How to Reduce the Fees
at an Aged Care Home?

Introduction

As we age, our healthcare needs usually increase and sometimes become more complex, and at some point, we may need to consider entering a residential aged care facility. While the thought of leaving your home and moving to an aged care home can be overwhelming, it's important to know that there are ways to reduce the cost of entry.

Here we will discuss some strategies you can use to minimise the cost of entering a Commonwealth regulated aged care home.

Understand the Fees and Charges

One of the most important steps to take when considering aged care is to understand the fees and charges associated with permanent admission.

Commonwealth regulated aged care homes charge fees based on the level of care you require and your financial situation.

There are four main types of fees you'll need to consider:

• Basic Daily Care Fee (BDCF) - Calculated by the Commonwealth - Fixed and Mandatory - Indexed to the Full Single Pension.
• Means-Tested Care Fee (MTCF) - Calculated by the Commonwealth - based upon the residents assets and income.
• Refundable Accommodation Deposit (RAD/DAP) - Arbitary and Negotiable.
• Additional Service Fee (ASF) - Arbitary, Optional and Negotiable.

To reduce aged care costs, you should completely understand what category of fees exist; what the purpose of the fees are required for; and are all the fees applicable to the individual resident.

Reduce the Means Tested Care Fee

The means-tested fee is based upon the income and assets of the aged care resident, so it increases as the resident’s assessable assets and income increase.

It is possible to lower the daily means-tested fee by:

• Gifting to family members ($10,000 per year allowable, maximum $30,000 over rolling five-year period)
• Prepaying Funeral Arrangements ($14,000 maximum).
• Legitimate Expenses (chair, personal communication devices etc)

It's important to note that reducing assets solely for the purpose of qualifying for admission to an aged care home is not considered legitimate. The Commonwealth has strict rules around asset transfers and can impose penalties if they suspect any wrongdoing. It is a good strategy to "always swim between the flags". Therefore, it's essential to seek experienced advice and ensure that any asset reduction strategy emplyed is legitimate and legal.

Negotiate the Refundable Accommodation Deposit (RAD)

The Refundable Accommodation Deposit (RAD) to secure a room at an aged-care facility can be as range between $300,000 to $1,300,000.

In many cases these RADs are negotiable, and at times can be greatly reduced. The willingness of an aged-care facility to negotiate on RADs depends very much on the demand and supply of rooms at their facility. It is possible to negotiate to pay some or all of the daily fees from the RAD to minimise the impact on a person’s cashflow - this is known as "RAD draw-down".

In the past, we have reduced a RAD by offering to pay the upfront lump sum rather than a daily accommodation payment (DAP) equivalent.

Negotiate the Additional Service Fee (ASF)

Additional Service Fees can range from $10 to $110 per day. Discuss the ASF with the aged care provider - if the resident is not using all the services it is possble to negotiate for a reduction in the ASF.

Explore RAD Payment Options - Lump Sum vs Daily Payment

With interest rates on unpaid RADs now set at 7.46 % pa, it is usually prudential to pay as much of the lump sum RAD upfront, thereby minimising the interest component.

Any investments that are not earning more than this rate per annum (after tax), should be considered for sale, to enable the RAD to be paid in full.

The exception may be the sale of the existing family home - which can be used as a rent generating asset which can offset the daily accommodtion payment (DAP) and also benefit from capital increasing value.

Plan Ahead for Potential Aged Care Admission

Review the current financial situation and identify areas where you may be able to cut costs to save money for aged care.

You should also consider choosing an aged care home that requests a lower accommodation payment.

Apply for Financial Assistance and Hardship Payments

If you're struggling to cover the costs of aged care, you may be eligible for financial assistance. The Australian Government provides financial support to eligible individuals to help them pay for their aged care expenses.

Seek Experienced Advice

One of the most important steps you can take when planning to enter an aged care home is to seek professional advice.

An aged care specialist can help you navigate the complex aged care system and ensure that you are making informed decisions about the financial aspects of the transition.