What do the proposed Aged Care changes mean?The Government recently announced proposed changes to the way Aged Care will be provided to Australians. It needs to be noted that these proposals are yet to pass through Parliament and there is currently no legislation in place to support the changes. It is possible that the details of the proposed changes may change through this process.
The Government announcement under a "Living Longer Living Better" package covering Aged Care Reform to provides a $3.7 billion program over 5 years. The major elements of the program include;
- Initiatives to help more people stay at home through more "Home Care Packages" which offer greater choice and control for individuals.
- Programs to improve the provision of residential aged care, via the building or more facilities and strengthening the aged care workforce.
- Improving care for the elderly with dementia and those with more diverse needs.
- Assistance for Carers through the introduction of Carers support centres as well as funding for education and research.
To offset the $3.7 billion dollar program the government announced proposed changes to the means testing which would be effective from 1st July 2014. The Government considers it appropriate for individuals to contribute to the cost of their care if they are able to do so. The mechanism for assessing the individual's ability to contribute ﬁnancially to the cost of their care is determined via means testing.
Financially there are two main areas that are affected by the proposed changes for individuals.
Home Care Packages
There are many individuals who maybe able to stay in their home if they were able to be provided with a level of home care to attend to their needs. It is proposed to expand the number of home care packages from 1st July 2014 from 60,000 packages to 140,000 packages over a 10 year period.
The availability of ﬁnancial assistance for Home Care is subject to an income means test. The income assessment includes an individuals income support payments (e.g. the Age Pension).
The total cost of home care consists of a basic daily fee and care fee. All individuals pay a basic daily fee.
Pensioners who are entitled to the full Age Pension
No care fee is payable or individuals or couples who have a total income less than the maximum level for a full pension payment. The maximum income levels are $23,543 for a single or $36,499 for a couple combined as at the 20 March 2012.
Pensioners who are entitled to a part Age Pension
If you have income above the maximum income rates above by less than the income cut out thresholds for the Age Pension you will incur a care fee of 50% of the income above the maximum income rate capped at $5,000 per year.
Self funded retirees
For those individuals and couples who are not eligible for any Age Pension payment they will pay a care fee of up to $10,000 per year calculated based on a sliding scale.
There will be a lifetime cap of $60,000 for care fees.
Provisions will be proposed to protect those already receiving home care as at the 30 June 2014.
Funding of Residential Care
The distinction between low level care (accommodation bond) and high level care (accommodation charge) will be removed. IT is proposed that from 1 July 2014 residents will have a choice of paying a fully refundable lump sum (e.g. an accommodation bond), a rental style payment or a combination of both.
Residents will be means tested to determine the financial contribution they need to pay towards their aged care. There are three components to the total fee payable which comprise of a:
- Basic daily fee of 85% of the single basic pension
- A care fee
- An accommodation payment
In regard to the Care Fee, annual and lifetime fee caps will apply. From 1st July 2014, care fees for age care residents will be capped at a maximum of $25,000 per annum and $60,000 over their lifetime. Caps as previously discussed, will also apply to home care packages which will count towards the $60,000 lifetime limit.
The new means testing for age pensioners who receive a part Age Pension and self funded retirees generally will result in higher total fee payments than under the current arrangements. The new means testing involves an assessment which is both income and asset tested, and as proposed is fairly complicated.
It is not intended for full Age Pension recipients to be financially worse off under the new means testing arrangements.
Those in residential care on 30th June 2014 (including care recipients on leave) will not be subject to the new arrangements while their current care continues. All residents will be subject to the new rules if their care needs change (e.g. if they move from low level care to high level care)
The family home will continue to be exempt from the Aged Care assets tests if occupied by a spouse or a protected person.
The proposed aged care means testing system is not at all simple, and it would not be easy for the elderly to understand.
The proposal changes are not designed to create a financial disadvantage for individuals who receive a full age pension.
However, for individuals who receive a part Age Pension or self funded individuals the proposed changes to the means testing will generally result in these individuals contributing more financially to the cost of their aged care.
If approved and implemented these proposed financial changes to the means testing will need to be considered for those individuals intending to retire in the future, as well as for those individuals already retired.
The information contained in this Brieﬁng is based on the understanding Lachlan Wealth Management Limited ABN 30111060587 AFS Licence 289986 has of the relevant Australian laws and the 2012 Federal announcements as at 20 April 2012. The Brieﬁng should not be taken to indicate if, when or the extent to which, announcements will become law. While all care has been taken in the preparation of the Brieﬁng (using sources believed to be reliable and accurate), no person, including Lachlan Wealth Management Limited or any other member of the Lachlan Partners group of companies, accepts responsibility for any loss suffered by any person arising from reliance on the information. The Brieﬁng, is general in nature, is not ﬁnancial product advice and does not take into account any individual's objectives, ﬁnancial situation or needs. We recommend that individuals obtain professional advice speciﬁc to their situation before making any ﬁnancial investment decision.
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