No question about it—aged care is complex. It can be a minefield for prospective residents and their families to navigate.
Rather than getting simpler, as of 1 July 2014, a bunch of new reforms will be introduced. Here are three guiding principles to help you navigate the changes.
Principle 1 – aged care is about more than numbers
Aged care is not a purely technical prospect. First and foremost it is an emotional and psychological dilemma. In my experience, when advising families, it is rare that everyone agrees on everything—from the standard of the facility through to geographic location or the type of care.
In terms of financial strategies, there is no ‘one-size-fits-all’ solution. You will need to compare multiple strategies to help clients to reach a decision. One of the difficulties I’ve also found is that decisions made by family members can sometimes be in their own best interest and have little to do with what’s best for the prospective resident.
Principle 2 – step back and get across the detail
The need for objective, quality advice in order to understand the changes to Government aged care rules is more important than ever.
Unfortunately, when it comes to being up-to-speed regarding aged care and Centrelink rules, it’s going to require you setting aside time to study and model different outcomes. In addition to an understanding of aged care and social security regulations, advisers should be across entitlements for veterans and the overlay of taxation, superannuation, and retirement income stream rules.
Principle 3 – for better or worse, make the most of the rules
As we approach 30 June 2014, I’m being asked more and more often whether residents will be better off under the new rules or whether they should bring forward plans to move into aged care.
In the modelling of the income-tested fee under the current rules and the application of the new means-tested fee post-30 June 2014 (see below), the cost of care will generally be more expensive under the new regime. The annual and lifetime capping of the means tested fee will make it more affordable for some people, particularly those who are generally healthier and have greater personal wealth. But it is critical advisers fully model the financial implications of multiple scenarios under both regimes in order to make the best decision.
The new rules do present some opportunity for financial strategy. By way of example, since only a portion of the principal residence will be assessed (if not occupied by a protected person), there may be more reasons than under the current regime to retain the principal residence. But again, I stress the importance of crunching the numbers on a case-by-case basis.
Aged care changes in brief
The ‘Living Longer, Living Better’ aged care reforms, which were announced in April 2012 and are scheduled to begin on 1 July 2014. Full details are at www.livinglongerlivingbetter.gov.au.
It is important to note existing residents will be grandfathered under the current rules and new rules will only apply to individuals who enter residential aged care on or after 1 July 2014. Major changes are summarised below.
|
|
Before 1 July 2014 |
From 1 July 2014 |
| Aged Care Assessment Team (ACAT) | ACAT assessments distinguish between high or low care. | No distinction between high and low-level care. ACAT will assess all forms of care. |
| Upfront accommodation costs |
Two options:
Costs determined by assessable assets. |
Costs known as:
Residents have 28 days on entering a facility to decide payment method. (Costs determined by a resident’s assessable income and assets.) |
| Retention amounts | For accommodation bonds, a facility may deduct a ‘retention amount’ each month for up to five years. | Amounts no longer to be deducted from RADs. |
| Ongoing care fees | Fees include:
|
Fees include:
|
| Home assessment | Home not assessed for income-tested fee. | For the purposes of paying a RAD or DAP, the full value of the home is included as an asset, unless an eligible person remains in the home. However, for means tested care fee purposes, the assessable value of the home is capped – up to a maximum of $144,500 (indexed to approximately $153,905 in July 2014). |
