New Residential Aged Care Rules - World Class levels of Complexity
There is much about the new Aged Care rules that come into place on July 1, 2025 that we broadly support, but there are a number of matters that we have concerns about and have been waiting on additional detail before making comments. In the continuing absence of some of these details we have decided to "plunge on" regardless.
Our concerns chiefly center on the almost absurd level of complexity attaching to the calculation of the new residential aged care costs. Anyone who has had any contact with the sector in the past will have been "impressed" with how difficult it was to previously calculate both aged care costs. Now, the rules are becoming substantially more complicated and let me illustrate this by addressing some of the component parts.
First of all, let me set the scene by indicating that there are a number of resident groups - and allocations between between these groups are almost entirely driven by an individual's asset and income position - as denoted by their "Means Tested Amount".
1. The Fully Supported or "Low Means" group - these individuals will continue to pay only the basic daily fee (BDF) - effectively 85% of the Age pension.
2. Partially Supported group - these individuals will pay the BDF and a contribution towards their accommodation costs (RAC or DAC)
3. Everyone else, and this will include most self-funded retirees, will pay all or some of the following.
- The BDF
- A Retirement Accommodation Deposit (RAD) or Daily Accommodation Payment (DAP) equivalent, plus
- A Hotelling Supplement (HS) - 7.8% of assets above $238,000 or 50% of income above $95,000 subject to daily Of $12.55, plus potentially
- Non-Clinical Care Contribution (NCCC) - 7.8% of assets over $502,981 or 50% of income over $131,279 - capped at four years or $130,000 whichever comes first, plus potentially
- A Higher Everyday Living Fee (HELF) - these are fees individually negotiated with the aged care homes after entry into the home for additional services provided on top of normal care needs, such as newspapers, wifi etc.,
Now, bearing in mind that these new fees will result in regular, continuing payments by residents which will impact their assets and therefore "Mean Tested Amount":
1. The Act provides that fees will depend on the "daily means tested amount" - how this figure is calculated is addressed in Section 319 of the Act and takes up more than 3 pages. It is difficult to see how that is going to work well unless residents report movements in assets and income very regularly.
2. Many of the above figures are indexed twice per annum, including DAP but not DAC payments, and
3. Aged care providers will retain 2% per annum of any RAD for up to 5 years - calculated on a daily basis, paid monthly - and note that the maximum RAD which doesn't require approval has now risen to $750,000 and is now indexed (from $550,00 previously).
The result is a complex, continually moving feast which is ridiculously difficult to understand and plan for - particularly since most people only interact with Aged Care at relatively rare points in their life. Additionally, the Government has chosen to grandfather existing residents - so, you will have two sets of rules (actually three because different rules apply to retirees who entered care prior to July 1, 2014). Everyone underestimates the impact and administrative cost of continual Government grandfathering.
Why the complexity? We think there are two broad reasons
Firstly, there is an understandable desire to ensure that aged care remains a financially viable sector and this requires a greater contribution by those who can afford to do so. So, the nature of the fees reflect the broad complexity of the sector and there needs to a "finer grained" approach to means testing.
Secondly, the complexity suits politicians and also providers to some degree - and remember that both the major parties supported these changes - as it obfuscates a very significant increases in fees. The Government has been open in indicating that perhaps half of all future residents will pay more under the new provisions, but taking a more transparent approach would make it apparent just how significant the fee increases are for many, particularly self-supporting, retirees.
We are considering constructing a calculator to assist in the calculation but unlike our Age Pension calculator it just couldn't be free - complexity and maintenance cost means that it will need to be online and a subscription costs will apply. That's unless we decide that life is already too demanding!
We haven't forgotten Home Care - we will provide a summary shortly. The largest concern we would currently flag is around availability and charging rates - Home Care is basically in competition with NDIS for the same resources and NDIS is basically unaffordable in its current form.
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