The ChallengerTech team respond to a variety of aged care related queries. In this month’s article, we share some of the common aged care queries received.
What are the steps involved to access aged care services?
Accessing aged care services typically involves three steps:
Before accessing services, a client’s health must be assessed to determine their eligibility for care. The assessment can be performed by any doctor, nurse or social worker who is a member of an Aged Care Assessment Team (ACAT) or Aged Care Assessment Service, (ACAS) in Victoria. Assessments can be requested via myagedcare.gov.au or by calling 1800 200 422.
In some areas there may be a wait period between requesting the assessment, completion of the assessment and the approval. Also, there may be a wait period after approval, before clients start receiving services for home care or are offered a place in a residential aged care facility.
Approvals are generally non-lapsing however where they are for a specific period, the client requires a new assessment when it expires. Clients may also need another assessment if their personal circumstances or care needs change.
2. Finding a service
Based on the result of the assessment, clients can visit myagedcare.gov.au to source home care providers or residential aged care facilities. Clients can also utilise aged care placement services who specialise in finding suitable facilities.
Where clients are assessed as eligible for a home care package, they will be placed in a national priority queue and will be contacted when a suitable package becomes available for use. During this time, clients should contact several service providers in preparation for when a package becomes available for use.
Where clients are assessed as eligible for residential aged care, they should visit several facilities for overall suitability, accounting for potential wait times that may apply.
3. Organising finances
Various ongoing aged care costs may be incurred by a client depending on the type of care they are eligible for. Home care package clients can be asked to pay a basic daily fee which is calculated at 17.5% of the basic single Age Pension rate. An income-tested fee may also apply as determined by a client’s level of income.
Residential aged care clients are generally required to fund an accommodation payment plus a basic daily fee which is calculated at 85% of the basic single Age Pension rate. The maximum advertised accommodation payment for a room is available by visiting myagedcare.gov.au. A means-tested care fee may apply determined by the client’s level of income and assets. Depending on the room type and other services used, additional service fees may also apply.
To review ongoing aged care costs for a client, use the Challenger Aged Care Calculator available on AdviserOnline.
What is a home care package?
Under the Aged Care Act 1997, the Australian Government provides subsidies to an approved home care provider to coordinate a package of care, services and case management to meet the individual care needs of older Australians.
Home care packages are designed to help clients live independently in their home for as long as they can. There are four levels of support a client may be eligible for:
- Home Care Level 1 – basic care needs with a package valued at approx. $11,870 p.a. Approx. 2 hours per week on average.
- Home Care Level 2 – low level care needs with a package valued at approx. $18,549 p.a. Approx. 3-4 hours per week on average.
- Home Care Level 3 – intermediate care needs with a package valued at approx. $36,332 p.a. Approx. 7-9 hours per week on average.
- Home Care Level 4 – high level care needs with a package valued at approx. $53,305 p.a. Approx. 10-13 hours per week on average.
These package values include a $10.17 basic daily fee and home care package subsidy, as at 1 January 2018. Where clients require more hours than can be afforded by their approved home care package level, they may apply for a new ACAT assessment if their health needs or circumstances have changed. Otherwise, they may need to fund the additional hours privately.
What is the difference between a ‘low means’ or an ‘accommodation payment’ resident for aged care?
When a client enters residential aged care, they can elect to submit a ‘Permanent Residential Aged Care – Request for a Combined Assets and Income Assessment’ SA457 form. The details are used to calculate a daily means-tested amount (MTA). The MTA is compared to the maximum accommodation supplement (MAS) for the relevant period to determine whether a client is classified as a ‘low means’ or an ‘accommodation payment’ resident at the time they enter care. As at 1 January 2018, the MAS is $55.44 p.d.
Where the MTA≥MAS, the client is classified as an ‘accommodation payment’ resident and can be asked to pay the maximum accommodation amount as advertised on MyAgedCare.
Where the MTA<MAS, the client is classified as a ‘low means’ resident and may be eligible for assistance with their accommodation costs from the Australian Government.
For clients changing facility, they undergo a similar process whereby an additional SA457 form can be submitted. Depending on the details provided, their classification can change upon entry into the second facility.
Where clients have assessable assets for aged care purposes of $162,815.20, their MTA will be $55.44 p.d. meaning they will enter care as an ‘accommodation payment’ resident. Importantly, where clients have a former home, their share of the property is assessed up to a cap of $162,815.201 where it is not occupied by a protected person. Therefore, a rule of thumb is that a resident will generally be assessed as an ‘accommodation payment’ resident if they enter care with a former home which is not ‘protected’ from assessment.
A protected person includes a:
- spouse or dependent child;
- carer eligible for an income support payment who has been living in the home for the past two years; or
- close relative eligible for an income support payment who has been living in the home for the past five years.
For worked examples and detailed calculations, please access Fast Facts and Challenger’s Aged Care Guide via AdviserOnline.
What are the implications for my client, if they choose not to complete a combined assets and income assessment for residential aged care?
When entering residential aged care, residents can complete a ‘Permanent Residential Aged Care – Request for a Combined Assets and Income Assessment’ (SA457) form.
Residents are encouraged to complete the SA457 form before entering care, but they can also complete it after they move in. Some residents choose not to complete the SA457 form, however this can have an impact on their fees.
Once completed, the assessment remains valid for 120 days from the date of receipt. Residents who enter care with a valid assessment undergo ongoing quarterly reviews of their means by the Department of Human Services (DHS).
Where residents elect to forego the SA457 form, DHS will issue two follow-up requests for form completion. If a form is not provided during this time, they are considered a Means Not Disclosed resident thereafter.
As a Means Not Disclosed resident, they can be asked to pay a means-tested care fee equal to the full cost of their care, as determined by their basic subsidy and primary supplements. The means-tested care fee retains both the annual and lifetime cap. They can also be asked to pay the accommodation payment agreed with the aged care facility.
Means Not Disclosed residents can subsequently submit a form at any time and fees may be backdated to their date of entry.
For example, Miranda is 85 and her cost of care is $100 per day. She chose not to complete the SA457 form, so she is classified as a Means Not Disclosed resident. Her means-tested care fee is $100 per day.
After speaking to her financial planner, Nathan, she learns that if she completed the SA457 form, her means-tested care fee could be reduced to $60 per day based on her circumstances.
With Nathan’s help, Miranda submits a SA457 form and her means-tested care fee reduces to $60 per day. The facility also credits any overpayment of means-tested care fee backdated to their date of entry.
When deciding how to pay for accommodation, what options are available?
‘Low means’ and ‘accommodation payment’ residents both have the option of paying a lump sum, a daily amount or a combination whereby the daily amount can be deducted from the lump sum paid. While this combined approach reduces the lump sum value over time which may impact estate outcomes, it may provide clients with a convenient cash flow solution.
Residents have up to 28 days after entry to decide how to pay for their accommodation. Where a resident chooses to pay for their accommodation as a lump sum, they will have six months to meet this obligation and a daily amount is payable in the interim. In making a lump sum payment, facilities are required to leave residents with a minimum level of assets, currently $47,500 as at 1 January 2018.
Low means residents can pay a lump sum refundable accommodation contribution (RAC) and/or daily accommodation contribution (DAC). To illustrate the relationship between the RAC and DAC, we explore the following:
DAC x 365 / maximum permissible interest rate (MPIR) set at date of entry = RAC
For example, Mary enters care with $130,000 in savings. She is currently paying a DAC of $39.66 p.d. She would like to make a $87,500 RAC payment as this satisfies the $47,500 minimum level of assets she must be left with. Assume on her date of entry to care, the MPIR is 5.72%:
- $39.66 x 365 / 5.72% = $253,075.18 RAC. If she paid this full amount, she would no longer be asked to pay a DAC.
- ($253,075.18 - $82,500) x 5.72% / 365 = $26.73 adjusted DAC
By making a part RAC payment, Mary has been able to reduce her DAC from $39.66 p.d. to $26.73 p.d., a reduction of $12.93 p.d.
Similarly, for accommodation payment residents, they can pay a lump sum refundable accommodation deposit (RAD) and/or daily accommodation payment (DAP). To illustrate the change in DAP where a RAD payment is made, we explore the following:
(Outstanding agreed accommodation amount – RAD) x MPIR set at date of entry/365 = DAP
For example, Richard enters care with $400,000 in savings and the agreed accommodation amount is $350,000. He chooses to make a RAD payment $300,000 leaving an outstanding agreed advertised amount of $50,000. As a result, we compare the following change in his DAP:
- $350,000 x 5.72% / 365 = $54.85 p.d.
- $50,000 x 5.72% / 365 = $7.84 p.d.
By making a part RAD payment, Richard has reduced his DAP from $54.89 p.d. to $7.84, a reduction of $47.01 p.d.
Challenger have developed an ‘Aged Care’ portal for use via AdviserOnline. On this portal, additional resources and tools have been made available for adviser use. Key resources include:
- The Aged Care Guide, a comprehensive document detailing the aged care process with worked fee calculations;
- The Aged Care Calculator helping advisers to project client cash flow, including Age Pension, aged care fees and estate planning outcomes;
- Technical articles and webinars; and
- Client flyers and case studies.
For assistance with a case study, please contact your Challenger BDM. Alternately, please contact the ChallengerTech team on 1800 176 486 for general aged care support.
1Applies separately to both members of a couple.
The information contained in this update is current as at 19 March 2018 unless otherwise specified and is provided by Challenger Life Company Limited ABN 44 072 486 938, AFSL 234670 (Challenger), the issuer of the Challenger Guaranteed Annuity and CarePlus Annuity. It is intended solely for licensed financial advisers and this update must not be passed on to retail clients. The examples shown are for illustrative purposes only and are not a prediction or guarantee of any particular outcome. This information is not intended to be financial product advice and has been prepared without taking into account any person’s objectives, financial situation or needs. Each person should, therefore, consider its appropriateness having regard to these matters and the information in the product disclosure statement (PDS) for the Challenger Guaranteed Annuity and CarePlus Annuity or other relevant annuity product before deciding whether to acquire or continue to hold an annuity. A copy of the PDS is available at www.challenger. com.au or by contacting our Adviser Services Team on 1800 621 009. This update may include statements of opinion, forward looking statements, forecasts or predictions based on current expectations about future events and results. Actual results may be materially different from those shown. This is because outcomes reflect the assumptions made and may be affected by known or unknown risks and uncertainties that are not able to be presently identified. Neither Challenger nor its related bodies corporate nor any of their employees receive any specific remuneration for any advice provided in respect of the annuity. Some or all of Challenger group companies and their directors may benefit from fees and other benefits received by another group company. Any taxation, Centrelink and/or Department of Veterans’ Affairs illustrations are based on current law at the time of writing which may change at a future date. Neither Challenger, nor any of its officers or employees, is a registered tax (financial) adviser under the Tax Agent Service Act and it is not licensed or authorised to provide tax or social security advice. Before acting, we strongly recommend that prospective investors obtain financial product advice, as well as taxation and applicable social security advice from a professional and registered tax agent who can take into account the investor’s individual circumstances.