Aged Care in Australia September 20, 2014

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Aged Care Over 1 million older people receive some form of care In Around 616,000 people over 70 received HACC services Around 70,000 received intensive Community Care services Around 215,000 people received permanent Residential Care Around 69,600 veteran’s received VHC and 31,400 received Community Nursing By million will receive aged care services in the community 700,000 (20%) in a residential care facility 9 million people aged 65+

Aged Care Where will the 2.8 million people live to access: Care? Social Interaction? Meals? Personal assistance?

Will you access care here?

Or here?

Get an ACAT Respite$47.15 pd for up to 9 weeks a year Home Care$9.70 pd + Care contribution Residential CareEntry costs – Lump sum or daily payment Ongoing costs - $47.15pd + Care Contribution + Extra services (optional) Access to Care Packages and Respite can be crucial to stay at home The costs of Aged Care

Home Care – care contribution Is a formalised process from 1/7/ c per dollar above $25,118 (single rate) Full Pensioners and equivalent ~ basic fee (17.5% pension - $9.70pd) (up to $25,118 single) no care contribution Part Pensioners and equivalent ~ basic fee + care contribution ($25,118 to $47,985 single) capped $5,070 p.a Self Funded retirees and equivalent ~ basic fee + care contribution (over $47,985 single) capped $10,140 p.a

Dorothy is 78, she is a part- pensioner. She currently receives a CACP and pays $9.70p.d/$3,540.50p.a Assets House $750,000 Cash $190,000 Contents$ 5,000 Income stream $5,000p.a Basic Care Fee $9.70p.d Care Contribution $4.64p.d Total $5,223p.a Case Study

If Dorothy kept $30,000 in cash and invested $160,000 via an insurance bond in a trust Basic Care Fee $9.70p.d Care Contribution $0.99p.d (reduced $1,333p.a) Total $3,854.40p.a Income Cash $30,000 - $1,050p.a Trust $160,000 - $0p.a Other income - $5,000p.a Pension - $21,491.80p.a (increase $2,665p.a) Total - $27,541.80p.a Total first year saving $3,997 Case Study

Residential Aged Care

Residential Care Entry costs (Accommodation payments) subject to Market Price. Resident can choose payment method: Lump Sum (Refundable Accommodation Deposit) Daily Charge (Daily Accommodation Payment) Combination RAD is returned in full on leaving the facility My Aged Care Website and Hotline Phone

How much will you pay? Accommodation Prices Accommodation Payments have 2 Tiers: Tier 1 for payments up to$550,000 (RAD) Tier 2 for accommodation payments above the Tier 1 threshold. Prices require government approval. Published on My Aged Care Website, Facility Website, Brochures together with facility features. Can pay less than the published RAD but not more. Be careful! Cant pay or don’t want to pay the full RAD? Remainder will be paid as DAP

Calculating the daily payment RAD X MPIR = DAP 350,000 x 6.69% = 23,415 / 365 = $64.15pd Note the interest rate changes to 6.63% from 1 October 2014

How much will you contribute to your care? Everyone pays the Basic Daily Fee$47.15 pd (85% of basic age pension) Extra services are optional $10 pd to $100+pd Ongoing Care costs are subsidised by the government. The extra amount someone contributes to their ongoing care costs is based on their assets and income. Assets below $45,500 and Income below $25, no contribution

Care Contribution Formula 50c per dollar above $25, plus 17.5% of assets between $45,500 - $155, plus 1% of assets between $155, $376, plus 2% of assets above $376, Minus Accommodation Supplement ($53.04) Capped at $25,349p.a/Cost of Care

Supported Residents Common Misconception: “If I don’t have any money, I won’t get in!” Assets below $45,500 and Income below $25, = Fully Support Resident. Once assets or income exceed the threshold we use the following formulae to determine the amount the resident can pay. 50c per dollar above $25, plus 17.5% of assets between $45,500 - $155, Govt will pay the difference between the resident contribution and up to $53.04 as supplement.

Supported Residents Jack and Mary are full pensioners – Jack is needing residential care Assets = House$600,000 (exempt asset by Mary) Cash at Bank $180,000 Contents $ 15,000 Total$195,000 divided by 2 = $97,500 Income is less than $24, = $0 (illness separated rate) Assets $97,500 - $45,500 = $52,000 X 17.5% = $9,125 $9,125 + $0 = $9,125/364 = $25.00 p.d Daily Accommodation Contribution (DAC) Or RAC $136,398

Supported Residents Before Jack moves into residential care: –Buys two Funeral Bond $24,000 –Gifts $10,000 to his children Assets (half share) = $80,500 Income is less than $24, = $0 Assets $80,500 - $45,500 = $35,000 X 17.5% = $6, $6, $0 = $6,141.83/364 = $16.83 p.d Daily Accommodation Contribution (DAC) Or RAC $91,806 Saving $2, paa ROI of 17.5%

Non supported residents Shirley is 84, full pensioner. She currently receives a CACP and pays $9.70p.d/$3,493.05p.a Assets House $550,000 Cash $48,000 Contents $2,000 Do I have to sell my home?

Shirley – keep or sell the house? Accommodation payment $300,000 RAD or $54.99 DAP But the house is already sold – can I do anything? RAD Option (sell house)DAP Option (keep house) RAD $300,000DAP $54.99p.d BDCF $47.15p.d Care Contribution $22.14p.dCare Contribution $1.37p.d Out of Pockets $50p.w Total $27,890.43p.aTotal $40,381.14p.a Income Pension $747.57pfnPension $854.30pfn 4% 4% $1,920p.a Total $31,356.80p.aTotal $24,131.80p.a + Rent?

Shirley case study Shirley decided to sell the house and pay a $300,000 RAD. Can her situation be improved? Total first year savings of $4,166 RAD Option (sell house)$160,000 Bond in Trust RAD $300,000 BDCF $47.15p.d Care Contribution $22.14p.dCare Contribution $18.33p.d Out of Pockets $50p.w Total $27,890.43p.aTotal $26,499.12p.a Income Pension $747.57pfnPension $854.30pfn 4% 4% $5,520p.a Total $31,356.80p.a Surplus $3, Total $27,731.80p.a Surplus $1,232.68

Care Contribution is income and asset tested, people can be asked to pay more than their cash flow. No daily limit, annual limit of $25,349 and lifetime limit of $60,838 Some residents will need to pay for a period of time, stop paying for the remainder of the year, start paying again and stop paying once they hit their lifetime limit. Self funded retirees

Keep the former home and rent Use of Trusts / Insurance Bonds Long Term Annuities Funeral Bonds Gifting Timing of entry Cash flow assessment Estate Planning Financial Strategies

Aged care is more than just a nursing home or hostel More living options are developing – the financial and legal arrangements will differ – advice will be important Home Care packages are subject to a formal income test Residential Care fees generally cost more post 1/7/14 Supported residents pay a lower entry cost Costs are: entry (RAD,DAP); ongoing BDF $ Care contribution + Extra Services Care contribution. Your assets and income determine how much you pay toward your care Its complicated Financial advice makes a significant difference Summary

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