Residential Aged Care for Low and Moderate Means Residents

In our previous article, Residential Aged Care, we looked at the costs of care for those with high means (assets above $178,839.20).  What about those with a lower level of assets? How can they afford Aged Care? Residents with low or moderate means will have their Age Care Accommodation supplemented by the Government so what does this mean and who is classed as a low or moderate means resident.

Firstly, it’s important to understand what assets are assessable by Centrelink for this purpose.  Generally speaking, any financial assets (super, cash, shares etc) are assessable at market value.  Gifts made above the Centrelink gifting limits are assessable as are personal assets such as cars, furniture, jewellery etc (albeit at fire sale values).  The resident’s home, (unless occupied by a protected person) will be assessed at the lower of market value and $178,839.20, for most people, automatically discounting them from Low or Moderate means classification.  In the case of a couple, who owns what is irrelevant, all assets are simply added up and divided by 2.

Where the resident has assets below $52,500, they will be considered to be of Low means.  Where the resident’s assets are between $52,500 and $178,839.20, they will be considered to be of Moderate means and once their assets exceed $178,839.20, they are considered to be of High means and will need to fund their own accommodation.

Income above a certain threshold will also be taken into account and can cause the relevant asset thresholds to be lower in some cases but for the vast majority of people it is simply a matter of assets.

When is the test applied?

A resident entering care is asked to complete a form to assist Centrelink in determining what their assets are.  A resident not in receipt of a Means Tested Pension will complete an S457 form, disclosing full details of their income and Assets.  A Resident in receipt of a Means Tested Pension who owns a home will complete an S485 form disclosing details of their home.  The form can be completed up to 120 days prior to entering care and should be completed based on the resident’s situation at the time of completing the form (this can be subsequently updated if circumstances change prior to entry).  If completed after entering care, the form should be completed based on the circumstances on the date of permanent entry.  A Means Tested Non Home Owner Pensioner is not required to complete a form, they will be assessed at the time of entry based on what records Centrelink already holds.

What if I don’t complete a form?

If, following a number of requests, Centrelink does not receive a form from a resident, they will not only be responsible for their full cost of accommodation, but also care.  This means that the facility will lose their Aged Care subsidy and on top of accommodation, the resident will pay up to $320 per day for care

So what do these classifications mean?

LOW MEANS Resident (under $52,500) A Low Means resident is not required to contribute anything to their care.  Instead, the facility will receive an Accommodation Supplement of up to $60.74 per day

MODERATE MEANS Resident ($52,500- $178,839.20) A moderate means Resident will pay a calculated Daily Accommodation Contribution (DAC) of between $1 and $60.74 per day.  The provider will have an equivalent amount deducted from their Accommodation Subsidy

HIGH MEANS Resident (over $178,839.20) will receive no assistance with their accommodation costs and will need to negotiate the cost with the facility.

Can I pay a lump sum instead?

Yes.  In our last article, Residential Aged Care, we explored how the accommodation cost published as a lump sum could be paid as a lump sum (RAD) or a daily fee (DAP), or a combination of the two.  A supported resident does not pay the published amount, but rather a calculated Daily Accommodation Contribution (DAC).  This daily fee can be converted to a Lump sum by multiplying by 365 and dividing by the Maximum Permissible Interest rate (MPIR) applicable at the time of entry.

So, a resident with a DAC of $25 per day, could reduce that amount to $0 by paying a Refundable Accommodation Contribution (RAC) of (25 x 365)/5% = $182,500.  Of course, the fact that the resident is supported means they probably don’t have that money at the time of entry. However, they could save 5% pa by using some of the money they do have to pay a partial RAC or, should their circumstances change in future, their partner vacates the house for example, they may be in a position then to pay a RAC.

What if circumstances change?

The amount of DAC payable by the resident is recalculated each quarter based on the relative calculation at that time and the resident’s assets.  Sometimes following entry to care, a resident’s financial circumstances will change significantly; this may come about due to a windfall (lottery, insurance payout, inheritance) but most usually because a protected person or spouse has now left the home, causing it to become assessable at $178,839.20.

In this case, the resident DOES NOT LOSE THEIR SUPPORTED STATUS, however the DAC will be recalculated and will increase up to the maximum $60.74 per day.  A Means Tested Fee may also become payable.

This can create a couple of undesirable outcomes.  Firstly, it is possible that a supported resident may find themselves paying more than an unsupported resident.  This could happen where a supported resident occupies a bed with a published cost of for instance $47.94 per day.  As a fully supported resident (due to limited assets and a home occupied by their partner), they would be paying no cost for their accommodation.  If their partner were to die, or move into care themselves, now the home is assessed against the resident at $178,839.20 and they could be asked to pay a DAC of up to $60.74 per day, $16 per day more than the published cost!

Secondly, let’s say the home is now to be sold for $1.5M.  The resident thinks well, if I’m going to pay more for my room, I would rather leave this (perhaps shared) room and move to the more expensive single room upstairs with views, at a cost of $80 per day.  After all, the home is sold, and I can afford it.  The resident however remains a supported resident and so cannot be charged more than $60.74 for their accommodation and the provider is unwilling to give them the single room for just $60.74 per day. So, they are stuck in the shared room and no doubt also now paying a Means tested fee!

The moral of this story is to get advice prior to entering care so you know exactly where you sit in the system and how things could change in the future. Zenith Aged Care assist over 200 families per year in this often complex area and can be contacted on 02 9525 7977. Should you wish to make an appointment with one of our experienced Solicitors please contact Solari and Stock on 8525 2700 to click here to request an appointment.

Note: This information, whilst current at the time of writing, is subject to change. It is intended as general information only and should not be relied on as advice.

Article written by Simon Boylan from Zenith Aged Care
Photo by micheile dot com on Unsplash