The recent Retirement Income Review* examined all aspects of Australia’s retirement system and concluded that it provides well for the needs of the vast majority older Australians, but it is complex and not well understood. In particular, there is a real lack of understanding and engagement with issues such as aged care.
As a young woman I recollect my mother in-law telling me that as you get older, you really don’t feel any different inside. She sometimes caught herself reflected in a window or mirror and instinctively thought “who is that grey-haired lady?” Perhaps this reluctance to recognise our own ageing process is why so few of us take the time and effort to think about how we can continue to live a good quality of life as we age.
People are often unaware of the extensive range of health and aged care services available to older Australians, especially directed to assist ageing at home. These services are heavily subsidised and are usually means-tested to suit each person’s financial situation.
A lack of knowledge about aged care services and their cost often means many older Australians do not maximise their quality of life in retirement. There is a reluctance to spend down retirement savings for fear of the costs of these services in later years, yet most people’s expenditure does not increase significantly during retirement
Understanding the options and the costs involved in aged care not only gives peace of mind but allows you to plan your future financially. In this brief article I will outline some of the support available for aged care. For most people this is support for ageing at home, as only around 20% of Australians over 80 live in residential aged care.
Aged care services include:
The Commonwealth Home Support Program
This program provides low-level support at home. It is designed for people who are generally able to manage but just need some help with daily tasks. Services include access to nursing, meals, home modification and transport. People needing this service apply on-line through My Aged Care and an assessor from the Regional Assessment Service will visit to determine suitability for this program. Care is not formally means tested. People may pay a co-contribution payment, which varies based on the services required and the fees set by providers.
Home Care Packages
These packages provide higher-level home support for those with more complex care needs. The program allows people to stay at home for as long as possible by subsidising in-home services and services to help stay connected with the community.
People wishing to apply for a Home Care Package register with My Aged Care and are then referred for a comprehensive assessment by an Aged Care Assessment Team. The assessor will recommend one of four levels of packages based on the person’s care needs. These are basic, low, intermediate or high packages which range from providing just a few hours per week to a daily schedule. Once a package is approved, you choose a provider, and the government then pays the provider a subsidy to arrange the package of services you require.
Home Care Packages range in value from $9,026 at Level 1 to just over $52,378 at level 4, which includes administrative costs. Due to the government subsidy the basic fee for consumers is far less ranging from $9.72 per day ($3,548 annually) for level 1 care, to $10.85 per day ($3,960 annually) for a level 4 package. Full pensioners and people with an income up to $28,101 do not pay any income-tested care fee, but those on higher incomes may be required to pay an additional income-tested care fee of up to a maximum of $31.14 per day.
There are often waiting times involved in applications for Home Care Packages. Individuals with higher or more urgent needs are prioritised, but others may have to wait some months to receive a package.
Residential Care
Residential care provides full-time care and accommodation for people who are no longer able or willing to live independently. All residents pay the basic daily fee (set at 85 per cent of the single base rate of Age Pension) to cover daily living costs, such as meals, cleaning and laundry. Above a certain income level, residents may also be required to pay a means-tested care fee and/or fully or partly cover their accommodation costs.
Where means-tested care fees are levied, the value of the family home is capped, but will not be included in the assets test if a partner, dependent child or long-term carer continues to live there. Should the property be sold, the full value is included in the means test.
Costs for residential care accommodation can be paid as a refundable lump-sum deposit (RAD), as a non-refundable ongoing daily accommodation payment (DAP) or a combination of both. Increasingly, people are choosing to pay their accommodation fees daily, rather than as a lump sum. In 2017-18, around three-quarters of aged care residents paid their accommodation fees by either a daily fee, or a combination of the daily fee and the refundable deposit.
There are both annual and lifetime caps on means-tested care fees for in-home and residential care to contain costs for those who may require such services for long periods of time. The current lifetime cap on income-tested care fees is $68,013, however less than 1% of age care users ever reach this cap.
People have a range of options for funding aged care, depending on their total means and how their assets are invested. Currently a large proportion of in-home and residential care recipients are full-rate age pensioners who meet care costs from this income. Private income streams are also used by drawing down financial assets such as superannuation or, increasingly, by accessing housing assets through equity release.
We would love to hear your views on the funding of age care and the experiences you have had. You can make your comments below.
^Deborah is a Professorial Fellow at Monash University and a member of the Reserve Bank of Australia Payments System Board. She is also a Non-Executive Director of SuperEd. In 2019 Deborah was appointed by the Treasurer Josh Frydenberg to the 3-member panel for the Retirement Income Review.
More details on all of these matters are available at https://www.myagedcare.gov.au/
* Retirement Income Review, The Commonwealth of Australia the Treasury, July 2020. (All data in this article unless specified otherwise are drawn from the Review or the My Aged Care website)
I thought the NDIS was to help people in need.
It just seems to be a job creation scheme for administrative Jobs.
Hundreds of privately run companies/offices springing up everywhere with people being employed to fill in forms and not help people in need.
How much of each $100 goes into actual care for patients and how much for into administration.
It’s all wrong.
It’s privatisation of Medicare by stealth
My father is currently in aged care and has reached the lifetime cap in Vic.He was getting home care in S.A when in his own home.While sorting through his stuff when he moved to Vic. i found a account for home care which stated he has paid nearly $10k of asset tested care fees which i believe that has not been counted in the lifetime cap he has reached.I have spoke to My Aged Care about this and they say that it has been counted in with all his fees but i have reason to believe that it hasnt.I have all recipts for all his aged care in Vic. and when i add them altogether they equal the cap without the 10k he has paid for Home care.They are telling me that he is owed nothing for the overpayments.Just
wanting to know if there is somewhere i can turn to to seek refund of this money as they say nothing is owing to him.I have letters from them stating he has reached the cap but all this was paid while in aged care.Any help on this matter would be great as i dont know
where i can turn as My Aged care says “Sorry mate but nothing is owing to you” PLESAE Help me if you know where i can turn to.
Steve, I have worked in aged care for over thirty years. If you feel that your means tested contribution has exceeded the amount of approx $68,000 then I would go to your local Federal member and register your concern and ask heor she to point you in the right direction to get your feels clarified. I would otherwise ring the Dept of Health in Canberra and register your concern/complaint and ask them for followup and resolution.
An 87 yo friend on Level 4 Home care package is paying his provider over $30,000 per month ( after the Government subsidy is deducted by them ) which seems incredible and he will surely run out of cash and the provider will likely have to cease their services.
Are there financial / aged care consultants who could review his arrangements ?
My 91 year Mum has just been approved for a Level 3 Home Care Package. My Age Care says that the funding is coming within a month. My question is she’ll need a provider who will look after Mum in blocks of 4-6 months in different LGA’s, the family is sharing the love and caring for her. Is that possible?
Max, my understanding is that level 4 Home Care Package receives approx $52,000 a year from the Federal Government. On top of this if your a pensioner you will pay apprx. $3,000 plus a year, if part pension approx. $5,000 plus a year (Mean Tested fee included) and self funded retiree approx $13,000 plus (means tested fee included). If you proceed into residential care then any means tested fee paid is carried forward. In regards your fees, they can be taken out of the level 4 packages ( if provider agrees) if not all consumed in admin fees and care or you pay on top. You paying $30,000 a year for a level 4 is way above what I am led to believe should be paid. Go to your local member or ring the Dept. health to get clarity. I could be wrong but paying $30,000 a year for a Level 4 package does seem over the top.