Every person entering aged care will be asked to pay towards daily living expenses for essential services
There are three different options to choose from when deciding on how to pay for you aged care
If you want to enter a Government funded aged care, you will be expected to go through an assessment process
The amount you’ll pay for an aged care home, which can also be referred to as a nursing home or aged care facility, depends on a number of things, including the type of accommodation you need or have chosen.
When it comes to payments there are four areas that can have an impact on the amount you’ll end up paying.
We’ll explain each of these in more detail below.
The basic daily fee
All residents of an aged care home are asked to pay something toward their daily living expenses. This is called the basic daily fee and the things you receive for this are:
- Your meals
- Cleaning of the home and your room
- Your laundry being washed, dried, and delivered to your room
- Heating and cooling
- Some personal care
- Assistance with daily living
- Some medical care and pharmaceutical services
The Australian Government has set the maximum price for the daily fee and this amount is reviewed twice a year, in March and September.
The maximum daily fee for a permanent resident of an aged care home is based on the Age Pension. The Government has set the maximum daily fee amount at 85 percent of the annual single basic Age Pension.
So for example, as of 1 July 2020 the single basic Age Pension is $860.60 per fortnight. 85 percent of this is $731.50 per fortnight or $52.25 per day as the maximum daily fee.
Learn more about pension including rates at the Services Australia website.
An accommodation payment
How much you pay for this depends on your assets and your income. If you have less than $50,500 in assets or annual income then you won’t have to pay anything.
If you have or receive more than $50,500 in assets and annual income, then you can be asked to pay an accommodation payment but you have some choice about how you pay for this.
Payment amounts can vary from care home to care home and from room to room and are set depending on the accommodation type and features of the home.
Your choice of the way you pay the aged care home is decided before you move in but you can have a change of mind in the first 28 days.
You can choose to pay for accommodation in different ways, such as the following options:
Payment option #1 - Refundable Accommodation Payment (RAD)
This is a single payment to the aged care home, similar to an interest-free loan.
The balance of the deposit is mostly refundable to you or your estate when you leave the home after the amounts which have been used to pay for agreed services have been deducted.
Payment option #2 - Daily Accommodation Payment (DAP)
A rental-style payment calculated on a per day basis that is not refundable.
In this option you pay an amount, most often monthly, for your accommodation, which is calculated based on a daily rate. These payments are not refunded when you leave the home.
*The government-set interest rate is called the MPIR (Maximum Permissible Interest Rate). See the current MPIR rates on the Department of Health website.
Payment option #3 - A combination of a single payment (RAD) and rental-style payments (DAP)
You may choose to pay a smaller RAD and a larger DAP or the other way around. This really depends on your personal circumstances.
Remember though that the way you pay the fees and charges should be agreed upon before you move into an aged care residence, although you still have up to 28 days after admission to change your choice of payment
The means test looks at your financial assets and your income to determine how much you can contribute to the cost of your care.
Depending on the overall amount you may be asked to pay an additional means-tested amount (fee) for your care.
There is a limit (price cap) on this fee, which at the moment is $28,087.41 (1 July 2020).
Your contribution may change as your income and assets go up and down depending on the share market, and as property prices and bank deposits change.
Regardless of those fluctuations you can never be asked to pay more than the capped amount.
Extra service fees
Some aged care homes are specifically designed for people who are able to pay for a higher level of luxury, so if you choose to move into one of these then an extra services fee may apply.
Extra services might include a very plush large room or services such as bedside phone, easy access to the internet, special therapies or special beverages like wine and spirits.
Difficulties paying your accommodation fees
If you are unable to pay for care because of financial difficulties, you can apply for financial hardship assistance from the Government. If your application is successful, the Government will lower your accommodation costs.
Read more about how the Government can help lower costs at My Aged Care.
Changes to fees
If you and a service provider have an agreement on the accommodation price then this amount will remain in place unless you choose to change rooms or facilities.
The fee structures mentioned above only apply to people entering aged care since 1 July 2014.
If you entered aged care before this date then your original bond arrangements apply, unless you leave care for more than 28 days or move to a different facility.
If you’re looking for a temporary stay in a nursing home then you’ll only need to pay a fee for the days you’ll be staying, just like a hotel.
This fee is the same as the basic daily fee paid by permanent residents.
For respite in an Extra Services home, you may be asked to pay an extra fee to cover the cost of the higher standard of services.
Nursing home costs
Click the play button below to listen to this great podcast explaining nursing home costs.
Who else can help?
You can call Centrelink on 13 23 00 for more information, read more at My Aged Care, or contact a financial advisor for specific advice.
Search for a nursing home
Find a home best suited to your needs on Aged Care Guide. Click here to start your search for a nursing home, or click here to compare up to ten aged care facilities with our provider comparison tool.
Have you found the aged care fees and charges difficult to navigate during your search for a nursing home? Tell us in the comments below.