Nursing home costs (or aged care facilities as they are now known) are made up of the following components: accomodation costs, daily fee, care fee and extra fee/service fee. The accommodation cost is determined once an income and assets assessment is completed. This is arranged through either the Department of Human Services or Department of Veteran Affairs.
A resident will be classified as one of the following: low means, moderate means or high means.
Low means residents do not have to pay any initial costs for entering residential aged care. Low means residents are fully subsidised by the Australian Government.
Moderate means residents do have to pay a refundable accommodation contribution (RAC) and can be partially subsidised by the Australian Government.
High means residents are required to pay a Refundable Accommodation Deposit (RAD) and receive no subsidies from the Australian Government.
Explaining the different fees that make up nursing home costs
Many of these fees are set by the government, while other costs are under the direct control of the nursing home themselves.
The objective for any person going into aged care should be to find a good home to fit your needs, while maximising your government benefits (Centrelink pension) and minimising the nursing home costs.
As this is quite a complex area, getting aged care financial advice is the best course of action, however it’s also important that you understand the fees you must pay.
We have set out below a brief outline of the nursing home fees:
Refundable Accommodation Deposit (previously known as an Accommodation Bond)
The RAD is an upfront deposit that covers ‘rent’ of your room for as long as you need it. Once set, it won’t change unless you leave. The RAD is refunded once the resident leaves the age care facility. The Government guarantees its return. The amount of the RAD is set by the residential care facility. Generally, it will be around $550,000, although it can be higher, but only if the Government provides approval. The residential care facility must advertise the amount of the Refundable Accommodation Deposit on the My Aged Care Government website (make sure you check this as well!).
If you’d like to understand more and options on how to pay for it see our article on the Refundable Accommodation Deposit.
Basic daily fee
- In simple terms this covers the daily living costs such as meals, heating/cooling laundry etc.
- This fee is set by the government and is the same for all.
- The fee is reviewed periodically by the government and is set at a rate equivalent to 85% of the aged pension. You can see current rates at The Aged Care Pricing Commission.
Means tested care fee
- This fee generally covers the ongoing cost of nursing care for a resident such. This includes specialist staff, equipment etc required for good quality care.
- The calculation of the means tested care fee is based on a formula set down by the government. This takes into account assets (including the family home) as well as income.
- The government pays/subsidises the nursing home costs to ensure that residents get the appropriate level of care, but looks to the resident to fund part of the nursing home fees where it is deemed that they have sufficient assets or income to do so.
- This is one area where advice from an aged care specialist advisor can save you money.
Extra service fee/additional service fee
- This is a fee which is set by the nursing home based on their ongoing costs. This could also cover additional or extra services that they offer.
- We are starting to see this fee introduced more frequently as nursing homes seek to cover their operating costs.
- Examples of additional services could be choice of meal, a glass of wine with dinner, hairdressing etc.
- It is always wise to ask for full details of the nursing home costs. Especically details around the extra service fee and the additional service fee so you know what you are up for.
It may seem that there is not much room to move in terms of meeting the nursing home fees outlined above. However, obtaining aged care in Melbourne advice can be very valuable in setting up the right asset and income structure to ensure that nursing home costs are kept as low as possible while pension entitlement is maximised.
We have written another article entitled ‘Do I need to sell the family home’ which can help you understand more options relating to how to meet the costs of nursing home care.
It is a very complex financial problem that always benefits from an expert doing the figures and working within the rules to find the best possible approach.
If you would like to talk to someone and get advice on the best approach for you, we would be happy to assist with these complicated financial calculations.
Claudia Rigoni from Aged Care Specialists Vic
Authorised Representatives of Synchron AFSL 243313