Subsidised aged care – how it works and why you need solid financial planning

Most of us don’t like to think about the prospect of getting older and needing to consider aged care options. In an ideal world, we see ourselves growing older in our own homes and enjoying life well into our senior years. Our first exposure to options for aged care often comes when an elderly parent begins to face challenges with independent living, and if this happens suddenly, we can be faced with the added stress of having to navigate the aged care maze in a hurry. Understanding how subsidised aged care works, and how it’s funded, can help you be prepared and give you greater awareness and control over your choices as you age

Subsidised aged care – how it works

There are three types of subsidised aged care options to consider if you or a parent is experiencing difficulty living independently at home.

In-home care

The Government has two schemes available to help people who want support to help them stay in the family home. The Commonwealth Home Support Programme (CHSP) offers financial subsidies to help people access support for everyday tasks to help them live independently at home. This covers things like help with daily chores, home maintenance, transport and social connection, and personal care. The government subsidises the cost of care through approved service providers. The provider you choose will help you identify your needs and work out the best way to use your funding package. They will also manage the package for you if you wish, but bear in mind this may eat into your funding.

Home Care Packages (HCP) are the second type of subsidised in-home care. The system is structured in a similar way as the CHSP, with approved service providers and four levels of subsidised care based on level of need, but HCPs are designed to assist people with more complex needs than can be supported by the CHSP.

Short-term care

Subsidised short-term care is available to support you in situations such as helping you transition from hospital back into the home, or with respite care if you are responsible for caring for your partner or an ageing family member. As with in home care, the level of support will vary subject to your needs, but in this case it’s only available for a set period of time.

Residential aged care

For people who can no longer live independently at home and who require more than short-term support, government-subsidised residential aged care homes provide accommodation and 24/7 care. These residential homes are government-regulated and independently accredited through the Aged Care Quality and Safety Commission (ACQSC). The government pays the subsidy directly to the aged care home, which must maintain its accreditation in order to continue to receive funding.

As with in-home and short-term care, access to residential aged care is based on an assessment of need.

Subsidised aged care – how your eligibility is assessed

Whichever type of support you need, your eligibility must be assessed before you can access care. In most Australian States and Territories that assessment will be conducted by the Aged Care Assessment Team (ACAT), but in Victoria it’s known as the Aged Care Assessment Service (ACAS). ACAT/ACAS services are made up of medical and allied health professionals who are qualified to assess your physical, psychological and social needs in order to determine the level of support or care you require.

Once you’ve been assessed, and if you’re determined as being eligible for subsidised care, you will receive a letter that sets out exactly what level of support you’re approved for, and a list of local providers or residential homes in your area.

The level of assessment will determine the amount of government subsidy that applies to your situation.

Costs of subsidised aged care – your contribution

In Australia, no-one will be denied care on the basis that they can’t afford it, however no matter which type of care you want or need, you are expected to make a contribution towards the fees if you are able to. Aged care providers across all types of care set their own fees, and the level of subsidy is determined by your ACAT/ACAS assessment.

Fees for in-home care can vary significantly based on provider and type of service, so it’s important to shop around and inform yourself before selecting a provider. This is where your financial advisor can help.

For residential care, things are a bit more complicated. There are four main fees associated with residential aged care:

• Basic daily fee: this fee covers daily living expenses such as meals and cleaning. It is the same for everyone and is fixed at 85% of the base Age Pension (whether you receive the pension or not)
• Means-tested care fee: this fee applies to people who can afford it and is based on an income and assets test
• Accommodation fee: this fee can be charged by the aged care home to cover bricks and mortar and maintenance costs. How much you pay will depend on your financial situation as determined by your income and assets test. Depending on your circumstances, you may either have to pay the full amount, part of the amount, or the government will subsidise the payment up to a maximum amount.

If you’re required to pay the Accommodation fee, it is often paid as an upfront bond or Refundable Accommodation Deposit (RAD) in a lump sum (which is fully refunded to family members once you leave the aged care home). It can also be paid as a Daily Accommodation Payment (DAP), or by a combination of the two. If you have a family home and other assets, it’s worth talking to a financial advisor about the best way to meet this cost. While selling the family home may give you the lump sum required to cover the RAD, it may have other impacts on your income assessment that will affect other fees and your Age Pension.

• Fees for additional services: these are things like satellite television, hairdressing services, or other “extras” that aren’t part of the standard package.

In all cases, it’s important that you are aware of the different types of fees and how they will impact your financial and care decisions. It’s a complex maze, so be sure to write a list of questions to ask your financial planner to give you clarity.

Financial advice early will help you be ready

The range of services, requirements and payment options in relation to subsidised aged care is complex. Getting financial advice early can give you more control over your choices, and ease the emotional turmoil in situations when you’re faced with these decisions unexpectedly.

This is general information and does not consider your circumstances. Before acting on such information, you should consider the appropriateness of the information having regard to your personal objectives, financial situation or needs.

Creo Wealth Pty Ltd ABN 96 605 894 415 is a Corporate Authorised Representative (No. 1236172) of ClearView Financial Advice Pty Limited ABN 89 133 593 012 AFS Licence No. 331367 GPO Box 4232, Sydney NSW 2001

Over to you

We’d love to hear your thoughts and experience with subsidised aged care, so please share!