Many people have seen the recent aged care reforms announced by the Albanese government on the 12th September - better access to aged care, shorter wait times and greater choice and control in services… all sounds pretty impressive, right?!
As with all reforms there are pros and cons. I will be the first to acknowledge that the current aged care system isn’t perfect and wait times are far from desirable. As discussed last newsletter, aged care facilities around Australia are operating at a loss and are rapidly closing. Something has to change.
Whilst this reform is yet to be passed through parliament, it’s already making waves for ageing Australians who want to know what they should do next.
For this reason, the theme I’ve chosen for October is
Aged Care Funding Reforms.
I want to start this piece off by acknowledging that I don’t yet have all the answers. Like many in the aged care sector, I’m still piecing together the ‘real’ impact these changes have on my clients and loved ones. What I want to do today is unpack what we know so far.
A high-level overview of the aged care reforms is that an additional $5.6 billion is being invested, which will benefit a projected 1.4 million Australians under the new Support at Home program by 2035 and provide additional support for residential aged care facilities.
The three key pillars to the reforms are:
CHANGES TO HOME CARE
Support at Home (the new Government funded home care starting from 1st July 2025) be separated into three supports -
Clinical Care - nursing, occupational therapy
Independence - assistance showering, getting dressed, taking medications
Everyday living - cleaning, gardening, shopping or meal preparation
The Government will pay 100% of all clinical care services. Individuals will contribute towards independence and everyday living costs.
There will be changes to the means tested fees to access Support at Home.
CHANGES TO RESIDENTIAL AGED CARE
Larger means-tested contributions for new entrants
Higher maximum room price that is indexed over time
The retention of a small portion of refundable accommodation deposits (RAD’s) - 2% per year, for up to 5 years
NO WORSE OFF PRINCIPLE
When current home care participants transition to Support at Home from 1 July 2025 they will maintain the same level of funding and retain any unspent funds. Participants will have the choice to remain on the current funding model or adopt the new. This is also true for residents of aged care facilities - the new contributions and accommodation arrangements will only apply to new entrants. This means everyone already in care on 30 June 2025 will maintain their current arrangements until they leave care.
That’s a lot of political speak… so what does that actually mean?
PROS
Faster access to home care - a new estimated 3 months to access. Much much better than the current 6-18 months.
Increased levels of home care funding = ability to access more support to stay at home longer.
Separate funding for equipment ($15,000) and palliative care ($25,000) - this is a much needed improvement and means people in the community can access additional funding when they really need it.
Increased residential care costs means that facilities can afford to stay open. With an annual estimated cost of $138,700/person in residential care, the Government needed to boost funding somewhere and they’ve done that.
Treatment of the family home does not change - only the first $206,039 in the value of the family home is assessable for means testing.
CONS
Increased fees for home care
At present, home care is income tested, not means tested. This means at present you’re only assessed based on your pension, superannuation payments, overseas pension, rental income, shares income etc. However, under the new model this will also include any assets - e.g. value of your home, bank accounts etc.
Under the current model, a full aged pensioner doesn’t pay anything towards their care and a fully self-funded retiree can pay a maximum of $36.60/day ($13,359/year).
Based on case studies provided by the Department of Health and Ageing, an individual accessing a ‘Home Class 5’ package on a full pension with minimal assets, will now need to contribute $2467/year towards their care. A fully self-funded retiree with $100,000 annual income, a home worth $1 million and $500,000 in assets, could pay $16,615/year towards their care.
This is a fairly significant increase in fees for individuals to access home care services.
Increased fees for residential care
At present, residential care is already means tested. If you are a full pensioner with minimal assets, you can access a fully government funded bed in residential care. However, if you have any assets you will now pay increased means tested fees towards your care.
Under the proposed policy anyone with more than $238,000 in assets, or who earns $95,400 in annual income, or a combination of the two will start contributing to the cost. The Government estimates that 50% of new residents will pay more under the new fee structure.
The Government has also increased the maximum price a provider can charge for a bond from $550,000 to $750,000 (previously unchanged since 2014). Facilities can still charge more than $750,000, but require special application to the Government to do so.
Increase to lifetime caps
Life time caps for care currently sit at $82,018.15, however this will be increasing to $130,000 covering both home care and residential care. That amount will be indexed. If you are in a residential care facility, you will only have to pay contributions for the first four years (the average stay in residential care is two years).
FLOW ON EFFECTS
MONEY DECISIONS
For the majority of the clients I work with personal contribution towards care is a massive factor when deciding if they will take up aged care supports. We know that early intervention and gradual increase in services is the best way to keep people independent in the community, but I worry this new model may discourage seniors starting early.
INCREASED ENTRY BEFORE 1 JULY 2025
As these proposed changes will only be implemented from 1 July 2025, I foresee a large number of individuals accessing aged care ASAP.
HOME CARE: The initial media release stated ‘Everyone who, as of 12 September 2024, is receiving a Home Care Package (a package), on the National Priority System, or assessed as eligible for a package, will make the same contributions, or lower, as they would have under Home Care arrangements.’ This leads me to believe that it’s already too late to enter home care under the current funding arrangements, however this is yet to be confirmed.
RESIDENTIAL CARE: What is confirmed is that funding arrangements and contributions for residential aged care won’t be implemented until 1 July 2025. For this reason, I think there will be many ageing Australians applying for residential care facilities before this date to try avoid the price increase. With facilities already overwhelmed and with funding increasing on the horizon, it will be interesting to see how eager facilities are to fill beds in May/June 2025…
SO, WHAT NOW?
It hasn’t been passed yet
We need to wait and see if this is passed in parliament. If it is accepted and put into legislation, it will come into effect from 1 July 2025. Providers will require significantly more details before this point in time and will update consumers as they know more.
If you are already in receipt of a Home Care Package, your services should not change. The ‘No Worse Off’ principle will apply and you should continue your services as is. This also applies if you’re already in residential care - your contribution and fees will remain the same.
Proactive care planning
If you’re a long time subscriber, you’ll know I’m always going on about proactive care planning. These changes to aged care fees could be the final nudge needed for yourself or a loved one to access care. Accessing aged care is undoubtedly cheaper under current arrangements, so if you’re on the fence about being assessed for home care or moving into residential care, I encourage you to progress with this.
If you want advice based on your individual situation, please feel free to get in touch and we can discuss your circumstances.
Seek independent financial advice
Although not all details are confirmed, now is a great time to start getting in touch with specialised aged care financial advisors. They can work alongside you to create a plan, so that you feel empowered to make decisions on your aged care journey.
If you’d like recommendations for aged care advisors in your area, please flick me an email or give me a call.
Keep up-to-date
A bit of a selfish plug, but now is the time to keep in contact with specialists in the aged care space (like me 👋🏼). We’ll be learning all the new changes as they’re confirmed and will be able to help guide you through this process. Aged care is already an overwhelming space and with any major changes comes a bit of chaos. Now is the best time to have someone by your side helping support you through the reforms.
As always, if you have any questions please feel free to send them through. Even if you don’t require my paid services, I’m always happy to help point people in the right direction.
I think it’s finally time to start ‘The Truth About Ageing’ back up! All these changes have me excited to get back behind the mic and share with you all. If you search for the podcast in your fave podcast app and subscribe, you’ll be the first to know when a new ep drops. You can still access the full back-catalogue of episodes through your favourite podcast app (Apple Podcasts, Spotify) or at www.navigateagedcare.com.au/podcast
Occasionally I also post updates on socials, which you can find at:
Facebook - @navigateagedcareau
Instagram - @thetruthaboutageing
Big love,
Kate.
If you’d like to chat about your unique situation and gain a better understanding of options available to you, please book a free 15 minute consult via the ‘Book Now’ button below.
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