Government announces changes to aged care
In April 2012, The Government released a range of proposed changes to aged care and options for older Australians. Many of the proposed changes address issues raised by the Productivity Commission, including:
- options to allow individuals to continue living in their home
- contributions to the cost of care by individuals, and
- centralised areas for seeking information.
The announcements include a range of measures mainly affecting the means-testing for the co-contribution by individuals. Caps will apply on an annual basis and over a person's lifetime to ensure that care is still accessible by recipients.
A recommendation by the Productivity Commission was to implement a single gateway to access all aged care services. The Aged Care Gateway will be established commencing with the new My Aged Care website and national call centre from 2013. This is designed to provide families and carers access to information to consider options and make decisions. The website will include an innovative ratings system of age care homes.
The online website integrates information and acts as an assessment entry point. One of the main benefits of being a central contact point is easy access to electronic records of a person's assessments, entitlements, contributions and use of approved services. It removes the need to re-provide information to a number of service providers.
Funding of residential aged care
From 1 July 2014, the Government aims to make significant changes to the funding of residential aged care. The focus is on asking those with the financial means to make an additional contribution.
Entry conditions:
The Government will allow residents the choice to pay for their accommodation. This removes the distinction between low level (accommodation bond) and high level (accommodation charge) based on the entry contribution.
From 1 July 2014, all residents will have the choice to pay for accommodation costs by either:
- a fully refundable lump sum
- rental style periodic payments, or
- a combination of both.
Care providers will not be able to select residents on the basis of the method of payment chosen by the resident. Residents will be given time to make a decision regarding the method of payment. A cooling off period allows the decision to be made once the person has moved into care. This will prevent residents from being forced to sell their home immediately to fund the costs. Care provider will need to seek approval from the Aged Care Financing Authority for the level of accommodation payments charged.
Ongoing Fees:
Residents who are assessed will be liable to pay a means-tested contribution determined as:
- a basic fee of 85% of the single basic pension
- a means tested contribution (which reduces the Government accommodation supplement), and
- a 'care fee' which is a means-tested contribution (reducing the Government subsidy).
The focus is to charge fees to those individuals who have the ability to pay. Provisions will still exist to ensure that residents with low income and assets are protected. Only income above the maximum income for a pensioner will count towards the aged care means test (that is $23,543 single pension, and $23,075 for a member of a couple - 2012 rates). An asset test free threshold of $40,500 will apply (applicable for 2012).
For those with income or assets above the specified thresholds (applicable for 2012), the maximum means tested contribution is:
- 50% of income above the income threshold PLUS
- 17.5% of the value of assets between $40,500 and $144,500 PLUS
- 1% of the value of assets between $144,500 and $353,500 PLUS
- 2% of the value of assets above $353,500.
The maximum means tested contribution is distributed in the following order:
- accommodation payment until the full cost of accommodation is paid
- care fee
The care fee cannot exceed that actual cost of care. An annual cap to the care costs of $25,000 a year will apply and no more than $60,000 over a lifetime will be payable (including contributions towards Home Care packages).
Family Home:
The proposals address issues relating to the family home. The treatment of the family home will not change from current arrangements. It will continue to be exempt from the aged care assets test if occupied by a spouse or other protected person. The home will continue to count when determining the entry contribution.
Home Care packages
In many cases, individual are able to remain in their home but need appropriate support to allow this to happen. From 1 July 2014, it is proposed to expand the number of Home Care packages to more than 80,000 over the next 10 years. The Government will provide care subsidy ranging from $7,000 to $45,000.
The availability of Home Care is subject to means testing. Currently means testing is based on the recipient's income using social security rules. Income also includes income support payments (eg the age pension). The implications for individual will depend on their circumstances; that is whether they receive the full pension or older Australians with income up to full pension rate, part pensioners or self-funded retirees with same income, or self-funded retirees with income above the cut out rate (rates & thresholds apply as at 20 March 2012).
The care fees will be capped at $10,000 p.a. All care recipients will have a lifetime cap of $60,000. This will include contributions towards residential aged care.
The new arrangements mean that recipients will be asked to pay more for care. Provisions will be introduced to protect those already receiving care as at 30 June 2014, however, individuals may transition to the new rules in their care needs change.
Carers and respite care
The Government will continue with its recognition of carers. From 1 July 2012 the Government will provide additional respite and carer counselling services.
Grandfathering rules
Those in residential care on 30 June 2014 will not be subject to the new arrangements while their current care continues. A resident will be subject to the rules if their care needs change (eg move from low level care to high level care). Respite care recipients in aged care homes will continue to be exempt from aged care means testing arrangements.
Conclusion
At this stage there is no legislation to support the changes being proposed. It is possible that details may change once legislation has passed the Parliament. The proposed changes mean the cost of care may increase for some of our clients. This will impact on cash flow, and consideration will need to be given to ensuring that you have the income and/or capital to meet your care needs now or in the future. As part of a broader retirement plan you may need to reconsider your savings goals, and additional savings may need to be considered now to take into account the higher cost of care in the future. If you would like to discuss this further please contact our office.
DISCLAIMER: The information provided in this article was an extract from the MLC Technical News dated 20 April 2012.