,409.85. This will be assessed and calculated by the Department of Human Services through Centrelink.
This is different to the situation prior to 1 July 2014, where only an asset assessment was used to determine a resident’s contribution towards accommodation costs, and only an income assessment used towards their ongoing costs of care.
Centrelink will calculate the daily MTA essentially as follows:
The daily income tested amount is 50 cents per dollar above the ‘assessable income free area’ (as at 1st October – 31st December 2020 this is $27,840.80) and divided by 365.
17.5% of assets between ‘first asset threshold’ of $50,500 and the ‘second asset threshold’ of $171,535.20 plus
1.0% of assets between ‘second asset threshold’ of $171,535.20 and the ‘third asset threshold’ of $413,605.60, plus
2.0% of assets above the ‘third asset threshold’ of $413,605.60.
Divide the sum of a), b) and c) by 365.
The total sum of 1 (from Income) and 2 (from Assets) is the daily Means Tested Amount.
The MTA is collected by providers but is wholly paid through to the Government.
Selected Regents Garden facilities have been approved to offer Extra Services, which is where residents are provided with higher standards of accommodation, services and food. For this, an additional Extra Service Amount is payable by residents. Please look for the “Extra Service + PLUS” logo for suites where an Extra Service Amount applies.
The Extra Service Amount has been approved by the Department of Social Services. The Extra Service status does not affect the care provided to residents, as all facilities are required to meet set care standards for all residents.
Please note that this is for general information only and you should speak to your advisors regarding your specific circumstances.
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