Five Key Numbers That Determine How Much You’ll Pay for Aged Care

 

As the population ages, more Australians are exploring aged care options, only to find that navigating costs can be complex. The expenses associated with aged care are influenced by several financial factors, and understanding these can help families plan better. Here, we break down the five numbers that directly impact how much you’ll pay for aged care.

1. Your Income
One of the main determinants of aged care costs is income. In Australia, income includes pension payments, rental income, and returns from investments, such as shares. When entering residential aged care, the government assesses your income to determine your contribution to care costs. Typically, the more income you have, the higher your expected payments.
● Basic Daily Care Fee: This fee is set by the government and covers day-to-day services like meals, cleaning, and personal care. It’s fixed for everyone but can be adjusted based on income thresholds.
● Means-Tested Care Fee: This is an additional fee based on your income and assets, and it’s one of the most variable aspects of aged care costs. High-income individuals can expect to pay more than those on lower incomes.

2. Your Assets
Assets include any real estate, superannuation, savings, and personal property you own. When assessing assets, the government excludes the primary residence if a spouse or dependent lives there, but it still considers investment properties and other valuable assets.
● Refundable Accommodation Deposit (RAD): This is a lump sum payment made for accommodation in an aged care facility, based on asset valuation. If you cannot afford to pay the RAD in full, you may have the option of a Daily Accommodation Payment (DAP), which is essentially a rental-style payment.
● Asset Threshold: Those whose assets fall below certain thresholds may qualify for government support, reducing their RAD or DAP, while those above these thresholds may need to contribute more.

3. The Cost of the Facility
Aged care facilities in Australia offer a range of services and amenities, from standard care to luxury accommodations. The cost of a particular facility often depends on its location, the level of care required, and the quality of amenities provided. High-demand areas or facilities with specialised care programs, like dementia care, may come with higher costs.
● RAD/DAP Amounts Vary: Luxury facilities or those with premium amenities will charge a higher RAD or DAP, making facility selection one of the largest factors in aged care cost variation.
● Extra Service Fees: Some facilities also charge extra service fees for additional amenities like upgraded rooms, entertainment options, or fine dining. Be sure to review these fees carefully, as they can add up quickly.

4. Government Support Eligibility
The Australian government provides various subsidies for aged care based on means testing. Your eligibility for support depends on your income, assets, and the level of care you require. Subsidised care can significantly reduce costs, but the exact reduction varies depending on financial assessments.
● Home Care vs. Residential Care: Government support is available for both home care and residential care, but the type of care you choose will impact the amount of funding you receive.
● Means-Tested Fee Cap: There is a cap on how much you can pay for means-tested fees each year and over a lifetime. For individuals with long-term care needs, this cap can limit out-of-pocket expenses.

5. Length of Stay
While it may seem like a simple factor, the length of your stay in an aged care facility plays a major role in costs. For instance, opting to pay a Daily Accommodation Payment instead of a lump-sum Refundable Accommodation Deposit can result in higher cumulative costs over time.
● RAD Refunds: If you choose to pay a RAD, any unused portion is refundable to your estate, making it potentially more cost-effective if your stay is shorter.
● Daily Fees Add Up: The Basic Daily Fee and Means-Tested Fee are recurring costs that accumulate monthly. For those anticipating a lengthy stay, factoring in the long-term total can provide a realistic picture of expenses.

Planning Ahead for Aged Care Costs

Planning for aged care costs is crucial, as the expenses associated with care can impact both your financial security and that of your family. Consulting with a financial advisor can help determine the best payment structure, whether you should pay a lump sum or daily payments, and how to maximise government subsidies.

Understanding these five numbers—your income, assets, facility costs, government support eligibility, and length of stay—can make a substantial difference in managing aged care expenses. By preparing ahead, you can find options that balance quality of care with affordability, ensuring a comfortable and secure future.