Wealthier aged care residents unfairly benefit from means testing changes: industry
Posted 2 hours 23 minutes ago
People who have to sell their house to fund their aged care could end up paying higher fees than those who can afford to keep their home, under an overhaul of the system beginning next month.
The changes, announced by the former Labor Government two years ago and broadly agreed to by the Coalition, mean that from July, daily care fees at nursing homes will be means tested on assets and income, rather than just income.
Crucially, the family home will be included in the means test if a spouse or dependent child doesn’t live in it, but its value will be capped at $154,179.
Those who are forced to sell their home will have the proceeds of the sale subject to a means test.
The changes will not affect anyone already in residential care, but are likely to mean that for most home-owning pensioners, aged care fees will be higher if they enter care after July, than before.
Work by specialist in aged care planning, financial planner Simon Boylan, from Zenith Financial Planning, shows one scenario, where someone with a $600,000 home could end up paying a higher means tested fee than someone with a $3 million home (see table).
“Because the assessable value of the home is going to be capped at $154,179, those who can afford to hang onto their home may well pay lower means tested fees than those that have to sell in order to fund their accommodation, because their assets won’t be capped,” he said.
||Case A – sells house
||Case B – keeps house
|Value of house
|Value of house that is means-tested
|Nursing home bond
||pays all of $500,000 bond upfront
||pays $400,000 of $500,000 bond upfront
|Annual means-tested aged care fee
|Source: Zenith Financial Planning: Figures used as an example only. Seek advice regarding your individual circumstances.
A leading aged care provider says the new system is inequitable and the government should address it.
“It’s not a level playing field,” says chief executive of HammondCare, Stephen Judd.
“It will tend to be the people that have got a more expensive house that’ll say ‘no, I’ll keep that, and only a small amount of it’s counted towards my assets’. Whereas if people have a less expensive house, they’ll be obliged to sell that and that will be counted towards their assets.
“That’s an inequity which I think needs to be ironed out.”
No plans to change the cap: minister
In its Aged Care report in 2011, the Productivity Commission recommended means testing the family home for aged care fees, but did not recommend a cap.
Assistant Social Services Minister, Mitch Fifield, says the government has no plans to change the cap.
“[Historically], we have treated the residential home as a different and special sort of asset,” he said.
“We think it’s important to let the reforms that are coming through on the first of July bed down, I think consumers and providers want as much certainty and continuity as possible.
“We do have legislated a five year review of these aged care reforms and we’ve also appointed an aged care steering committee, which will be looking at the next steps for reform, but at the moment we don’t have any plans to change the arrangements.”
Mr Fifield says the reforms will see more transparency and choice in the system, as aged care facilities now must publish their fees on their websites and in other publications, as well as on the www.myagedcare.gov.au website, and residents will be able to decide if they want to pay upfront or at a daily rate, or a combination of both.