The cost of residential aged care went up in October
The cost of residential aged care has increased for some people since 1 October, and these changes come after the indexation on 20 September which saw a bigger jump than usual. While it may not be too much trouble to most residents already in aged-care facilities, this sudden price hike could impact the costs of care for new residents. This article provides an overview summary so that readers know what they should keep particular attention toward next time their finances must support him/herself through life’s journey!
Increase in the MPIR for new agreements
The rate used to convert a lump sum into daily fees has gone up, but it doesn’t matter if you’re already in care or moving into residential homes now. The new rates make your upfront payment more appealing than paying daily. The old MPIR was 5.00% and now it is 6.31%. What this means is shown in the case study below, and makes paying a RAD more desirable, and the cost of care more expensive for those who cannot afford to.
Let’s say an aged care facility has a RAD (refundable accommodation deposit) of $600,000. Residents have the options of paying the RAD in full (buying a room), paying a DAP (daily accommodation payment) instead or a mixture of the two.
If someone entered care in September, the DAP would be calculated as follow:
$600,000 x 5.00% / 365 days = 30000/365 = $82.19 per day
If the same situation but October 1st and onwards it would look like this:
$600,000 x 6.31% / 365 days = 37860/365 = $103.73 per day
This is a significant increase of more than 25% and a result of the increase in interest rates this year.
If you are assessed as low means the rules are quite different and the higher interest rates don’t impact your daily room price, but it can make the lump sum option relatively cheaper.
Increase in the daily cap for means-tested fees
There is a means tested care fee for aged care and this fee has daily, annual and lifetime caps. A new government funding model that started on 1 October saw the daily cap increase from $264.81 per day up to $358.41 per day. This applies to people already in care, as well as new residents.
This means that those with high assets or income will potentially reach the annual cap of $30,574 much sooner than before. This impacts cashflow strategies for residents.
Indexation of age pension
The age pension increased about 4% September 20th and this indexation applies to all government rates, which includes the basic daily fee, which is calculated at 85% of the full rate single age pension. This has increased to $56.87.
Aged Care Financial Advisers is here to help
When it comes to aged care, there are a lot of financial factors to consider. From government benefits to private insurance, navigating the system can be daunting. That’s where aged care financial advice comes in. A professional can help you understand your options and make the best decisions for your situation.
Financial advice can also help you plan for the future. For example, if you’re considering selling your home to move into an aged care facility, a financial adviser can help you understand the tax implications and make sure you get the best possible price. They can also assist with estate planning, to make sure your assets are distributed according to your wishes.
In short, financial advice can be invaluable when it comes to aged care. It can save you money, stress, and headache down the line. So, if you’re considering entering an aged care facility, it’s well worth seeking out professional advice.