Are you navigating the aged care system for yourself or a loved one? Incoming reforms may impact the amount you’ll pay to access residential care and home care services…
The Aged Care Bill, tabled in Parliament on 12 September 2024, proposes sweeping fee reforms aimed at addressing the financial challenges facing Australia’s aged care sector. These reforms come in response to the findings of the Royal Commission into Aged Care and the recommendations from the Aged Care Taskforce, both of which highlighted the need for a more sustainable system, given Australia’s ageing population. With the number of Australians aged over 85 expected to triple over the next 40 years, the pressure on aged care services is only going to increase.
The reforms seek to balance government funding with consumer contributions, ensuring that the aged care system can continue to meet the rising demand for services. The Bill, which has bipartisan support, is not yet law but is expected to pass without significant amendments. However, as with all legislative changes, the details matter, and more information will be available in time.
Aged Care Fee Reforms – Who Will Be Affected?
Most of the changes to aged care fees will take effect from 1 July 2025 and will only apply to new residents entering residential care from that date. Those already receiving a home care package or on the National Priority System as of 12 September 2024 will remain under the current fee structure for home care. This transitional period could see increased demand for financial advice as individuals weigh up their options before the new rules come into effect.
Residential Care – Accommodation Fees
Currently, more than half of aged care providers are losing money on accommodation, limiting investment in new facilities. To address this, the Bill proposes five key changes:
- The cap on approved accommodation prices will increase to $750,000 from 1 January 2025.
- Refundable Accommodation Deposits (RADs) and Refundable Accommodation Contributions (RACs) will have a retention (non-refundable) amount of up to 10% over the first five years.
- The Daily Accommodation Payment (DAP) will be indexed in line with the Consumer Price Index (CPI).
- New RADs may be eliminated from 2035, encouraging other funding models.
- Room subsidies will increase for low-means residents, ensuring more affordable accommodation options.
Residential Care – Daily Fees
The new system will replace the current means-tested fee structure with a three-part fee model, including:
Everyday living expenses
Residents with assets over $238,000 or income exceeding $95,400 (or a combination) could pay up to $12.55 more per day for everyday costs.
Clinical care
This will be fully funded by the government, alleviating a significant financial burden for residents.
Non-clinical care
For residents with assets over $502,981 or income above $131,279 (or a combination), a new means-tested fee of up to $101.16 per day will apply for non-clinical care. However, there is a lifetime cap on non-clinical care contributions, limiting them to the first four years or a dollar limit of $130,000, indexed for inflation.
Aged Care Fee Reforms – Home Care
The new Support at Home program, also set to start from 1 July 2025, will categorise services into clinical care, independence support, and everyday living costs. Significant changes include:
- Care will be approved under 10 package levels, with the highest level offering a greater budget than the current Level 4 package.
- Clinical care will be entirely funded by the government, reducing the financial strain on clients.
- Full pensioners will pay 5% of independence support costs and 17.5% of everyday living costs, while self-funded retirees will contribute 50% and 80% of these costs, respectively. Part-pensioners will pay on a sliding scale between these two extremes, with means-testing aligned with age pension rules.
- The lifetime cap on fees, which applies across both home care and residential care, will increase to $130,000.
- For clients entering a Home Care Package after 30 June 2025, there will be limits on the accumulation of unspent funds, with a maximum of $1,000 or 10% of the package budget (whichever is higher) across quarters.
Looking Ahead
While the Aged Care Bill and its associated Fee Reforms is not yet law, its passage through Parliament is expected to occur without significant changes. These reforms represent a critical step toward ensuring the long-term sustainability of Australia’s aged care system, which is essential as the population ages. However, much remains to be clarified, and additional details will be provided in due course.
As the reforms take shape, it’s vital to stay informed and consider the implications for both current and future care arrangements. If you need aged care advice for yourself or a loved one, please reach out to the specialist Aged Care team at Priority, on 1300 349 188, or via our website.