Aged Care Costs
and Funding

Costs, Subsidies and Financial Assistance

As the Australian population continues to age, the demand for residential aged care is increasing. Residential aged care provides accommodation, personal care, and support services for older people who are unable to live independently in their own homes. However, many Australians are confused about the costs and funding of residential aged care, so we will discuss the various costs involved in residential aged care and how the government provides financial assistance to eligible individuals.

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Aged Care Costs

There are several costs involved in residential aged care.

These include:

• Basic Daily Care Fee (BDCF): The Basic Daily Care Fee is a fee that is charged to all residents of residential aged care facilities (nursing homes). The BDCF is designed to cover the basic care needs of residents and is calculated on a daily basis and paid monthly. This fee is a crucial component of the funding system for residential aged care in Australia and has been in place since 1 July 2014.
  
  The current BDCF from 20 March 2024 is $61.96 per day.
  
  The Basic Daily Care Fee covers a range of services including meals, cleaning, laundry, and personal care. It is important to note that the BDCF does not cover the cost of any extra services or amenities that a resident may require. These additional services, such as hairdressing or physiotherapy, are charged separately.
  
  The BDCF is an important component of the funding system for residential aged care in Australia. The Australian Government provides funding to residential aged care providers to help cover the costs of care for residents. This funding is made up of a range of fees and charges, including the Basic Daily Care Fee. The amount of funding (subsidies) provided to aged care providers is also based on the care needs of the residents they care for.
• Means-Tested Care Fee (MTCF): This fee is based on an individual's income and assets. The government assesses an individual's financial situation to determine if they need to contribute towards the cost of their care. Refundable Accommodation Deposit (RAD): This is a lump sum payment that is paid to the aged care provider as a deposit for accommodation. The amount charged varies depending on the room type and location of the aged care facility. The RAD is refunded to the resident or their estate when they leave the aged care facility.
• Accommodation Cost (RAD and/or DAP): This is the fee charged by the aged care provider to cover the cost of accommodation. The amount charged varies depending on the room type and location of the aged care facility.
• Additional Service Fee (ASF): Some aged care facilities offer additional services such as hairdressing, internet access, and leisure activities. These services may attract an extra fee.

It is important to note that not all residents will need to pay all of these fees. The amount of fees charged will depend on an individual's financial situation.

Aged Care Subsidies

The Australian government provides financial assistance to eligible individuals to help cover the costs of residential aged care.

The government offers two types of funding for residential aged care:

Residential Aged Care Subsidy: The government provides a subsidy to aged care providers to help cover the cost of care for eligible residents. The subsidy is paid directly to the aged care provider on behalf of the resident. To be eligible for the subsidy, residents must undergo an assessment by the Aged Care Assessment Team (ACAT). The ACAT will assess the resident's care needs and determine if they are eligible for the subsidy.

The amount of the subsidy paid to the aged care provider will depend on the resident's care needs and their financial situation. The government uses a means-testing process to determine the amount of the subsidy.

Financial Hardship Assistance Unit (FHU)

The Residential Aged Care System is designed to provide high-quality care for elderly individuals who require assistance with their daily living activities. However, there are certain circumstances where residents may experience financial hardship while accessing the services offered by the system.

To address this issue, the government has established the Financial Hardship Unit (FHU) to provide financial support to residents who are experiencing financial difficulties.

The FHU is a unit within the Department of Health and Ageing and is responsible for providing financial assistance to aged care residents who are unable to pay for their accommodation costs. These costs include the basic daily fee, the means-tested care fee, and the accommodation payment. The FHU offers various forms of financial support, including interest-free loans, payment arrangements, and debt waivers.

To be eligible for financial assistance from the FHU, residents must meet certain criteria. Firstly, residents must demonstrate that they are experiencing financial hardship and are unable to pay their aged care fees. Secondly, residents must provide evidence of their financial situation, including their income, assets, and liabilities. The FHU will then assess the resident's financial situation and determine the appropriate level of financial assistance.

The financial support provided by the FHU can make a significant difference in the lives of aged care residents who are experiencing financial difficulties. For example, interest-free loans can be used to cover accommodation payments, allowing residents to remain in their chosen aged care facility. Payment arrangements can also be made to help residents manage their aged care fees, ensuring that they are not overwhelmed by the costs of care.

In addition to providing financial support, the FHU also offers advice and guidance to residents who are experiencing financial difficulties. This can include information on accessing other forms of financial assistance, such as the Age Pension, as well as advice on managing debt and budgeting.

Many aged care residents may not be aware of the FHU or may not know how to access financial assistance. This highlights the importance of raising awareness of the FHU and ensuring that information on financial support is readily available to residents and their families.