Home Care expansion and new User Pays in aged care explained

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Summary

Commencing in 26 months (July 2014), the government is stripping $320M a year out of high care bricks and mortar to give ageing Australians the choice to have care delivered into the their homes.

The $320M is largely coming from attacking ACFI ‘rorts’ in high care facilities.

In addition, care will be means tested. Full Pensioners will be exempt. Part Pensioners and self funded retirees will contribute to the cost of their care up to $60,000 over their (later) lifetime.

Bonds still apply or the alternative of a pay as you go system. Bonds, their structure and investments have to be approved by a new Government authority.

The total cost to the Government is just $115M a year ($571M over 5 years).

Only 12% of high care residents will have to pay substantial extra fees for care.

Care delivered to the home

Level of government support to individuals will be income tested
• Government subsidy will range from $7,500 to $45,000pa
• See income test. The new charges are:
A) BASIC FEE: from $0 to $3,135pa, based on 17.5% of the single pension
B) CARE FEE: exempt for Full Pensioners; up to $5,000pa for Part Pensioners; up to $10,000pa for self funded retirees, with a lifetime cap of $60,000

The CARE FEE is calculated on 50% of income between $23,540 (the pension) and $43,186pa for singles and $36,500 and $66,134 for couples, but no greater than the cost of the care.

Aged care facilities

Residents will have to pay a means tested fee
• Payment can be a refundable bond, a rental style fee or a combination
• Charges need the approval of a new Aged Care Financing Authority
• Full Pensioners: up to 85% of the pension
• Part Pensioners or self funded retirees: means tested fee up to $52.80 per day ($19,272 pa or $370pw)
• Additional CARE FEE up to $25,000pa, lifetime capped at $60,000 (including previously paid Home Care)

Income Test

Same rules as the pension
• Only income above the full pension ($23,540) and assets above $40,500 counted
• Family home not included if occupied by spouse
• The family home can be rented out if the income is included in the means test
• Home’s income value capped at $144,500
• Income calculation: 50% of income above the relevant pension PLUS 17.5% of assets between $40,500 and $144,500 PLUS 1% of assets between $144,50 and $353,500 plus 2% of assets above $353,500

Funding

The cost of residential aged care is judged at $136 per day
• Reforms starts after the next Federal election: 1 July, 2014
• User of care will now pay towards care, saving the Government $561M over 5 years
• Means testing residential care will raise $378M and home care $183M (total $561M)
• New funding over 5 years: $577M
• $1.6B over 5 years will be taken from exiting high care budgets by eliminating AFI rorting
• Home packages increase will from 60,000 to 100,000
• 50% of aged care residents on pensions will not pay for care
• 37% part Pensioners will pay several thousand dollars a year
• 12% of high care residents expected to pay the $50,000 per year

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